Most of the R32 billion in net receipts from two-pot withdrawals went towards repaying debt and immediate consumption, but some consumers took on more debt by using their withdrawals to finance vehicle purchases, according to the Bureau of Market Research (BMR).
There is no evidence to indicate that households used the withdrawals to bolster their savings, says the BMR, which is a market research entity within the University of South Africa.
Its analysis of deposit trends showed no deviations from historical patterns, with no significant increases in savings accounts or other investment vehicles.
“This absence of savings growth suggests that consumers were more focused on immediate financial relief than on safeguarding their future. Given that the two-pot system draws from retirement funds, this trend raises concerns about the long-term financial security of those who opted to withdraw,” the Bureau said.
The BMR’s findings align with a survey conducted by Alexforbes, which showed that 80% of claimants used their withdrawals for debt repayment and essential living expenses.
Read: Alexforbes reports R7 billion in two-pot system withdrawals
The study by the BMR’s Personal Finance Research Division was aimed at establishing how consumers have used their savings benefit withdrawals since the two-pot retirement system took effect on 1 September last year.
The researchers drew on data from multiple sources, including the South African Revenue Service (for withdrawal claims and associated tax deductions), National Treasury (historical tax collection figures), VeriCred Credit Bureau (credit data), the South African Reserve Bank, Statistics South Africa (spending patterns), and eNaTIS (vehicle registrations).
From 1 September 2024 to 31 January 2025, SARS processed valid withdrawal claims totalling R43.4bn. An estimated R11bn was deducted in taxes, leaving a net amount of about R32bn in the hands of consumers.
This R32bn represents the actual disposable funds available for allocation toward various financial priorities. According to the SARB, this net figure equates to roughly 1.4% of the total bank credit extended to households, which is relatively small.
Most money went to repay debt
The standout finding from the study is the prominent role debt repayment played in the allocation of two-pot withdrawals. Many consumers seized the opportunity to address their outstanding financial obligations, with varying impacts across different types of debt.
The study noted that the trend of increasing overdue debt reversed in September 2024 for specific credit types, including clothing retail accounts, cellphone contracts, and education loans. But this was temporary – the overdue balances for cellphone contracts and education loans subsequently rose.
The BMR said this suggests that two-pot withdrawals were primarily used for once-off repayments rather than continuous repayments.
From October onwards, overdue balances for general retail and furniture store accounts also bucked the trend. The declining trend persisted through December for clothing and furniture accounts, which aligns with retail sales data that showed no unusual spike in sales. This indicates that consumers prioritised debt repayment over new purchases, the BMR said.
Spending on essential items
Two-pot withdrawals had an impact on consumption patterns – primarily general consumer purchases rather than luxury or non-essential items.
Retail sales by general dealers, which include essential goods such as groceries and household items, rose noticeably in September and October 2024. This increase exceeded typical seasonal expectations, suggesting that consumers used their withdrawals to cover day-to-day necessities, the BMR said.
Spending on items such as clothing and furniture showed some growth, but the study attributed this largely to seasonal factors, such as Black Friday promotions in November 2024, rather than two-pot withdrawals. The historical trends in these categories remained intact, indicating that the additional liquidity did not significantly fuel discretionary purchases.
Increase in vehicle purchases
One of the most striking consequences of the two-pot withdrawals was a surge in vehicle purchases, particularly in the used car market:
Between September and December 2024, used car registrations soared, with October 2024 marking the highest monthly total since 2012.
Although lower interest rates likely contributed to higher vehicle sales, the magnitude of the increase – particularly in September and October – suggests that two-pot receipts were used as deposits for used vehicle purchases, the BMR said.
Credit data corroborated this trend, showing an accelerated growth in outstanding vehicle finance debt during September and October 2024, coinciding with an increase in vehicle registrations.
Although total vehicle financing debt continued to grow in November and December, the rate of increase slowed. This aligns with vehicle registration data, which showed diminishing deviations from historical trends, indicating that the initial surge in vehicle purchases driven by two-pot withdrawals was not sustained in the later months.
New vehicle registrations followed a more conventional pattern, increasing in October but stabilising thereafter, making it difficult to isolate the influence of two-pot receipts from other macro-economic factors such as a reduction in interest rates, the BMR said.
The BMR said the findings highlight the financial priorities of South African households, emphasising the need for continued financial literacy and responsible debt management strategies.
“Given that the two-pot withdrawals did not lead to significant increases in savings and were primarily used for immediate financial needs, policymakers and financial institutions may need to focus on educating consumers about long-term financial planning.”
Claims for 2025 are already flowing in
The BMR’s observations coincide with Alexforbes disclosing last week that it has already received more than 33 000 claims for savings benefit withdrawals since the start of the 2025/26 tax year on 1 March.
Research by Alexforbes found that individuals who claimed in the previous tax year had a high likelihood of claiming again in the new tax year. “This already appears to be the case, given the significant numbers of claims in just four days,” the financial services group said in a statement on 5 March.
“This high level of claims so early in the tax year once again highlights that many South Africans are financially stretched.”
Although the two-pot system provides much-needed financial relief for retirement fund members facing short-term financial constraints, Alexforbes urges members to consider the long-term impact of withdrawing from their retirement savings.
Withdrawing funds from the savings component reduces the capital that will compound over time to provide financial security in retirement. Members should carefully assess whether they genuinely need the funds or whether alternative financial solutions are available.
Savings benefit withdrawals are subject to taxation as part of a member’s annual income. This could push the member into in a higher tax bracket and result in an increased tax liability.
Alexforbes warns that heightened withdrawal activity has attracted the interest of scammers and fraudsters.
Members are advised to use the secure platforms of financial services providers to submit their claims.
Members must never share their personal information, including banking password or one-time passwords, with anyone claiming to assist with withdrawals. They should be suspicious of unsolicited and unexpected messages about two-pot withdrawals that purportedly come from financial institutions.
