Compulsory preservation under the two-pot retirement system could leave a member better off than in Alexforbes’ previous-system scenario, even if the member empties the savings component every tax year.
But this protection does not come close to eliminating the cost of repeated withdrawals. Alexforbes projects a replacement ratio of 51% when a hypothetical member fully depletes the savings component annually, compared with 76.5% if the member leaves all retirement savings invested.
The findings are contained in Member Insights 2026, released by Alexforbes on 14 October 2026.
Compulsory preservation changes the outcome
The two-pot retirement system, which took effect on 1 September 2024, divides qualifying retirement fund contributions between two components.
Broadly, one-third is allocated to a savings component that members may access before retirement, subject to the rules governing withdrawals. The other two-thirds is allocated to a retirement component that generally cannot be taken in cash when a member leaves a retirement fund following termination of employment.
This differs from the previous system, under which members could generally withdraw their accumulated retirement benefits when leaving a fund following termination of employment, subject to tax.
During an online presentation of the report, Vickie Lange, the head of solutions enhancement in Alexforbes’ Corporate Solutions division, said the two-pot system protected twice as much of a member’s new contributions as it made accessible through the savings component.
According to Alexforbes, compulsory preservation of the retirement component explains why its two-pot scenarios produce better outcomes than its previous-system scenario, even where the savings component is repeatedly depleted.
Scenarios follow a new member over 40 years
The figures are projections for a hypothetical new member entering the two-pot system. They are not observed outcomes among existing retirement fund members.
The scenarios assume the member:
- earns an annual pensionable salary of R350 000 in today’s money;
- contributes 15% of pensionable salary towards retirement;
- earns a net investment return of 7% a year;
- contributes for 40 years; and
- retires at 65.
The projected retirement incomes also depend on Alexforbes’ actuarial assumptions for converting accumulated savings into a pension.
The model excludes savings in the vested component, which contains benefits accumulated before the two-pot system took effect. It is intended to compare future outcomes under specified savings-component withdrawal patterns.
Existing members may have vested benefits, different accumulated fund credits, contribution rates, salaries, investment returns, periods without contributions, and retirement dates. Their outcomes will also depend on when they withdraw from the savings component and how much they take.
Annual withdrawals reduce projected retirement income by one-third
Under the full-preservation scenario, the member leaves both components invested throughout the 40-year period. The model produces expected retirement income of R267 707 a year in today’s money and a replacement ratio of 76.5%.
If the member withdraws the full available savings-component balance every tax year, the projected income falls to R178 471 and the replacement ratio to 51%.
The pre-two-pot-system scenario produces projected income of R98 461 and a replacement ratio of 28.1%.
The report does not set out in its published assumptions how the behaviour underlying the 28.1% outcome was modelled. It does not state how often the hypothetical member changes jobs, how much is withdrawn, or when withdrawals occur.
Compared with full preservation, fully depleting the savings component every tax year reduces projected retirement income by R89 236 a year in today’s money. The annual-depletion outcome is one-third below the full-preservation result. Conversely, the full-preservation result is 50% higher than the annual-depletion outcome.
The amount and timing of a withdrawal matter
The report also models four scenarios in which a member makes one withdrawal from the savings component and makes no further withdrawals thereafter.
A member who withdraws the full savings-component balance in year 10 is projected to receive annual retirement income of R234 776, producing a replacement ratio of 67.1%.
If the member withdraws the full balance in year 30, the projected income falls to R192 039 and the replacement ratio to 54.9%.
The effect is smaller when only half of the balance is withdrawn. A 50% withdrawal in year 10 produces projected income of R251 241 and a replacement ratio of 71.8%. The same percentage withdrawal in year 30 produces projected income of R229 873 and a replacement ratio of 65.7%.
Within Alexforbes’ scenarios, a withdrawal in year 30 produces a lower outcome than the same percentage withdrawal in year 10 because less time remains for further contributions and investment growth. However, the scenarios compare the same percentage of the balance, not necessarily the same rand amount: the balance in year 30 would generally be larger.
The scenarios therefore do not establish that withdrawing earlier is always less costly. They show that the outcome depends on the proportion and value withdrawn, the balance left invested, the years remaining until retirement, and whether the member withdraws again.
Michael Prinsloo, executive for corporate solutions at Alexforbes, said during the presentation that a member who took half of the savings component after 10 years for an emergency, and then preserved thereafter, faced a trade-off but not the same outcome as a member who withdrew every year.
The reduction in retirement income is not the only cost of accessing the savings component. Withdrawals are added to members’ taxable income and taxed at their marginal rates.
As at 31 March 2026, the total tax paid to the South African Revenue Service on members’ behalf was R3.6bn. The average tax rate on withdrawals since the two-pot system began was 25%, although each member’s actual liability depended on the applicable marginal tax rate.
Repeat withdrawals are already occurring
The report’s administrative data show that a sizeable group of members has accessed the savings component in successive tax years.
By 31 July 2026, Alexforbes had processed more than 1.16 million savings-component withdrawals, with more than R16.2 billion withdrawn. The report divides this activity into three periods:
- more than 385 000 claims worth more than R6.9bn from 1 September 2024 to 28 February 2025;
- more than 410 000 claims worth more than R4.7bn from 1 March 2025 to 28 February 2026; and
- more than 365 000 claims worth more than R4.6bn from 1 March to 31 July 2026.
Lange said updated administrative data showed that approximately 1.2 million savings-component withdrawals worth about R17bn had been processed by the end of September 2026.
The difference reflects the cut-off dates: the full report provides totals to 31 July, whereas the online presentation updated them to the end of September.
The member-level data also show repeated use of the annual withdrawal opportunity.
Of the members who claimed during the 2025 tax year, 67% submitted another claim during the 2026 tax year. By 31 March 2026, 31% of the members who claimed during the 2025 tax year had made withdrawals in all three tax years covered by the analysis.
Lange clarified that the latter group consisted of about 100 000 members. The 31% does not refer to the entire active membership; it refers to members who had already claimed during the first tax year.
Alexforbes said most withdrawals appeared to reflect immediate financial pressure rather than a lack of awareness of the importance of long-term retirement savings.
The company cited an 18% increase in retrenchments between 2024 and 2025 and the membership’s average annual pensionable salary of about R320 000 as context for this interpretation.
Claims surge at the start of a tax year
Withdrawal activity was concentrated in a small number of months.
More than 230 000 claims worth over R3.9bn were submitted in September 2024, when the system took effect. This was followed by more than 80 000 claims worth over R1.4bn in October.
More than 95 000 claims worth over R780m were submitted in March 2025, and more than 220 000 claims worth over R2.7bn in March 2026.
Alexforbes said these four peak months accounted for about 62% of the withdrawals included in its analysis from the start of the two-pot system to 31 March 2026.
Lange said March could record between three and six times as many claims as an average month because the beginning of a new tax year makes another withdrawal available to eligible members.
