Retirement warning: Half of fund members have cashed out their retirement savings

Retirement savings are being cashed out by a significant portion of employees in South Africa, according to a new report. The Sanlam Benchmark 2024 found that half of retirement fund participants have withdrawn all their retirement funds at some point. Moreover, only about 6% of South Africans are on track to retire comfortably.

Since the two-pot system was introduced in September 2024, over 2.4 million South Africans have already withdrawn from their retirement savings. The majority of these withdrawals were used to pay off debt and meet essential living costs.

Alex Cook, CEO of fintech company Wealthbit, explained that debt often develops gradually, with small gaps in people's financial systems. "There is no emergency buffer," Cook noted. "Credit gets used to cover short-term gaps. Minimum payments create a false sense of control. Over time, those small cracks become expensive."

Financial stress can have a profound impact on an individual's ability to focus, plan, and perform at work. Stress and poor financial health can lead to poorer performance and lower productivity. Cook emphasized that debt affects more than just a person's bank account; it affects their ability to focus, plan, and cope at work.

The Old Mutual Savings & Investment Monitor 2026 revealed that 40% of working South Africans were considerably financially stressed in 2026, up from 38% in 2025. Among those earning less than R30,000 a month, the figure increased from 41% to 47%. The survey identified a person's ability to manage debt as the primary driver of financial stress.

Financial vulnerability and over-indebtedness are on the rise, with more people using credit to purchase essential items like food. Rising food prices, unemployment, and a shorter-term financial mindset are contributing to this trend. South Africans spend 62 cents out of every Rand they earn on debt, according to the South African Reserve Bank's household to debt ratio.

Employers can help employees build better financial systems, Cook suggested. "A financial system that manages daily spending and prepares for the unexpected can make all the difference," he said. The goal should be to prevent debt from becoming overwhelming in the first place. Understanding the underlying habits, blind spots, and missing foundations that make debt more likely can help individuals respond faster, reduce the damage, and develop practical, sustainable solutions to their financial problems.