Two years of two-pot withdrawals are a wake-up call for financial advisers

Over the two years since the launch of South Africa’s two-pot retirement solution, advisers and financial institutions have gained unprecedented insights into the financial wellbeing of individuals and households. They have access to granular data on how frequently retirement fund members access their savings pots, how much they withdraw and even what they use the money for.

“The two-pot withdrawal data shows why you should never draw conclusions about an individual’s financial circumstances solely through an investment lens,” says Keith Peter, Advice Manager for Old Mutual Personal Finance. Consumers might have plenty of capital in their retirement pot and be receiving market-linked returns on that money, but still be struggling to cope financially.

Peter says that financial advisers have gained more visibility into customers’ budgeting, cash flow challenges, debt burdens, emergency savings and overall financial resilience over the past two years than over any comparable period. The picture emerging from two-pot withdrawal data is also consistent with the broader financial stresses identified in national research.

The picture emerging from two-pot withdrawals is consistent with broader consumer financial stress trends identified in national research. OMSIM 2026 revealed that half of the working South Africans who partook in the survey frequently worried about their debt, while 53% gambled and an alarming 42% said they often gambled in the hope of covering expenses or debt.

Combining the OMSIM findings with two-pot withdrawal data points to a fundamental problem among local consumers that advisers will have to tackle through the financial advice process. Any withdrawal from a pension or preservation fund or retirement annuity should be seen as an opportunity for an advice conversation. “This withdrawal behaviour often reveals broader financial vulnerabilities that we may not otherwise have identified during a normal review process,” Peter says.

Consumers should not fear being judged for dipping into their savings pots. “The key question is not whether the withdrawal was right or wrong, but whether the event that triggered the withdrawal requires a deeper look into the financial affairs of that particular client,” Peter says. Once the core reasons for withdrawals are known, consumers can work with their advisers on finding a sustainable solution.

Repeat withdrawals are a warning sign that a consumer’s financial plan, though technically correct, is practically unworkable. This is a notable financial planning challenge in a world where consumers often receive infrequent financial advice and are trying to stick to a financial plan despite changing circumstances. A plan drawn up five years ago cannot on its own navigate divorce, illnesses, retrenchment or even above-inflation cost-of-living increases.

Financial advisers bring empathy and understanding to the table. One useful intervention is for advisers to illustrate the long-term impact on future retirement capital of each withdrawal. Again, allowance must be made for legitimate and immediate financial needs such as medical expenses or settling high-interest debt and funding a retirement.

There has always been a danger that households would start viewing their savings pot as a vessel for emergency funds. Yes, the cash is available for emergencies, but it is far better for clients to work with their advisers to build a de facto emergency fund. More broadly, advisers play the role of educator, helping consumers make the necessary financial changes in light of their unique circumstances.

Two-pot withdrawals have provided a short-term boost to household spending and tax collections. Trade union Cosatu estimates more than R80 billion has been withdrawn by more than four million workers over the two years, while SARS has collected over R22.9 billion in two-pot-related PAYE over the 2025 and 2026 tax years. But these benefits must not deflect from the impact that repeat withdrawals can have on members’ long-term financial resilience

Consumers with established trust relationships with their adviser will often reach out to check whether their proposed transaction makes sense, but the fact that two-pot is available directly to retirement fund members means that many withdraw without the benefit of advice. “Getting all consumers and retirement fund members access to affordable financial advice at each financial decision point is something that all financial services stakeholders should aspire to”, Peter concludes. “Advice, given at these critical inflection points, can make all the difference”.