How South Africans are spending two-pot retirement billions

South Africans who withdraw from their savings component under the new two-pot retirement system are primarily using the money to cover everyday expenses.

This reflects the cost-of-living pressures that millions of South Africans are facing, with the extra cash needed to cover basic necessities. 

A large portion of South Africans also used the money to pay down debt, which, in turn, should free up further cash to save or spend. 

This is feedback from FNB in its recently released Retirement Insights Survey for 2025, which analysed the financial behaviour of its clients and South Africans about saving for retirement. 

One of the significant aspects of retirement studied in the survey was South Africans’ engagement with the new two-pot retirement system and its impact on savings and financial outcomes later in life. 

Samukelo Zwane, Head of Product at FNB Wealth and Investments, said the two-pot system has already significantly shifted consumer behaviour regarding retirement savings. 

Introduced to balance long-term preservation with limited pre-retirement access to funds, the system gives individuals access to a ‘savings pot’ from which they can withdraw money under specific conditions.

Zwane explained that awareness of the two-pot system has grown rapidly since its implementation in September 2024 and has encouraged South Africans to engage more with their retirement savings. 

However, while 69% of respondents are aware of the system, the depth of understanding varies greatly across income groups.

Generally, more affluent consumers have a better understanding of the system than their entry-level counterparts. 

Despite this disparity in knowledge, withdrawal rates are largely similar, with around 26% of individuals accessing funds across income segments. 

Billions have been withdrawn under the system, with R22 billion being paid out to 1.1 million South Africans in the first six weeks alone. 

By January 2025, over 2.6 million withdrawals had been processed, pushing total disbursements past R43 billion. 

The South African Reserve Bank has projected that total withdrawals in the initial months could range from R40 billion to R100 billion. 

How people are spending two-pot money

Withdrawals under the two-pot system suggest a short-term financial boost for many households, followed by a surge in spending. 

This may result in a temporary boost to economic growth and VAT collections, providing some relief for government finances. 

However, it also raises the potential for adverse long-term consequences, especially when it comes to retirement savings adequacy.

This largely depends on how the money withdrawn under the system is used, with it potentially enhancing financial outcomes for South Africans. 

The two-pot system is designed to give South Africans access to some of their retirement savings to cover emergency expenses without penalising them. 

Alongside this, the majority of the funds saved are then preserved until retirement, improving financial outcomes late in life. 

Zwane explained that what consumers are doing with their two-pot withdrawals reveals a lot about the current economic realities and financial pressure many are facing. 

FNB’s data showed that the most common reason for withdrawal was to cover day-to-day expenses, as salaries failed to keep up with inflation since the pandemic. 

The second-most common reason for withdrawal was to pay off debt, which can improve consumer financial health by freeing up additional monthly cash flow to boost savings. 

Secondary motivations included education fees, unforeseen expenses, new appliances, and, worryingly for Zwane, holidays. 

Nearly a quarter of respondents who withdrew under the two-pot system reported using the money for discretionary spending, such as holidays. 

Some also withdrew money from their retirement funds to reinvest the capital in other investment products, indicating that they are unhappy with the performance of their funds or are using the system as a liquidity tool. 

The primary reasons why South Africans are withdrawing from their retirement funds under the two-pot system are illustrated in the graphic below.