The two-pot system was established to make it easier for South African citizens to access a portion of their retirement savings during times of financial hardship. However, many participants are often surprised to find that the amount credited to their bank account is significantly less than the amount they requested.
The amounts withdrawn from the Savings Component of the two-pot system have been substantial. According to a SARS report, by January 2025, over two million taxpayers had withdrawn a gross amount of R43.4 billion from their Savings Components. These funds were frequently used to pay off debts or cover living expenses.
It is important to remember that withdrawals should not become an annual financial lifeline. SARS taxes them as income at the participant's marginal rate, and administrators may charge fees, meaning the actual payout can be much less than requested.
The Financial Sector Conduct Authority (FSCA) acknowledges that emergencies can necessitate access to funds. To avoid further financial strain, participants are advised to understand potential deductions before applying.
Consider the example of Sophie, who faced unexpected medical expenses and requested R30,000 for treatment. After SARS deducted R10,800 at her marginal rate of 36%, and the administrator took R500, she only received R18,700. Participants should use the SARS two-pot system calculator to estimate the net payout before submitting an application. Taxes and fees can leave a household in difficulty during a crisis, and withdrawals also reduce future investment growth.
How the Two-Pot System Shapes Your Money
The contributions you and your employer make are distributed across three components:
- Savings Component: One third (33.3%) of current contributions goes here. Participants can withdraw no less than R2,000 once per tax year, subject to tax limits and fees. For instance, a participant earning R22,000 per month and contributing about R6,000 (27.5%) would direct approximately R2,000 here and R4,000 to the Pension Component.
- Pension Component: Two thirds (66.7%) of current contributions go here. This is saved for retirement and cannot be withdrawn early; upon retirement, it must be used to purchase an annuity.
- Vested Rights Component: These are savings accumulated before August 31, 2024, which remain subject to inheritance rules. With the implementation on September 1, 2024, 10% of existing pension savings were transferred to top up the Savings Component, with a limit of R30,000 per fund.
The True Cost of Early Access
Early access can affect your financial situation in two ways: through immediate deductions and through lost investment growth.
- Tax Hit: Withdrawals from the Savings Component are taxed as ordinary income at your marginal rate, which ranges from 18% to 45%, and may be accompanied by administrative charges. This is not cash in hand. In Sophie's case, 36% of the requested R30,000 went to taxes and fees before she received it.
- Loss of Compounding Growth: Compounding occurs when investment returns generate further returns. Consider a 35-year-old earning R35,000 per month who withdraws R10,000 from the Savings Component. The calculation process is as follows: Gross withdrawal is R10,000. Minus administrative fee: R500. Taxable amount: R9,500. SARS tax (31% of R9,500): R2,945. Net payout to the participant: R9,500 - R2,945 = R6,555. The participant receives R6,555. If the R10,000 had remained invested at an assumed annual growth rate of 7%, it could have grown to approximately R19,672 in 10 years, R38,697 in 20 years, and R76,123 in 30 years by age 65. If this is combined with other savings in your pension fund, this amount could be even higher. Thus, the withdrawal costs more than the cash received today because it also forfeits the potential growth of the entire R10,000 amount. These figures are illustrations; actual returns and taxes depend on individual circumstances.
Financial Wellbeing: Managing and Protecting Earnings
Financial wellbeing means meeting present needs while simultaneously protecting future financial independence. According to the FinScope Consumer South Africa 2025 survey by FinMark Trust, 48% of adults in South Africa do not save at all, while the proportion saving through formal financial institutions has decreased from 30% in 2024 to 22% in 2025.
This data highlights the difficulties many South Africans face in balancing immediate financial needs with saving for future goals and building long-term financial security. Retirement security also depends on contributions being made to your fund. Some employers deduct contributions from salaries but fail to remit them. Regularly checking fund statements against payslips can help identify issues early and protect retirement savings.
The FSCA regularly publishes lists of employers reported by pension funds for failing to pay pension contributions withheld from employee salaries. On July 2, 2026, the FSCA published a list of 6,064 employers reported for non-compliance with Section 13A of the Pension Funds Act. These employers were required to pay approximately R8.33 billion in unpaid pension contributions, affecting about 590,000 fund members. This is a serious legal matter, as Section 13A establishes employers' obligations to remit contributions to the relevant pension funds. Non-compliance can constitute an offense under the Pension Funds Act. These unpaid contributions jeopardize employees' retirement savings and financial security.
To protect your retirement savings:
- Check your monthly payslip against the benefits statement or confirm contributions with the fund administrator.
- Ask your employer's HR or accounting department, as well as the fund's principal officer, about any outstanding amounts.
- If the issue remains unresolved, lodge a complaint with the Pension Funds Adjudication Office (OPFA) or contact the FSCA queries department.
- Report missing contributions as soon as you notice them.
Building True Long-Term Resilience
The two-pot system provides controlled access to a portion of your retirement savings while keeping the majority of contributions for retirement. However, it is important to remember that the two-pot system is not a substitute for an emergency fund. Where possible, create separate reserves for emergencies to cover unforeseen expenses, such as medical bills, urgent car repairs, or temporary loss of income, without resorting to retirement funds.
If financial pressure forces you to withdraw funds, consider both the immediate payout and its future value. Before applying, ask yourself: is this withdrawal truly necessary now? Are there other options? Do I have an emergency fund I can use instead? Do I understand the taxes, fees, and potential lost investment growth? Sophie's experience is not a criticism of her decision, but a reminder to consider these questions before applying.
The cost of living creates real financial strain, but retiring without sufficient funds can have a higher long-term price. Check your pension benefit statements, confirm that contributions are going into your fund, and calculate the likely payout if you are considering a withdrawal. Where possible, prioritize creating and topping up emergency reserves to have a financial buffer when unforeseen expenses arise. Informed decisions today can help protect your future financial independence.
Your retirement savings are meant to support your future self. Before making a withdrawal, ensure you understand both the money you will receive today and the money you might lose tomorrow.
To check if your employer is on the FSCA's published list of employers with overdue pension contributions, visit www.fsca.co.za. For information on your Two-Pot savings, consult an authorized financial advisor or pension consultant. If your contributions remain unpaid, contact your pension fund administrator. If your complaint remains unresolved, you can file a free complaint with the Pension Funds Adjudication Office (OPFA) at www.pfa.org.za. Alicia Moses is the Manager of the Strategic Framework Department at the FSCA's Consumer Education Department in South Africa.