South Africa’s Two-Pot Retirement System: What happens when workers need their pension savings before they retire?

What is the Two-Pot Retirement System in South Africa?

According to the South African National Treasury, the Two-Pot Retirement System allows retirement fund members to withdraw some of their savings before retirement, while keeping the rest locked away for retirement.

This means you can access part of your retirement savings, without resigning from your job. The new system came into effect on 1 September 2024.

How does the Two-Pot Retirement System work?

Two-Pot Retirement System rules explained

From 1 September 2024, new retirement contributions are divided between two components: a Savings Pot and a Retirement Pot.

One-third of your contributions goes into the Savings Pot, while two-thirds goes into the Retirement Pot.

How to withdraw money from the Two-Pot Retirement System

You can access money in the Savings Pot before retirement, but there are some limits. You must withdraw at least R2,000, and you can only make one retirement withdrawal in each tax year. There is no maximum withdrawal amount from the Savings Pot.

The Retirement Pot is different. You cannot access this money if you resign from your job. It is intended to remain invested until you retire.

What you had already saved by 31 August 2024 is kept in a separate Vested Pot. No new contributions are added to this pot, but the money remains invested in your retirement fund.

Who qualifies for the Two-Pot Retirement System?

The system applies to active members of most retirement funds in both the private and public sectors. There are some exceptions, including older or “legacy” retirement annuity policies and funds with no active members.

Why was the Two-Pot system initiated?

The aim is to strike a balance between saving for retirement and dealing with more immediate financial pressures. The system allows people to access some of their retirement savings when they are in financial difficulty - for example, paying medical bills, or fixing a car - while keeping most of their new contributions protected for retirement.

The downside of withdrawing from your pension

The Savings Pot can provide a useful safety net when unexpected expenses come up. But taking money out early comes at a cost.

The amount you withdraw will no longer be available to grow and earn compound returns over the years. This means that even a relatively small withdrawal today can reduce the amount you have available when you retire.

Evidence of increased Two-Pot Retirement withdrawals

While the Two-Pot system was designed to help those with retirement funds with an “emergency fund” reserve, according to data from major fund administrators like Old Mutual Corporate, up to 80% of eligible members have made a withdrawal from their Savings Pot since the system launched in September 2024, leaving only 21% with untouched savings.

In all, South African retirement fund members have withdrawn nearly R57 billion from their savings since 1 September 2024. According to the South African Revenue Service (SARS), almost 500,000 of the nearly 4 million withdrawals made so far were repeat withdrawals

The trends show that those who withdraw tend to be from the lower to middle class bands, and in their 30s. Most importantly, most are using their funds to cover basic living expenses.

What are people spending their pension savings on in South Africa?

• Momentum: 44% of withdrawals go toward paying off debt, 23% to cover everyday living expenses, and 20% toward education.
• Old Mutual: Basic living needs (34%), followed by emergencies (26%) and debt repayment (26%).
• Discovery: 34% of withdrawals were for home, car and living expenses, 22% for education, and 20% to cover short-term debt.
• A Nedbank 2025 corporate survey of Two-Pot Retirement withdrawals found that nearly 8 out of 10 employees used the money either to repay debt or to cover basic living costs. Of those surveyed, 45% used the funds to service loans, while 35% withdrew to cover essentials like groceries, school fees, and housing.

(Source: https://smartaboutmoney.co.za/)

The cost of living and the Two-Pot Retirement System in South Africa

According to Guy Chennells of Discovery Corporate and Employee Benefits, the amount of money being spent on education and day-to-day expenses are “sadly all indications of the cost of living crisis faced by so many.”

South African households are feeling the pressure, with the cost of living rising faster than inflation. Climate change, the cost of fuel (driven by global conflict), aggressive utility price hikes, high unemployment and weak economic growth are all contributing factors.

Food Baskets, Minimum Wages and Living Wages in South Africa

In September 2026, the Pietermaritzburg Economic Justice and Dignity Group (PMBEJD) Household Food Basket reached R5,488.06, marking a 2% year-on-year increase with more than half of monitored basic foods rising in price.

Contrast this with WageIndicator’s data on Minimum Wages and Living Wages in South Africa:

• The National Minimum Wage is R30.23 per hour worked, or R5,239.46 to R5,894.40 for 40-45 hours of work. This barely covers a food basket - and doesn’t account for transport, electricity, school fees or anything else.
• Living Wages for the same area (Pietermaritzburg, Kwa-Zulu Natal), for a typical family lower-bound, are estimated at R64.35 per hour worked, or R12, 547.05 per month.

However, while Minimum Wages are statutory, Living Wages are not, and depend on a variety of factors including Collective Bargaining Agreements (CBAs) and contracts between employees and employers.

Saving for tomorrow when today is already a struggle

The Two-Pot System was designed to give workers a financial safety net without forcing them to sacrifice their long-term retirement security. But the scale and purpose of withdrawals suggest something more fundamental is happening.

When people are using retirement savings to pay for groceries, housing, education and debt, these are not necessarily emergencies – they are the costs of everyday life. For workers whose wages do not cover the basics, saving for retirement can become a luxury they cannot afford. The challenge, then, is not simply to encourage people to save, but to ensure that wages are high enough for them to do so.