Old Mutual two-pot floodgates open – over 3,000 claims a day

Since the beginning of September, Old Mutual has received 226,000 claims from South Africans seeking to withdraw money from their retirement savings under the new two-pot system.

Old Mutual announced today that it has paid over 200,000 claims totalling R2.3 billion since the launch of the two-pot retirement system on 1 September 2024. 

This new system allows retirement fund members to withdraw a portion of their savings every year before retirement while another portion is kept in a vested ‘pot’.

It is a reform aimed at improving the accessibility and security of South Africans’ retirement savings. Under this system, retirement contributions are split into two “pots”:

• Savings Pot: Accessible before retirement, this portion allows individuals to withdraw a part of their savings under certain conditions, such as emergencies. The amount withdrawn is taxed, ensuring people use the funds responsibly.
• Retirement Pot: This portion remains locked until retirement age, ensuring that a significant portion of savings is preserved for retirement income.

When the system was implemented at the start of September, thousands of South Africans applied to withdraw funds from their accounts.

Several financial institutions have revealed the sheer volume of withdrawals they have seen since the system’s implementation.

The South African Revenue Service said it had received 1.2 million tax-directive applications for withdrawals, of which 1.1 million were approved. 

According to Momentum’s latest annual results, the insurer has also handled over 150,000 withdrawal claims, totalling R2.5 billion.

Alexforbes said it also experienced more than R1.5 billion in withdrawals within the first two weeks of the new system’s implementation. 

On Wednesday, 23 October, Old Mutual said its clients had submitted 226,000 claims, and the company receives an average of about 3,200 claims a day via its WhatsApp channel.

“Our claims process has been functioning smoothly, and we are satisfied with the progress so far,” Old Mutual’s Michelle Acton said. 

“Our focus has been on managing the high volume of claims carefully while ensuring they are processed efficiently.” 

“The South African Revenue Service (SARS) has been prompt in providing tax directives, and this has enabled us to handle claims with minimal delays.”

Acton advised members still considering a withdrawal to take a considered approach before accessing their retirement savings. 

“There is no need to rush. The system is here to stay, so take your time to assess whether a withdrawal is the right choice for your financial circumstances,” she said.

“Members should also remember that any withdrawal will be taxed at their applicable marginal tax rate, and an administration fee will apply.”

To withdraw under the two-pot system, members must have at least R2,000 in their savings pot, sourced from a retirement fund, annuity, or preservation fund. 

While Old Mutual does not yet have specific data on how members are using their Two-Pot funds, the 2024 Old Mutual Savings and Investment Monitor (OMSIM) provides insights into expected spending patterns.

According to this monitor, many members plan to use their savings for debt repayment (60%), emergencies (23%), and medical expenses (4%).

Discovery Corporate and Employee Benefits, Guy Chennells, revealed earlier this month that South Africans are largely using their withdrawals from the new two-pot retirement system to settle short-term debt and cover expenses related to their homes or cars. 

This was revealed in a survey the company conducted on individuals who submitted withdrawal requests. 

“Responses showed that the main reason our claimants withdrew from their savings was to resolve home or car expenses (24%). This was closely followed by a need to pay off short-term debt (21%),” he said.

“We found it surprising that a big group of claimants (20%) was using the extra money for education, presumably in the majority of cases for children’s school fees, as well as for day-to-day expenses (11%).”