JOHANNESBURG - Several investment houses have reported a surge in withdrawals from the two-pot system since its introduction in 2024.
Government introduced the system to allow households to access a portion of their retirement savings before the mandatory age.
Now, National Treasury is reportedly mulling an idea to allow broader access to the retirement pot of savings in the two-pot system.
READ | Two-pot withdrawals showing consumers under strain
Deputy Director-General: Tax and Financial Sector Policy at National Treasury, Chris Axelson said the withdrawal would be in a case of dire financial distress under strict conditions.
These could possibly be:
- You should not be getting any other benefits
- Should not have an income
- Have no other financial support
Axelson says further conversations still need to be had on what would be the most reasonable way to do this without undermining the progress that has been made in the two-pot system.
“If you've got a huge amount in that retirement pot but, you've got nothing else, potentially you could get some access. It would not be the full access, we would look at all these conditions and say that maybe you can get a small portion, a small portion per year perhaps,” he said.
Previously when you resigned from your employment you could take everything in full, but this has now changed.
The two-pot system splits the amount that one is able to access into a savings pot and a retirement pot meant to support long-term retirement savings.
Households are still advised to use the savings component sparingly.
READ | Two pot retirement system | One year, R9.5bn withdrawn
According to Axelson surveys conducted by financial institutions have shown how individuals are using their money from their two-pot system in various ways.
Some pay off debt while others use it for daily life expenditure which is concerning.
“It also shows you that households are struggling. It's not easy out there. Income increases and wage increases are low. So people are turning to this as another mechanism to get by. We hope that the savings pot is enough for people to continue,” he said.
Financial journalist Maya Fisher-French said any access to the retirement pot has to be done with very strict rules in place and would require demonstration of hardship
“In this case it would be on retrenchment. So if you were retrenched it may be that there is a period of time that you would have to wait to access your retirement pot.”