While R15bn has been collected in taxes.
South African retirement fund members have withdrawn nearly R57 billion from their savings since the implementation of the two-pot retirement system in September 2024, with almost four million withdrawals recorded to date.
Speaking at the 2025 Sanlam Benchmark event on Thursday, Edward Kieswetter, South African Revenue Service (Sars) Commissioner, revealed that the total amount of tax collected amounted to around R15 billion. Debt retained from those withdrawals was “just short of R1 billion”.
Out of the nearly four million withdrawals, just short of 500 000 were repeat withdrawals.
“This year, about 478 000 of people who dipped in last year came and dipped in again,” said Kieswetter.
“And we expect that to continue because the financial distress people are in hasn’t changed.”
Although the two-pot system is not without flaws, Kieswetter described it as a “healthy balance”. People are expected to prepare financially for the future, yet many struggle to meet basic needs today.
A ‘Goldilocks’ balance
“Telling people they must save 15% to 20% of today’s earnings when they can’t even cover the cost of today has a moral dilemma. So, in that respect, the two-pot system is the closest to a Goldilocks balance – allowing earlier access but also enforcing preservation.”
Sanlam’s 2025 benchmark study shows that awareness of the two-pot system has grown sharply — from 59% in 2024 to 92% in 2025. While 77% of surveyed members said they understood the tax implications of accessing their savings, 43% were concerned that early access could negatively affect their long-term retirement outcomes.
The survey reflects input from 74 employer funds, 168 participating employers in umbrella funds, and 506 consumers who are employed and belong to a retirement fund.
At Thursday’s event, a panel — which included Kieswetter, Kaizer Moyane, CEO of the Association for Savings and Investment South Africa (Asisa) and Cosatu’s Nkosana Dolopi — discussed the tension between providing short-term financial relief and preserving savings for retirement.
Moyane pointed out that South Africa has a “terribly low savings rate”.
“Before the two-pot system, we had a terrible trend where people would quit their jobs to get access to retirement funds – just to make ends meet. It perpetuated the cycle of low savings. And so, we have not fully closed that loop. But there has been a big win in terms of mandatory preservation.”
Under the two-pot system, one-third of contributions is allocated to a savings pot accessible before retirement, while two-thirds must be preserved in a retirement pot and annuitised upon retirement.
Two-pot taxes an ‘agony’ for workers
Dolopi warned that workers are often disillusioned by how little they receive after taxes and fees.
“There’s a perception that something is being taken away. If you’re told you can withdraw R30 000, but you end up with far less, it becomes a source of frustration.
“You’re taking something from us that we thought would assist us,” he said, looking at Kieswetter, adding that the taxes imposed on these withdrawals are “an accumulation for the taxman, but agony for workers”.
Moneyweb previously reported that retirement fund members feel the tax treatment of withdrawals is unfair.
Lower tax rates ‘during working years’
Under the two-pot system, withdrawals are taxed at a member’s marginal income tax rate – which is higher than under the previous retirement system.
Responding to these concerns, Kieswetter explained that the design of the retirement system defers taxation until the point of withdrawal.
“Contributions are tax-deductible now, so the tax event is always going to happen when you draw on the funds. That’s by design. And for many people, the tax rate in retirement will be lower than during their working years.”
With the two-pot system, Kieswetter said, “the tax event” takes place on withdrawal.
“The complexity is not the two-pot system design, but the fact that the tax burden comes earlier. And until the policymakers decide differently, you will continue to be taxed on withdrawals.”
Two-pot and retrenchment
Concerns were also raised about how the two-pot system applies to retrenched workers.
“What happens if a member is retrenched? This matter hasn’t been addressed,” Asisa’s Moyane said.
“We want to ensure that preservation is not disturbed. That’s an issue that needs to be discussed. With the job losses and low growth in South Africa, we thought we could bring about a two-thirds preservation.
“But if people can access that when they are retrenched, we would be undoing the positives. We need to talk about this.
“Preservation should be the objective here.”
National Treasury indicated in February 2025 that there is consideration to allow members to access a portion of their retirement savings if they are retrenched, but this will be subject to strict conditions, including proof that the individual has no other source of income after a specified period.
Industry costs
Sanlam noted in its benchmark study that the two-pot system has introduced both “opportunity and strain”.
The Financial Sector Conduct Authority (FSCA) estimates that the once-off cost of implementing the two-pot system amounts to R1.6 billion.
“This could explain the increased administration fees, with employer fund fees rising from 0.51% to 0.71% – the highest since 2016. In contrast, umbrella fund fees have remained stable at about 0.61% since 2018, likely due to economies of scale,” Sanlam added.
