/ 3 March 2023

Protecting your future retirement savings in a “two pot” world

Old Mutual

From 1 March 2024, Treasury has proposed plans to both protect your retirement savings and offer relief in tough times. The new fund structure is promising, but South Africans will need to continue to manage their savings with caution.

In his Budget Speech last month, South Africa’s Minister of Finance Enoch Godongwana confirmed National Treasury’s intention to improve retirement savings outcomes through a “two pot” retirement savings structure, which is proposed to come into effect on 1 March 2024.  

South Africans may shine in many areas, from rugby, music and dancing to being super-friendly and able to laugh at ourselves and our problems, but saving for retirement is unfortunately not one of our strengths. Not by a long shot.

Annual surveys conducted by Old Mutual show that as much as 94% of working South Africans are not yet planning and saving enough for a comfortable retirement. The situation is made worse by the fact that many members of pension or provident funds resign from their jobs when they are under extreme financial pressure just so they can access the cash in their retirement savings.

Lizl Budhram, Head of Advice at Old Mutual, says: “The long-term consequences of accessing some or all of your retirement savings in this way can unfortunately be dire. It’s seldom possible to make up for the loss of years of compound interest.

“However, the financial upheaval caused by the Covid-19 pandemic and lockdown has been so severe that many people have felt they had no alternative.”

New system offers relief in tough times

The new “two pot” retirement fund system offers an alternative to resigning from the fund and cashing in everything. All pension and provident fund members, as well as retirement annuity policyholders, will be allowed to access up to one-third of their retirement savings before retirement age without needing to resign or change jobs. 

It will however be compulsory to preserve the bulk of your retirement savings (the two-thirds in the main “pot”), leaving it to grow untouched and intact.

It’s important to know that this new system will apply only to your future savings (from 1 March 2024, when the “two pot” will be launched). This means none of your existing savings will be part of the “two pot” arrangement.

In short, the “two pot” system is designed to simultaneously serve two key purposes. The larger “pot” protects your future retirement wellbeing, while the smaller one is a little more flexible and offers cash relief in times of severe financial distress.

How to prepare for a comfortable retirement via the “two pot” system:

  • Fill those pots! Increase your monthly retirement savings, if at all possible, especially if you have already withdrawn and spent funds from your retirement savings. The more you save, and the sooner and longer you save, the more you will benefit from the phenomenal power of compound interest. 
  • Set up a short-term emergency fund separate from the long-term pots. Aim to save the equivalent of at least three months’ salary in an accessible savings account as a buffer or safety net for difficult times. Although the new regulations will allow you to dip into your retirement savings (via the relief “pot”), that doesn’t mean you should. 

It remains a far better idea to leave your entire retirement savings and both pots untouched until you retire, says Budhram. When you need extra money, avoid seeing the “savings pot” as your first port of call. Rather see it as an absolute last resort.

She explains: “It will remain very difficult to resuscitate a retirement plan that has suffered large cash withdrawals. When you leave your retirement savings (including both pots) untouched to grow over the long-term, the power of compound interest is able to significantly boost your savings.

  • Track your expenses. Sign up to an app like 22seven that helps you identify, understand and change risky spending habits.
  • Team up with an accredited financial adviser who is backed by a responsible and reputable licensed financial services provider.
  • Together you can figure out your financial needs and goals, and draw up a financial plan and a budget. Having a great financial adviser has many advantages and benefits. Not only can they answer all your questions regarding the new retirement fund system, they can also advise you on your short-term and long-term savings and investment options, and help you manage your finances in the most tax-efficient way.
  • Ask your adviser about the Old Mutual Max Investments Optimal Retirement Plan. It’s designed to adapt to life’s twists and turns by adjusting your premium amount when necessary and boosting your fund value after five years. 
  • Consider adding premium protection to your plan, to ensure your remaining premiums will be paid if you become disabled, keeping your retirement plans on track.  

Find out more:

  • speak to your financial adviser
  • contact 0860 60 60 60 if you don’t have an Old Mutual financial adviser
  • go to oldmutual.co.za/retirement 

Old Mutual Life Assurance Company (SA) Limited is a licensed FSP and Life Insurer.


The material is not intended as and does not constitute financial or any other advice. The material does not take your personal financial circumstances into account. For this reason, it is recommended that you speak to an accredited financial adviser to consider all your options and draw up a plan to achieve your financial goals.