South Africa's Two-Pot retirement system, which allows workers limited access to their retirement savings, has seen significant demand since its implementation. By January 2025, more than 2 million taxpayers had withdrawn R43.4 billion gross from their Savings Components, according to SARS. Many used the funds to service debt or meet household costs. However, financial experts warn that repeated withdrawals could significantly reduce the amount available when they retire.
The Two-Pot system lets pension fund and retirement annuity members access part of their savings during difficult times. A withdrawal can cover essential expenses, but carries tax and long-term costs. The system divides contributions among three components: the Savings Component, Retirement Component, and Vested Component. The Savings Component allows members to withdraw at least R2 000 once per tax year, subject to marginal tax and fees.
Withdrawals from the Savings Component are taxed as regular income at the member's marginal rate, which ranges from 18% to 45%, and may attract administration fees. This means that the payout can be far less than the amount requested. For example, Sophie, who was unexpectedly hospitalised, requested R30 000 to pay medical bills but received R18 700. SARS deducted R10 800 at her 36% marginal rate, and her administrator charged R500.
Members should estimate their net payout with the SARS Two-Pot retirement system calculator before applying. Tax and fees can leave a household short during a crisis. Withdrawals also reduce future investment growth. Consider a 35-year-old earning R35 000 a month who withdraws R10 000 from the Savings Component. After estimated SARS tax of R2 945, the member receives R6 555. If the R10 000 stayed invested at an assumed 7% annual growth rate, it could grow to about R19 672 in 10 years, R38 697 in 20 years and R76 123 over 30 years, by age 65.
The Financial Sector Conduct Authority (FSCA) recognises that emergencies can make access necessary. Knowing the likely deductions before applying can prevent further financial strain. The FSCA publishes lists of employers reported by retirement funds for failing to remit deductions. Its communication of 2 July 2026 identifies non-compliant employers according to the duration and severity of arrears.
To protect retirement savings, members should check their monthly payslip against their benefit statement or confirm contributions with their fund administrator. They should also ask their employer's human resources or payroll department and the fund's principal officer about any unpaid amounts. If the matter remains unresolved, they can complain to the Office of the Pension Funds Adjudicator (OPFA) or contact the FSCA enquiries department.
Building true long-term resilience requires considering both the payout and future cost of a withdrawal. Before applying, members should ask: Is the withdrawal necessary now? Are other options available? Do I understand the tax, fees and potential lost growth? Informed decisions today can help protect future financial independence. For information about Two-Pot savings, members can speak to a financial adviser or retirement benefits counsellor.
Key points
- Withdrawals from the Savings Component are taxed as regular income at the member's marginal rate, which ranges from 18% to 45%, and may attract administration fees.
- Members should estimate their net payout with the SARS Two-Pot retirement system calculator before applying to avoid further financial strain.
- The Two-Pot system offers controlled access while preserving most contributions for retirement, but repeated withdrawals could significantly reduce retirement funds.
