By: Vuyokazi Mabude, Head of Knowledge and Insights at Old Mutual
With South Africa’s new Two-Pot Retirement System about to launch, research suggests that fewer people plan to dip into their retirement savings early. The 2024 Old Mutual Savings and Investment Monitor’s deep dive into the Two-Pot Retirement System reveals that the number of working South Africans with retirement savings provision (income R8,000 – R119,000) who said they were likely to withdraw their savings has dropped significantly by 10%, from 62% in 2023 to 52% in 2024.
Vuyokazi Mabude, Head of Knowledge and Insights at Old Mutual, attributes this encouraging trend to heightened awareness and education about the Two-Pot Retirement System, alongside improved economic conditions. “This indicates that South Africans are becoming more focused on securing their financial future. Our research shows that people have a better understanding of the importance of saving for retirement, and they are feeling more confident about their finances and making smarter decisions,” she says
“Furthermore, broader access to financial advice has significantly boosted financial confidence, which was a key finding in this year’s Monitor, leading to more informed and better money decisions.”
The Monitor also suggests that confidence in the adequacy of retirement savings affects views on the Two-Pot Retirement System. “Higher confidence appears to also typically correlate with a positive perception of Two-Pot, while working South Africans who have lower confidence in the adequacy of their retirement savings displays greater scepticism. “Lower confidence is more common among lower-income groups and individuals younger than 50, who are also more likely to withdraw their retirement savings,” she says.
The study also found that respondents who better understand the Two-Pot retirement system are more likely to view the Two-Pot Retirement System positively. “Those with a
better understanding of the system (57%) tend to appreciate its benefits. Enhancing understanding and confidence in retirement savings can improve perceptions of retirement reforms,” says Mabude.”This suggests there is an opportunity to provide additional information, which may guide them to reconsider withdrawing their funds.”
Other interesting findings from the Monitor on the topic of retirement and the Two-Pot Retirement System include:
· Only 26% of working South Africans are ‘Very confident’ that they have enough savings for retirement, compared to 38% of higher-income earners (R60,000 – R119,999)
· Awareness of the Two-Pot Retirement System is highest among those aged 50 and above (68%), compared to just 51% among those aged 18-29.
· Saving for a comfortable retirement continues to be the top savings goal among employed South Africans, followed closely by saving for a rainy day and paying off debt. Old Mutual remains confident that introducing the Two-Pot Retirement System will result in better outcomes for more South Africans. “Research undertaken by Old Mutual Corporate Consultants suggests that over a lifetime of savings in an occupational fund, like a pension or provident fund, a member can expect to save between 2 – 3 times more money than in the old system,” says Mabude.
“The new system is designed to offer greater flexibility during emergencies while safeguarding long-term savings by preventing members from withdrawing their entire balance—a practice that has proven to be the greatest destroyer of long-term value.” While these changes are promising, much more needs to be done to secure the financial future of the majority of South Africans. “After the implementation of the Two- Pot Retirement System, Old Mutual looks forward to collaborating with the government and the private sector on the next phase of National Treasury’s retirement-industry reform process, to make a comfortable retirement a reality for more people,” concludes Mabude.
“We remain optimistic about the potential of retirement reform to enhance financial security. These insights underscore the need for ongoing financial education to ensure that all South Africans benefit from the reform and achieve a secure financial future.”
