Two-Pot withdrawals raise timing-risk questions for retirement funds

New two-pot withdrawal data is exposing a timing risk for retirement funds as financially pressured members access the savings component of their retirement savings during difficult market conditions, potentially reducing the value they receive when they withdraw.

• Discover more Old Mutual Corporate insights on Smoothed Bonus and retirement investment design here.

“Two-pot has changed the preservation equation, but it has also made timing risk more visible,” says Michelle Acton, chief customer officer at Old Mutual Corporate, who spoke to Alishia Seckam on Smart Money.

“When members are under financial pressure, they are not waiting for markets to recover. They need the money now. If that withdrawal happens during weak markets, a short-term emergency can become a worse long-term retirement outcome.”

March 2026 brought the issue into sharper focus.

Old Mutual Corporate saw a significant increase in two-pot claims at the start of the new tax year, just as markets came under pressure from heightened geopolitical risk linked to the Iran conflict.

The conflict raised concerns about energy prices, shipping disruption and inflation, contributing to weaker market conditions at the very moment financially pressured members were accessing their savings.

The reality funds must design for

Retirement funds now have to design for the reality that different workers may need to access or exit their savings at moments shaped by broader market and economic pressure, from job loss and income shocks to rising household costs.

The challenge is to keep members exposed to long-term growth without leaving those who need access to carry the full impact of difficult conditions.

Acton warns that the answer is not simply to move the savings pot into cash or very conservative portfolios.

This may reduce short-term risk for those who withdraw, but it could weaken outcomes for those who remain invested.

“This is still retirement fund money,” says Acton. “Employers and trustees need to make sure the money is invested to earn the returns needed to give decent outcomes at retirement.”

The questions funds should now ask

Old Mutual Corporate says retirement funds should look beyond headline performance and ask whether their investment strategy protects member value when it matters most.

“That requires a different way of thinking about performance. The question is not only whether a portfolio can deliver growth over time, but whether the path of returns helps members stay invested and avoids passing the full force of volatile markets onto individual members,” says Acton.

Funds should ask whether current strategies balance long-term growth, short-term market-risk management and enough liquidity to meet withdrawals as they occur.

They should also ask whether members who do not withdraw remain positioned for adequate long-term growth.

March 2026 brought the issue into sharper focus.

Two-pot withdrawal volumes rose back to levels last seen when the system was introduced, just as markets came under pressure.

Funds therefore, had to manage higher liquidity demand at the same time as members risked withdrawing at poorer values.

Two-pot is working, but the next risk is design

Old Mutual Corporate says the two-pot retirement reform is working as intended by stopping members from cashing out all their retirement savings when they change jobs.

Preservation has increased by 33% since the system was introduced, meaning more members are keeping their retirement savings invested for the long term.

That makes investment design more important, not less.

If more money is staying invested for longer, funds should ask whether they are positioned to support better long-term outcomes while still protecting members who may need access during difficult market conditions.

The next task is to ensure that access does not unintentionally weaken those outcomes when members withdraw at the wrong point in the market cycle.

“Now funds need to solve for timing risk,” Acton concludes. “Better retirement outcomes are not driven by growth alone. They depend on how the investment journey is designed.”

This article is based on an interview with Michelle Acton, Chief Customer Officer at Old Mutual Corporate, on Smart Money with Alishia Seckam.

Watch the full interview here:

The discussion forms part of Old Mutual Corporate’s work on Growth & Protection, which focuses on helping retirement funds look beyond headline returns and consider how members experience markets at the moments that shape their outcomes.

For more Old Mutual Corporate insights on Smoothed Bonus and retirement investment design, read more here: www.oldmutual.co.za/retirementinvestments.