The need to settle short-term debt and paying off home or car expenses are the main reasons for accessing the 'Two-Pot' retirement system.
The need to settle short-term debt and paying off home or car expenses are the main reasons for accessing the 'Two-Pot' retirement system. Image: iStock

Home » Top 10 reasons South Africans are leaving the ‘Top Pot’ retirement system

Top 10 reasons South Africans are leaving the ‘Top Pot’ retirement system

The primary reasons for accessing the ‘Two-Pot’ retirement system are to settle short-term debt and cover home or car expenses.

01-10-24 13:26
The need to settle short-term debt and paying off home or car expenses are the main reasons for accessing the 'Two-Pot' retirement system.
The need to settle short-term debt and paying off home or car expenses are the main reasons for accessing the 'Two-Pot' retirement system. Image: iStock

As anticipated by the industry, debt repayment emerged as a major reason for withdrawals from the ‘Two-Pot’ retirement system, with claimants citing the need to pay off short-term debt as one of their primary motivations for requesting funds.

The other was to cover home or car expenses.

This is according to the Discovery Corporate and Employee Benefits’ pension and provident fund business.

‘Two-Pot’ retirement system gives access to 1/3 of savings

The ‘Two-Pot’ retirement system was implemented exactly one month ago on 1 September 2024.

It was designed to give South Africans access to one-third of their retirement savings for short-term needs while preventing them from withdrawing from their retirement fund in full when changing jobs.

Guy Chennells, Chief Commercial Officer at Discovery Corporate and Employee Benefits, explained that the data was gathered from individuals who submitted withdrawal requests via a user-friendly WhatsApp channel.

“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%),” Chennells 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%). Sadly, these are all indications of the cost-of-living crisis faced by so many,” he said.

Chennells explained that if claimants chose the ‘Other’ category as their ‘Two-Pot’ withdrawal reason, they were asked to give an example of what ‘Other’ meant for them.

“While a notable 17% of claimants selected ‘Other’ as their motive for withdrawal, the majority of reasons given here was for home improvements and renovations,” he says.

“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.”

A good sign was that ‘Travel’ was only selected as a reason for withdrawal from ‘Two-Pot’ savings by 1% of claimants suggesting very few wished to access their savings for a holiday to the beach.