SPENDING AND SAVING: Two-pot, two years later: savings are used to put food on the table
Households increasingly rely on retirement money for basic living and everyday expenses.
Two years after the two-pot retirement system was introduced, South Africans are increasingly turning to their retirement savings to cover basic living expenses. Previously, the system was introduced to allow limited access to retirement savings without forcing workers to resign. However, the withdrawals indicate uncomfortable financial realities for many households.
Michelle Acton, chief customer officer at Old Mutual Corporate, revealed in a survey that the top reason for using the two-pot money is not to cover debt anymore. Instead, people are using these funds to buy food, support family members, and pay for school fees, rent, and electricity. Acton stated that the main use is for basic living expenses.
The debate surrounding the two-pot system has evolved. While the law permits access to the savings pot, the bigger question now is what happens to the money that must remain invested. Old Mutual has seen a 33% increase in preservation rates, while cash withdrawals on exit have fallen below 50%. Sanlam's findings are similar, with 84% of stand-alone funds and 80% of umbrella funds reporting increased member engagement since the system's implementation.
Despite the increased awareness, retirement confidence is not built solely on the savings pot. Experts emphasize the importance of preserving savings, increasing contributions where possible, and managing debt to build long-term retirement confidence. The real lesson from the two-pot system is that the retirement pot is a promise to avoid short-term survival, rather than a solution to solve one crisis by feeding another.
Written by urgent.news from Daily Maverick's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
