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.
Less than two weeks before the new two-pot retirement system launches, research suggests that fewer people plan to dip into their retirement savings early.
This information is contained in the 2024 Old Mutual Savings and Investment Monitor report.
Old Mutual head of knowledge and insights Vuyokazi Mabude attributes this 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.
“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.”
According to the study, respondents who better understand the two-pot retirement system are more likely to view it 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.
“This suggests there is an opportunity to provide additional information, which may guide them to reconsider withdrawing their funds,” Mabude says.
Other 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.
“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 two to three times more money than in the old system,” says Mabude.
She said 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.
“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,” she says.
Meanwhile, the Sanlam Benchmark 2024 research, Accelerating A Better Working South Africa, shows the number of individuals planning to “cash out” funds from their two-pot savings component has jumped significantly, from 31% in 2022 to 59% in 2024.
According to Koketso Mahlalela, head of member-led outcomes at Sanlam Corporate, these findings highlight how people are under financial pressure and struggling to make it to month-end.
“However, it’s imperative that individuals carefully consider accessing their retirement funding only for extreme and urgent financial needs and make informed decisions to preserve their savings when possible,” Mahlalela said.
According to Mahlalela, Sanlam’s Benchmark research revealed that 50% of individuals had opted to cash in all their retirement funds when changing jobs in 2024 – a stark increase from 37% in 2023.
“Most respondents (33%) used their funds to cover their living expenses in 2024, with 21% either servicing, reducing, or settling their debt. The primary need for additional funding appears to be day-to-day living expenses and debt management.
“Under 30% of respondents used it for other purposes, like travelling, starting a business, or assisting family members. While the two-pot system offers flexibility, educating employees about the long-term implications of early withdrawals can guide them towards alternatives,” she says.
PERSONAL FINANCE