How South Africans spend their two-pot retirement billions

South Africans have spent nearly a quarter of all the money withdrawn under the two-pot retirement system on paying off their home or car loans. 

Another 21% of the money withdrawn has been spent to pay off short-term debt, with a further 20% being spent on education and school fees. 

This indicates that South Africans have used their two-pot withdrawals in a better financial way than many feared, with only 11% of the cash withdrawn being used to make daily purchases. 

Discovery Bank and Visa revealed this as part of their SpendTrend 25 report, which details the spending habits of South Africans. 

The data on two-pot retirement withdrawals was provided by Discovery’s Corporate and Employee Benefits division. 

South African consumers remain under immense pressure, with spending declining in real terms year-on-year, the report showed. 

One of the ways in which South Africans are supplementing their income is by tapping into their two-pot retirement savings. 

Since September 2024, South Africans have been able to access part of their retirement savings without any penalties. 

More money has been withdrawn under this system than many expected, with R43.4 billion being paid out as of the end of January 2025. 

Asset managers expected a short-term ‘blitz’ of withdrawals followed by a steady decline to a steady state of much lower annual payouts. 

Many expect the system to result in better long-term outcomes for both savers and asset managers, with two-thirds of retirement funds being locked in until maturity. 

One thing is for certain: The sheer volume of withdrawals shows that South Africans are under immense financial pressure, with hundreds of thousands taking the opportunity to earn some extra cash.

Discovery Bank noted that South Africans have also become increasingly reliant on credit facilities for everyday expenses.

How South Africans spend their two-pot money

There has been much speculation about what South Africans would do if they had the opportunity to withdraw a portion of their retirement savings prematurely. 

Many thought it would be used to fund ‘revenge spending’, where consumers who have cut back on buying clothes, furniture and other discretionary items would splash their cash at retailers.

However, data from Discovery shows that South Africans have been much more responsible than expected when it comes to using this extra cash. 

Nearly a quarter of all clients say that they withdrew money from their retirement fund to pay home or car costs, including loans. 

Over 20% of them said they would use the money to pay off short-term debt and a significant share plan to use the money for educational purposes, particularly school fees. 

Only 11% of respondents indicated that they would use the additional cash to fund daily expenses. 

However, this is not all good news, as it still shows that the cash from retirement withdrawals is not being used for emergency spending – which was the intention. 

This reveals how long-term savings are being used to cover immediate costs, even as inflation

eases. 

While many South Africans are under financial strain, using retirement savings on short-term needs is a concerning trend. 

The unsustainability of this financial behaviour makes education on long-term financial management crucial across all income groups, Discovery said. 

Many of the respondents who selected ‘Other’ as a reason for withdrawing said they would use the extra cash for home improvements and renovations. 

This isn’t really recommended as a good use of Two-Pot savings because it does not truly classify as emergency spending.

It’s still understandable, though, because South Africans who want to improve their lives are simply unable to create discretionary spending from their regular income at the moment.

Only 1% of claimants selected ‘Travel’ as a reason for withdrawing from their two-pot savings.