A year into South Africa’s two-pot retirement system, industry experts say it is boosting long-term savings but warn that advisers must help members to navigate preservation, communication, and cybersecurity challenges to secure meaningful retirement outcomes.
Industry leaders convened at Ebnet’s “In the Moment Roundtable Rumble – two pots, one year” on webinar on 29 September to assess its impact.
Although the system is widely seen as a step forward for retirement savings, experts cautioned that achieving long-term benefits will require time, careful member engagement, and robust administration.
Overall, the two-pot system is already improving the outlook for retirement savings at a macro level, with projections indicating significantly higher accumulated funds over the long term. At the same time, new complexities around communication, unclaimed benefits, and cyber risks highlight the work still to be done.
Better outcomes at an industry level
Guy Chennells, the chief commercial officer of Discovery Corporate & Employee Benefits, said although individual experiences may vary, the two-pot system has improved outcomes for the industry overall.
“At an individual level, I would love for someone to show me a scenario where someone’s worse [off] under two-pot than they would have been under not two-pot,” he said.
Without two-pot, he explained, retirement fund assets would likely rise from about R4 trillion today to R50 trillion in 40 years, assuming minimal withdrawals and preservation rates of just 16%.
With two pots, however, even if every member withdrew annually, assets could reach more than R150 trillion – three times higher than without the reform. And if behaviour continues as Discovery has observed – with six in ten preserving and four in ten withdrawing – the figure could climb past R200 trillion.
Read: Two-pot system could quadruple South Africans’ savings, Discovery says
“The question was, is it better? Unequivocally, yes. If you’re asking, does it get people to decent retirement outcomes, not in every case, you still need to participate in your own future,” he said.
Joey Sankar, the executive of pension administration at EPPF, highlighted the importance of educating members to prioritise preservation. He noted the tension between immediate financial pressures, such as debt or education costs, and long-term savings.
“From my experience with the education that we’ve been driving, the very first thing is to say to members … is preserve, preserve, preserve,” he said.
Michael Prinsloo, the head of products at Alexforbes, echoed the long-term outlook, saying the system will take time to demonstrate its full benefits. He emphasised consolidating accounts, preserving vested pots, and exploring alternative financial solutions before accessing retirement savings.
“Those projection years … this is a long-term game, and we need to give the system time to show those benefits,” Prinsloo said.
Subedra Reddy, the executive head of actuarial services at NBC Holdings, praised the move from zero preservation to two-thirds compulsory preservation.
Reddy pointed out concerns about small balances, which may be eroded by fees if members are forced to preserve them, potentially leaving individuals with multiple small pots. Still, he believes the shift will improve retirement outcomes significantly over time. He pointed to the overall acceptance of the two-pot system by members.
“We haven’t had a massive outcry of members saying, you know, two-thirds is stuck in my preservation pot. Members have taken what they could and not really complained about what’s been left behind,” he observed.
Challenges still to come
Industry leaders agreed that its implementation brings new complexities that funds, administrators, and advisers will need to address.
Reddy said ongoing communication with members will become a central challenge. He noted that the traditional model – where members exited a fund and were paid out in full – was no longer relevant. Under the two-pot system, members will leave behind preserved balances that must be managed over decades.
“Now you have to keep in communication with them,” he said. “Once they realise that money is there, and it’s going to sit there, and I can’t touch it … to actually keep in contact with that member regarding investment choices, fees, etcetera, is going to be very difficult, very, very challenging.”
Reddy cautioned that the preservation system could lead to a surge in unclaimed benefits if accurate member information was not maintained. He highlighted the risk of members registering with work email addresses that lapse when they leave employment. Without up-to-date contact details such as personal emails, phone numbers, and addresses, administrators may lose touch with members, compounding an already significant problem.
“As much as the preservation will solve a lot of problems in the long term, it’s going to have a lot of challenges in the short term,” he said.
Chennells highlighted the risk of member confusion about what can and cannot be accessed under the new rules.
“People have very clearly heard the message I can access cash, but for whatever reason, haven’t heard the message that I won’t be able to access [the] retirement [component],” he said.
Chennells said there have already been “vociferous complaints” from members who accessed their savings pots but were shocked to find they could not withdraw preserved balances when leaving a job. He cautioned that sustained pressure to relax preservation rules could undermine the system’s long-term benefits.
“That’s the big risk for this system … once you loosen that, everyone will find a way to get it again, maybe not everyone, but you’ll be substantially back where you were,” he said.
Siphamandla Buthelezi, the executive head of platforms at NMG, drew attention to the risks of fraud and cybercrime as automation and digital engagement expand under the two-pot system.
“It might not be a real challenge right now, but I think it’s going to be,” he said. “With any automation, any technology, comes the opportunity for fraud.”
Buthelezi noted that the industry has strengthened its defences through cybersecurity standards, enhanced verification processes, and greater alignment with global practices. He pointed to systems that verify banking details against identity numbers before payments are processed as an example of safeguards already in place. However, he said that cyber resilience must go hand-in-hand with member education.
“There needs to be a huge focus on member education going forward,” he said. “Not just ‘you can take [money]’ but all the other points – what can you do within the system, what does it mean for you going forward?”
Preservation remains key
Sankar emphasised that preservation is the cornerstone of the system, and advisers and administrators must actively support members in understanding it.
He acknowledged the pressure between immediate financial needs and long-term retirement security, emphasising the importance of recovery mechanisms that enable members to maximise preserved savings.
Sankar also highlighted accountability, noting that the infrastructure for withdrawals exists but needs to be leveraged to support preservation.
“We are at the crawling stages, and we are saying to ourselves, what do we enable you better with in order for you to preserve, preserve, preserve. So, balance that equation, hold your administrators accountable, hold your employers accountable to the employee benefit that you have at the end of the day,” he said.
He said the next year will be critical for the system, with a focus on member understanding, education, and behaviours to ensure the long-term success of South Africans’ retirement savings.
