When South Africa’s two-pot retirement system came into effect on 1 September 2024, most attention focused on withdrawals. How much money would members take out? Would retirement savings be eroded? Could administrators cope with the expected surge in claims?
Within the first year of implementation, the retirement fund industry had processed more than four million withdrawal transactions worth over R57 billion, according to figures shared by Liberty Corporate in October 2025.
Nearly two years later, Alexforbes believes the reform may be producing a less obvious but potentially more significant long-term consequence.
At its annual-results presentation for the year to the end of March 2026, Alexforbes pointed to growing evidence that compulsory preservation is changing member-retention patterns within the funds it administers.
Although billions of rand have flowed out of retirement savings, a growing number of former employees are remaining connected to retirement funds long after leaving their employers.
That trend, Alexforbes believes, could ultimately prove to be one of the most important long-term consequences of the reform.
From industry concern to business-as-usual
When the two-pot system was introduced, many retirement fund administrators warned of the operational complexity involved in processing millions of withdrawal requests while simultaneously calculating tax, preserving retirement balances, and maintaining member records.
Alexforbes described the implementation as one of the most significant operational exercises undertaken by the retirement industry in recent years. The reform required retirement funds and administrators to build new systems, process unprecedented transaction volumes, and manage member communication on a massive scale.
The group says those concerns have largely subsided.
Alexforbes has now processed more than 1.1 million claims worth R15.5bn through its systems, with almost R4bn collected in tax on behalf of the South African Revenue Service. The process is now largely automated, with most claims settled within five business days.
The scale of withdrawals remains significant. In its year-end revenue announcement on 1 April 2026, SARS reported that it had collected R11bn in PAYE from two-pot withdrawals during the 2025/26 tax year, following R11.9bn collected in the previous year. SARS also cited two-pot withdrawals as one of the factors supporting domestic VAT collections, highlighting the broader economic impact of the reform.
Claims data also suggests that many members are making repeated use of the savings component. According to Alexforbes, 67% of members who claimed during the 2025 tax year submitted another claim during 2026, while 31% have made withdrawals in all three tax years since the system was introduced.
Claims volumes and the associated administration fees were lower during FY2026 than during the initial implementation period, suggesting that the first wave of pent-up demand may be beginning to normalise.
What initially appeared to be one of the biggest operational challenges facing retirement fund administrators has increasingly become part of normal business operations.
The larger story, however, may be what happens after members leave employment.
Members are staying in the system
Historically, employees who resigned or changed jobs often withdrew their entire retirement benefit in cash. Once that happened, they effectively disappeared from the retirement fund ecosystem.
The two-pot system changed that dynamic.
Because a significant portion of retirement savings must remain preserved, many departing employees now continue to hold retirement assets within their former fund, even after their employment relationship ends.
Chief executive Dawie de Villiers said the effect of compulsory preservation was emerging much faster than expected.
Alexforbes has already started seeing higher numbers of members remaining within the funds it administers because, unlike under the previous regime, departing employees can no longer withdraw all their retirement savings when changing jobs. As De Villiers put it: “They stay a member in the fund because they have to.”
The effect can already be seen in the group’s membership statistics.
Alexforbes reported that active retirement fund members under administration increased by 17% during FY2026, reaching more than 1.33 million members.
Although not all this growth can be attributed directly to two-pot preservation, management identified compulsory preservation as an important contributor to the trend.
The group noted in its annual results commentary that although two-pot claim volumes and related fees declined year-on-year, the compulsory preservation component is adding to membership numbers and ongoing servicing requirements.
A structural shift for retirement funds
For retirement fund administrators, compulsory preservation may represent a significant structural change.
In the past, retirement funds experienced a steady erosion of assets and member records as employees changed jobs and withdrew their benefits.
Now, many of those members remain within the funds they previously would have exited.
De Villiers believes that over time preservation could begin offsetting a meaningful portion of the natural outflows experienced by retirement funds.
“Over five years, we’ll start seeing that. You’ll probably see the preservation part of it starting to negate the outflows that we have on a yearly basis,” he said.
As preserved balances accumulate over time, the effect could become increasingly significant.
The amounts involved are still relatively modest because members have only been contributing to their retirement and savings pots since September 2024. However, as balances build over several years, administrators may begin to see a growing pool of preserved assets remaining within retirement funds.
An advice opportunity emerges
The trend also creates new opportunities for advisers and retirement fund administrators.
Rather than losing contact with members when they leave employment, administrators now retain an ongoing relationship with many of them.
De Villiers said Alexforbes sees an opportunity to engage these preserved members before they become part of the industry’s long-standing unclaimed-benefits problem.
“We know exactly who that member is,” he said.
The objective is to help members make better decisions about their preserved savings while introducing them to broader financial planning and wealth management solutions.
For administrators and advisers alike, the challenge now shifts from processing claims to engaging members. As preserved balances grow over time, decisions around preservation, transfers, retirement planning, and eventual drawdown strategies are likely to become increasingly important.
For Alexforbes, which is simultaneously expanding its retail advice business and strengthening its intermediary strategy, the preserved member base represents a potentially valuable pipeline of future clients.
In some cases, members may remain within the institutional environment. In others, they may eventually transition into retail advice relationships as their financial needs evolve.
Much of the public discussion around two-pot has focused on the money leaving retirement funds. But Alexforbes believes the more important story may ultimately be the money – and the members – that stay behind. If that trend continues, the reform could reshape not only retirement outcomes, but also the way funds, administrators, and advisers engage with clients.
