While the two-pot retirement system appears to be improving preservation levels, a rising concern is that, in a work environment where people are changing jobs more frequently, compulsory preserved savings are becoming fragmented across multiple funds, with negative consequences for long-term outcomes.
This issue was raised by Anna Siwiak, head of product development at Sanlam Corporate: Umbrella Solutions, in her presentation at the launch of the 2026 Sanlam Benchmark Survey in June. Siwiak and Melissa Reddy, senior investment specialist at Sanlam Corporate: Investments, expanded on this concern in the Insights Report accompanying the survey.
Siwiak says that following the implementation of the two-pot system in September 2024, there has been a notable increase in members of the Sanlam Umbrella Fund retaining preserved retirement pots within the fund, a trend she expects is consistent across other umbrella funds.
She says many members are accessing the maximum permissible cash portion when they change jobs, leaving just the compulsory preservation component invested in the fund. This results in a growing proportion of members accumulating multiple preserved pots across different providers as they change employers over time.
“This fragmentation introduces a number of risks,” Siwiak says. “Smaller, dispersed balances are more susceptible to fee erosion, potentially undermining long-term outcomes. In addition, each preserved pot remains subject to regulatory processes, which can increase administrative complexity.”
Reddy sees this trend in the survey’s statistics on the Millennial generation. “Unlike previous generations, Millennials are more likely to change jobs, resulting in savings across multiple providers and products,” she says.
This presents a practical challenge for members: it is often difficult to form a single, consolidated view of one’s retirement position, Reddy says. “This lack of visibility can make it harder to assess whether one is truly on track, reduce confidence in decision-making, and ultimately weaken engagement,” she says.
Siwiak says the issue highlights the increasing importance of effective member guidance and advice.
“Supporting members to consolidate benefits where appropriate, maintain visibility over their accumulated savings, and make informed decisions will be critical in ensuring that the flexibility introduced by the two-pot system does not inadvertently compromise retirement adequacy,” she says.
Guidance and visibility become critical
Vickie Lange, the head of solutions enhancement at Alexforbes Corporate Solutions, says appropriate guidance and advice are crucial in members’ management and consolidation of their preserved savings.
“When members change jobs they can leave their retirement pots – or, in fact, their entire benefit – in the fund they were contributing to, and this would be a preserved benefit in the fund’s records. Alternatively, they may transfer their savings to their new employer’s fund, if that’s an option, or consider a preservation fund or retirement annuity (RA) fund.
“Alexforbes data shows an increase in preserved benefits. This positive trend needs to be supported by ongoing member education on consolidation options based on members’ personal circumstances,” Lange says.
She emphasises the need for members to maintain contact with the funds in which they have preserved savings.
“Members who have left money in retirement funds related to previous employment should ensure that their contact details are up to date with the relevant administrators. This is vital to ensure they continue to receive statements and updates about their retirement savings. In addition, it is critical that the fund has an up-to-date beneficiary nomination form,” Lange says.
Responding to the concern that fees might erode small values in multiple preserved pots, the Financial Sector Conduct Authority said that the Default Regulations for retirement funds require that administration fees for paid-up members must be fair, reasonable, and commensurate with fees for active members.
“Generally, the assets of the fund remain invested and for as long as the return on investment exceeds the costs the assets will continue to grow. The challenge is when unclaimed assets are invested in liquid assets with lower returns to cater for the payment of valid claims, it is possible that these assets can be eroded by tracing fees, among others, although funds should set up their fee structure in such a way that it is proportionate with the services provided for active versus passive investing and the appropriateness thereof based on the fund’s member profile and approved investment policy statement as required by Regulation 28 of the Pension Funds Act,” the FSCA says.
The authority points out that while costs are not regulated by the current legislation, as part of its ongoing supervision of retirement funds, they “are monitored as part of assessing value for money”.
Consolidation does not always mean combining funds
From an adviser’s point of view, it may not be advantageous for a client to consolidate multiple sources of preserved savings into a single vehicle, as long as fees, as a percentage of assets, are consistent across investments and there is an overall investment strategy. This is best managed on a single investment platform, according to Craig Torr, Certified Financial Planner and director of Crue Invest in Cape Town.
“Typically, we encourage clients with multiple preservation funds to move them onto a single platform,” Torr says. “However, when it comes to combining the various funds, that’s not always necessary in our view, and it does limit your flexibility when it comes to retirement. If everything’s sitting in one fund, you either retire from it or you don’t. But many of our clients are downscaling their work – they’re not coming to a hard stop on a particular day – so they can stagger their retirement from the various funds. And as long as it’s not costing them any more, having those separate ‘line items’ can be of some value.”
Torr says although transfers may prove burdensome, migrating the funds onto a single platform makes sense from an investment management point of view.
“The administration fee is based on the total assets on that platform, and you can then ensure that your underlying investment strategies are aligned,” he says.
