Two-pot retirement: Most South Africans using funds for short-term relief
Most South Africans are using their two-pot retirement funds to settle debts and for short-term financial relief.
Zain Johnson (standing in for 702 and CapeTalk's Africa Melane) speaks to Rob Southey, Head of Asset Consulting at Momentum.
Listen below:
South Africans have been using money from their two-pot retirement fund withdrawals mainly for short-term financial relief.
According to Southey, between 1 September and the end of January, R43 billion was taken out of retirement funds. After taxes, around R32 billion went back into the economy.
Research from the Bureau of Market Research shows that many people used the money to pay off debts like store accounts, small loans from microlenders, cellphone bills, and education fees.
Others used it to buy second-hand cars. Southey reports that October 2024 saw the highest number of used car sales since 2012.
He says that most people are using the money for necessities, not luxuries, while return withdrawals from clients are common.
"The two-pot forces you to hold one-third of contributions to your savings pot, which you can withdraw, but two-thirds go into a retirement pot, which you can't touch, which is almost like a guardrail that the regulator has put in place. So, it builds up your long-term financial sustainability, but it also allows a certain amount of relief in terms of accessing the savings pot... We are going to see whether people are disciplined, but people are spending their money on necessities, not luxury."
- Rob Southey, Head of Asset Consulting - Momentum
Southey has advice for people thinking about withdrawing from their two-pot retirement funds.
"Understand the implication it has on you in retirement. If you withdraw from your savings pot every year, it substantially reduces your benefit at retirement, so if you don't need the money, don't touch it, but if you do need the money, try to be sensible about it."
- Rob Southey, Head of Asset Consulting - Momentum
"People should also get financial planning advice or some financial education - even for something as simple as budgeting, and make sure you understand your financial plan."
- Rob Southey, Head of Asset Consulting - Momentum
Scroll up to the audio player to listen to the full conversation.