Two-pot retirement system survey reveals widespread financial pressure

She points out that the survey reveals widespread financial pressure as 79% of respondents who consider a withdrawal indicate they will use the funds to repay debt. “Respondents’ perceptions of their financial health also showed cause for concern, as only 11% rated their financial health as excellent, while 43% rated it as average and 24% as poor.

How did they learn about the two-pot retirement system? The survey results indicate that 50% learnt about the two-pot retirement system from news and media outlets, while 36% were informed by their employers.

However, 9% reported they did not receive any information, signalling an opportunity to continue educating the public on this important topic, Nicholson says.

Only 57% of the respondents currently have a pension fund or retirement annuity (RA), with 80% of these products tied directly to their employment, while only 10% of respondents had more than one retirement product as part of their employment package, as well as independently.

How consumers feel about the two-pot retirement system

How did consumers feel about having access to their savings? Nicholson says the survey showed that the ability to access a portion of their retirement savings before retirement garnered mixed feelings, with 57% of respondents saying they felt comfortable with this access, while 29% were concerned about the impact on their long-term savings.

When asked if they would consider withdrawing funds, 49% indicated they would, although a significant 23% remained hesitant, citing concerns about future retirement stability.

The survey also indicated some barriers to retirement saving, with 35% of respondents without pension funds or Ras citing affordability as a barrier, while 43% noted their employers do not offer pension packages.

However, 46% of the respondents expressed newfound interest in retirement funds due to the accessibility of a savings portion, showing promise for increased participation.

The survey also indicated various withdrawal trends among the 30% of respondents who already requested a withdrawal, with 23% saying they found the process straightforward and that it was “excellent”, “amazing” and “short and easy”.

The other 7% reported that withdrawing their funds was “hectic and frustrating”, with “unprofessional employees” giving differing explanations and processing taking longer than expected.

Tax implications of withdrawal under two-pot retirement system

Several respondents also said they were taken aback by the tax implications. Some respondents noted that the process was “stressful as Sars took it all” and “this two-pot system is unfair… Sars takes most of it and “we, the poor, get poorer”.

However, Nicholson says, on balance the JustMoney survey reveals cautious optimism about the new two-pot retirement system.

“Many South Africans view it as a potential solution to balance short-term financial needs with long-term retirement goals. The ability to access a portion of their savings may enhance financial flexibility for some and even encourage saving.”

She says it was notable that nearly a third (31%) of respondents said they planned to retire between the ages of 50 and 60, which is unrealistic for most South Africans, while 19% said they had not considered when they would retire.

“This highlights the critical need for education on how to manage money and the true cost of retirement if South Africans are to make informed saving choices and avoid financial shortfalls later in life. Pension withdrawals must be made thoughtfully to protect future retirement stability.”

Before you request a withdrawal, consider this

Nicholson says pension fund members who want to withdraw some of their retirement savings under the two-pot retirement system should:

• Assess the emergency: Only withdraw funds if you face a genuine financial emergency, as the two-pot retirement system is designed to be a safety net, not a source of funds for discretionary spending.
• First, explore alternatives: Before tapping into your retirement savings, look into other options, such as budgeting adjustments, negotiating payment plans, or using other forms of credit cautiously. Protecting your retirement savings must be a priority.
• Consider the long-term impact: Withdrawing funds reduces the amount that can grow for your retirement. Compound interest works best with larger amounts left untouched over time and therefore, withdrawals can significantly lower your final savings.
• Understand the tax implications:  Calculate the tax burden you will incur and evaluate if the remaining amount will genuinely solve your financial issue.

Caroline Naylor-Renn, chief operating officer at 10X Investments, agrees. “More emphasis must be placed on highlighting the long-term negative financial impact of withdrawing funds early.

“It is far more beneficial for individuals to leave their money invested and allow it to grow, rather than tapping into it for short-term needs. Two-pot retirement system funds, in particular, should only be accessed in cases of genuine financial emergency.”