Two-pot after two years: What every trustee needs to know
The retirement industry is cautiously optimistic that the Two-pot retirement system is achieving one of its primary objectives: helping members preserve more of their retirement savings. While repeat withdrawals remain a concern, early evidence suggests that preservation rates are improving.
Two years after its introduction, the system has revealed both expected outcomes and unexpected consequences, offering valuable lessons and important considerations for r retirement fund trustees.
Managing withdrawals without sacrificing long-term returns
March 2026 saw withdrawal volumes rise back to levels last seen when the Two-pot system was launched. This coincided with renewed pressure on markets, including the conflict in Iran, soaring fuel prices and inflation.
Michelle Acton, chief customer officer at Old Mutual Corporate, warned that withdrawals carry a timing risk for members: financially pressured members often can’t wait for markets to recover before accessing their savings, so a withdrawal made during a market downturn can lock in losses and materially reduce long-term retirement outcomes.
Acton cautioned retirement funds against holding the savings pot entirely in cash or highly conservative portfolios. While this approach may reduce volatility for members who withdraw, it can also erode long-term returns for the majority of members who remain invested. Instead, she argues funds need investment strategies that balance long-term growth with enough available liquidity, so that members who need to withdraw during weak markets aren’t forced to carry the full impact of the downturn alone.
Trustee takeaway
Does your fund’s investment strategy strike an appropriate balance between liquidity and long-term growth? And during periods of market stress, are members who need to withdraw adequately protected from losing more value than necessary?
Repeat withdrawals and financial literacy
Industry research emerging from the first two years of the Two-pot system shows a worrying trend: a rise in repeat withdrawals driven by ongoing financial pressure rather than one-off emergencies. This reflects the financial strain many South Africans face from rising living costs and persistent economic strain.
Trustee takeaway
Repeated withdrawals are not only a retirement savings challenge, but also a financial wellness and education challenge. Trustees should prioritise clear, practical member communication that helps individuals understand the long-term cost of repeatedly accessing their savings pot.
New laws to tackle contributions defaults
The implementation of the Two-pot system also highlighted a longstanding challenge within the retirement industry: employers who deduct retirement fund contributions from employees’ salaries but fail to pay those contributions over to the fund. The Financial Sector Conduct Authority (FSCA) found arrears reaching R8.33 billion, affecting close to 590 000 members. The problem is particularly pronounced in sectors such as private security, transport, construction, and the metals industry.
In response, two important regulatory developments have followed. In January 2026, the Minister of Employment and Labour removed an old exemption. Labour inspectors can now act against employers who deduct retirement contributions from your pay but don’t pay them to the fund on time.
A further bill, currently being refined by the Department of Employment and Labour after public comment closed in March, if enacted, would treat unpaid contributions the same as unpaid wages. Funds would be able to deal with unpaid contributions through multiple channels – the Labour Court and the CCMA – and not just the Pension Funds Adjudicator.
Trustee takeaway
Contribution monitoring remains a core trustee responsibility. Boards should ensure they have robust processes to identify payment defaults early, investigate discrepancies and take appropriate action. While recent and proposed regulatory changes provide stronger enforcement tools, trustees remain accountable for reporting, documenting and pursuing contribution arrears until they are solved.
Fair fees for all
The introduction of the Two-pot system has also brought increased attention to the fees members pay when accessing their savings. Following concerns that withdrawal fees varied widely across providers, the FSCA launched an investigation. It found the average fee to withdraw R30 000 was around R357, though these range from flat fees of R200 to R600 to sliding-scale charges of around 2% of the withdrawal amount at some administrators.
The FSCA also estimated that implementing the Two-pot system cost the industry a once-off R1.6 billion. To recover a portion of these expenses, some funds and administrators have increased their administration fees.
While the FSCA does not regulate prices and cannot prescribe what providers may charge, it has said that it will engage administrators whose fees are notably above industry norms and will issue guidance on what it considers fair and transparent pricing.
Trustee takeaway
Trustees should understand how withdrawal fees and any administration fee increases have been determined. Ask your fund's administrator to explain how increases were calculated. If fees are significantly higher than the industry average, trustees should be able to explain why. Equally important is ensuring that all fees are communicated clearly and transparently, enabling members to make informed decisions about accessing their savings.
Could the retirement component be accessible?
As policymakers assess the early impact of the Two-pot system, attention is already turning to what the next phase of retirement reform could look like.
National Treasury is considering whether members should be allowed limited access to the retirement component in exceptional circumstances, such as retrenchment or severe financial distress.
Any such access would be subject to strict conditions, likely including proof that the member has no other income (such as UIF payments) after a set period, and a limit on how much can be withdrawn, rather than a full cash lump sum.
The proposal has, however, prompted questions from across the industry. Some have raised concerns about how practical this will be to administer, including who decides whether a member qualifies as being in financial distress and what evidence would be required.
For now, the debate reflects the same tension at the heart of the Two-pot system itself: how to provide meaningful financial support during times of hardship while protecting retirement outcomes over the long term.
Trustee takeaway
This remains a proposal rather than a regulatory reality. Trustees should closely monitor further announcements from National Treasury. More broadly, it is worth remembering that most of the current research on Two-pot comes from separate industry players and their own member data. In March 2027, the first industry-wide analysis of how the Two-pot system is affecting preservation rates will form part of a comprehensive retirement industry report planned by the FSCA. Trustees should keep that report on their radar.
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All content is for general educational purposes and does not constitute formal financial advice. Always consult a qualified, licensed financial professional before making any financial decisions.