Early evidence from Old Mutual Corporate suggests the two-pot retirement system is improving the preservation of retirement savings, despite continued high levels of withdrawals by financially strained members.
Preservation refers to members who are not cashing out their savings, from either the savings component or the savings and vested components, when changing jobs. Cashing out before retirement is one of the main reasons South Africans retire with too little saved.
According to Old Mutual Corporate, the share of retirement savings remaining invested when members exit employment increased from 39% before the two-pot system was implemented in September 2024 to 52% by the end of 2025.
This improvement represents a meaningful increase in the proportion of benefits retained within the retirement system rather than withdrawn as cash, said Michelle Acton, the chief customer officer at Old Mutual Corporate.
The findings on preservation are based on an analysis of claims within Old Mutual Corporate’s retirement fund administration membership base of about 800 000 members, where an average of 50% of the total membership was eligible to claim. Specific insights were drawn from the Old Mutual SuperFund, which is the oldest and largest umbrella fund in South Africa.
“The early evidence suggests the two-pot system is delivering on its design and that responsible flexibility can still improve retirement outcomes over time,” Acton said. “It means members can access savings in moments of pressure, while ensuring that the majority of their retirement savings remains protected and invested. The next step is to apply that same design thinking to participation and contribution levels, so that more savings remain in the system over time.”
Acton said it is too early to say whether the two-pot system has led to a decline in members resigning to access their retirement savings.
“Historically, it has also been difficult to distinguish clearly between members who resigned specifically to access their retirement savings and those who resigned for other personal or employment-related reasons.”
Meanwhile, National Treasury has signalled that it may consider allowing members to access their retirement component on retrenchment. Many in the industry see this as potentially weakening the two-pot system’s preservation architecture.
Asked for Old Mutual Corporate’s perspective on the proposal, Acton said it recognises the importance of supporting members who experience genuine financial hardship, including retrenchment. “At the same time, it believes the current two-pot framework seeks to balance short-term access with the long-term objective of improving retirement outcomes. The compulsory-preservation element remains critical to protecting members’ retirement savings and ensuring that retirement funds continue to serve their intended purpose over time.”
Withdrawals reflect financial strain
Preservation has improved even as withdrawal activity has returned to inception-level volumes, with about 80% of eligible members of the Old Mutual SuperFund having accessed their savings component at least once and a significant proportion making repeat withdrawals.
“This improvement does not mean the underlying financial pressure has eased. If anything, the withdrawal data shows why structured access remains necessary,” said Acton.
Old Mutual Corporate’s survey found that withdrawals are being driven by financial necessity rather than discretionary spending. Claims are primarily used for basic living expenses (34%), debt repayment (26%), and emergencies (26%), with spending concentrated on essentials such as food, rent, electricity, and transport.
“Liquidity pressure is real, and for many South Africans, access to savings is not optional,” said Acton. “What matters is that this access is now structured. Members are no longer required to resign or withdraw everything to meet short-term needs on exit from employment, and that is where the reform is starting to make a measurable difference.”
Preservation is not the same as adequacy
Old Mutual Corporate’s research suggests that improved preservation under the two-pot system could increase retirement savings by two to three times over a working lifetime, potentially shifting the proportion of South Africans on track for retirement from about 6% to closer to 20%.
However, Old Mutual Corporate says better preservation alone will not solve the country’s retirement adequacy problem. Preserving savings means keeping existing money invested for longer. Adequacy, by contrast, is about whether people are saving enough in the first place to retire with sufficient income.
“Preserving what you have keeps more money invested,” said Acton. “But adequacy depends on how much is contributed and whether people remain in the system over time.”
“If participation remains quasi-voluntary and default contribution rates stay low, under-saving becomes embedded. We know which levers move outcomes. The question is whether we are prepared to use them.”
Mandatory membership and calibrated contribution defaults
In this regard, Acton said the two-pot system strengthens the case for the next logical reform measures, namely, automatic (or mandatory) fund membership for employees and calibrated contribution defaults.
Regarding mandatory membership, Acton said the exact scope – including income thresholds, employment categories, and employer size – would have to be determined through policy consultation to balance coverage, affordability, and implementation.
She said National Treasury has previously estimated that approximately two-thirds of formal-sector employees belong to a retirement fund, which implies that roughly one-third of formal-sector employees are not covered by an occupational retirement fund.
Statistics South Africa’s Quarterly Labour Force Survey for the third quarter of 2025 recorded about 11.98 million people employed in the formal sector. Using Treasury’s two-thirds coverage estimate as a broad proxy, this suggests that about four million formal-sector workers may be outside occupational retirement fund coverage.
Acton said Old Mutual Corporate envisages calibrated contribution defaults being implemented gradually, “through a phased and consultative approach that gives employers and members time to plan”.
For example, if the proposed minimum contribution rate is 10%, this could be introduced over five years, with contributions adjusted annually, ideally when salaries are increased. This would make the change easier to absorb from an affordability and budgeting perspective.
“Implementation could also be sequenced by employer size, starting with larger employers, followed by medium-sized businesses, and then smaller employers. In practical terms, this could be rolled out over a five- to ten-year period, with the long-term objective of expanding retirement fund coverage among income earners in a sustainable and inclusive way,” Acton said.
