Nearly four million pension fund withdrawals totalling close to R57 billion have been made under South Africa’s two-pot retirement system since its introduction on 1 September 2024, with the South African Revenue Service (SARS) collecting R15 billion in tax revenue.
SARS commissioner Edward Kieswetter revealed these figures, adding that nearly R1 billion of the tax came from pension fund members with outstanding tax debt.
Repeat withdrawals point to ongoing distress
While four million withdrawals have been made, just under 500 000 were repeat withdrawals, allowed once per tax year under the system.
The second round of withdrawals began on 1 March 2025, and Kieswetter noted that 478 000 members had already made use of this option.
“We expect the repeat withdrawals to continue because the financial distress of people has not changed,” Kieswetter said.
Two-Pot system: Designed for balance
The two-pot system was introduced to discourage South Africans from resigning just to access retirement funds, while still providing limited early access to a portion of their savings for emergencies.
Under the system, two-thirds of retirement funds must be preserved until formal retirement, while the savings pot allows one withdrawal per year.
Kieswetter acknowledged the moral complexity of enforcing savings in an economy where many can’t meet basic expenses.
“Telling people to save 15% to 20% when they can’t even afford today is a moral dilemma. The two-pot system is the closest to a ‘Goldilocks balance’ – permitting access, but enforcing preservation.”
Economic growth a critical issue
Kieswetter highlighted the broader economic constraints behind the high number of withdrawals, joking: “Our problem is that we keep cutting the pie into smaller pieces instead of growing the size of the pie.”
The commissioner stressed that the lack of economic growth is the root challenge, making it hard for households to build and preserve retirement wealth.
Tax shock for some pension members
Many pension members expressed frustration at the high tax burden on withdrawals, with some receiving no payout at all due to tax arrears. Kieswetter defended the design.
“The system defers taxation until withdrawal. Contributions are tax-deductible now, so the tax will always be due later. It’s not a flaw of the two-pot system but of the tax framework itself.”
He clarified that unless policy changes, withdrawals will continue to be taxed, often at marginal tax rates that reflect the individual’s total income for the year.
Quick facts:
- System launched: 1 September 2024
- Withdrawals to date: 4 million
- Total withdrawn: R57 billion
- SARS tax collected: R15 billion
- Repeat withdrawals: 478 000
- Tax arrears recovered: R1 billion
With repeat withdrawals expected to rise and economic hardship remaining persistent, the two-pot retirement system reveals both the depth of financial stress among South Africans and the delicate balancing act between access and preservation in retirement policy.
Have you taken advantage of the two-pot system yet?
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