The two-pot retirement system was designed to help South Africans access part of their retirement savings in times of financial pressure. But many members are often surprised to discover that the amount paid into their bank account is far less than the money they requested.
Withdrawals from the Savings Component of the two-pot retirement systems have been significant. By January 2025, more than 2 million taxpayers had withdrawn R43.4 billion gross from their Savings Components, SARS reported. Many used it to service debt or meet household costs.
Withdrawals should not become an annual financial crutch. SARS taxes them as income at the member’s marginal rate, and administrators may charge fees. The payout can be far less than the amount requested.
The Financial Sector Conduct Authority (FSCA) recognises that emergencies can make access necessary. Knowing the likely deductions before applying can prevent further financial strain.
Consider Sophie, who incurred unexpected hospital expenses and requested R30 000 to pay her medical. She only received R18 700 after SARS deducted R10 800 at her 36% marginal rate, and her administrator charged R500. Members should estimate their net payout with the SARS Two-Pot retirement system calculator before applying.
Tax and fees can leave a household short during a crisis. Withdrawals also reduce future investment growth.
HOW THE TWO-POT SYSTEM SHAPES YOUR MONEY
You and your employer’s contributions are divided among three components:
- Savings Component: One-third (33.3%) of ongoing contributions goes here. Members may withdraw at least R2 000 once per tax year, subject to marginal tax and fees. A member earning R22 000 monthly and contributing about R6 000 (27.5%) would direct roughly R2 000 here and R4 000 to the Retirement Component.
- Retirement Component: Two-thirds (66.7%) of ongoing contributions go here. It is preserved for retirement and cannot be cashed out early; at retirement it must be used to purchase an annuity.
- Vested Component: This is savings accumulated up to 31 August 2024 and remains subject to legacy rules. At implementation on 1 September 2024, 10% of existing retirement savings was transferred to seed the Savings Component, capped at R30 000 per fund.
THE TRUE COST OF EARLY ACCESS
Early access can affect your finances in two ways: through the immediate deductions and through the investment growth you give up.
- The tax hit: Withdrawals from the Savings Component are taxed as regular income at your marginal rate, which ranges from 18% to 45%, and may attract administration fees. This is not tax-free cash. In Sophie’s case, 36% of the requested R30 000 went to tax and fees before reaching her.
- The loss of compound growth: Compound growth occurs when investment returns also earn returns. Consider a 35-year-old earning R35 000 a month who withdraws R10 000 from the Savings Component.
The Calculation Process:
- Gross Withdrawal: R10 000
- Less Admin Fee: R500
- Taxable Amount: R9 500
- SARS Tax (31% of R9 500): R2 945
- Net Payout to Member: R9 500 - R2 945 = R6 555
The member receives R6 555. If the R10 000 stayed invested at an assumed 7% annual growth rate, it could grow to about R19 672 in 10 years, R38 697 in 20 years and R76 123 over 30 years, by age 65. If this is coupled with the rest of your pension fund savings, this amount may be even higher.
The withdrawal therefore costs more than the cash taken today: it also gives up the potential growth on the full R10 000. These figures are illustrations; actual returns and tax depend on individual circumstances.
FINANCIAL WELLNESS: MANAGING AND PROTECTING WHAT YOU EARN
Financial wellness means meeting today’s needs while protecting future financial independence. According to FinMark Trust’s FinScope Consumer South Africa 2025 Survey, 48% of South African adults are not saving at all, while the proportion saving through formal financial institutions declined from 30% in 2024 to 22% in 2025.
These findings highlight the challenges many South Africans face in balancing immediate financial needs with saving for future goals and building long-term financial security.
Retirement security also depends on contributions reaching your fund. Some employers deduct contributions from salaries but fail to pay them over. Regularly checking your fund statements against your payslips can help you identify problems early and protect your retirement savings.
The FSCA regularly publishes lists of employers reported by retirement funds for failing to pay over retirement contributions deducted from employees’ salaries. On 2 July 2026, the FSCA published a list of 6,064 employers reported for failing to comply with Section 13A of the Pension Funds Act. These employers owed an estimated R8.33 billion in unpaid retirement contributions, affecting approximately 590,000 fund members.
This is a serious legal matter because Section 13A sets out employers’ obligations to pay retirement fund contributions to the relevant funds. Failure to comply can constitute an offence under the Pension Funds Act. These unpaid contributions put employees’ retirement savings and financial security at risk.
To protect your retirement savings:
- Check your monthly payslip against your benefit statement or confirm contributions with your fund administrator.
- Ask your employer’s human resources or payroll department and the fund’s principal officer about any unpaid amounts.
- If the matter remains unresolved, complain to the Office of the Pension Funds Adjudicator (OPFA) or contact the FSCA enquiries department.
- Raise missing contributions as soon as you spot them.
BUILDING TRUE LONG-TERM RESILIENCE
The Two-Pot system offers controlled access to a portion of your retirement savings while preserving most contributions for retirement. However, it is important to remember that the Two-Pot system is not a substitute for an emergency savings fund. Where possible, build separate emergency savings to cover unexpected expenses, such as medical bills, urgent car repairs or temporary loss of income, without dipping into money intended for retirement.
If financial pressure does make a withdrawal necessary, consider both the immediate payout and its future cost.
Before applying, ask yourself: Is this withdrawal necessary now? Are other options available? Do I have emergency savings I can use instead? Do I understand the tax, fees, and potential lost investment growth? Sophie’s experience is not a criticism of her decision; it is a reminder to consider these questions before applying.
The cost of living creates real financial strain, but retiring without enough money can carry a greater long-term cost. Check your pension benefit statements, confirm that contributions are being paid into your fund, and calculate the likely payout if you are considering withdrawing. Where possible, prioritise building and replenishing your emergency savings so that you have a financial buffer when unexpected expenses arise. Informed decisions today can help protect your future financial independence.
Your retirement savings are designed to support your future self. Before making a withdrawal, make sure you understand both the money you will receive today and the money you may be giving up tomorrow.
To check whether your employer appears on the FSCA’s published list of employers with arrear retirement fund contributions, visit www.fsca.co.za. For information about your Two-Pot savings, speak to an authorised financial adviser or retirement benefits counsellor. If your contributions remain unpaid, contact your retirement fund administrator. If your complaint remains unresolved, you can lodge a complaint free of charge with the Office of the Pension Funds Adjudicator (OPFA) at www.pfa.org.za.
Alicia Moses is the Manager of the Strategic Framework Unit in the Consumer Education Department of the Financial Sector Conduct Authority (FSCA), South Africa