The National Treasury is considering allowing limited access to funds that are currently strictly preserved until retirement under “very strict” conditions.
This was the feedback from Chris Axelson, deputy director-general for tax and financial sector policy at the Treasury.
Axelson told a joint sitting of Parliament’s Standing Committee on Finance and Select Committee on Finance that discussions around potential reforms are expected to begin later this year.
“There were some requests for refinement for the two-pot regime. We do aim to initiate discussions later this year to talk about potential access to the retirement pot, but only under very strict financial distress conditions,” he said.
South Africa’s two-pot retirement system, introduced in September 2024, was designed to allow limited access to savings while preserving the bulk of retirement funds.
Under the system, one-third of retirement contributions is allocated to a savings pot, which members can access once a year, while the remaining two-thirds is placed in a retirement pot that is preserved until retirement.
Withdrawals from the savings pot are taxed at a person’s marginal income tax rate to reinforce the intention that these funds should be used only in cases of genuine financial need.
The retirement pot is not accessible until the people reached reitemnt age, even if an individual resigns, changes jobs, or faces financial hardship. The only exception has been if a person ceases to be a South African tax resident.
While Axelson did not provide a specific reason for reconsidering access to the retirement pot, growing financial pressure on older South Africans is likely a key factor.
Recent data from consumer analytics group Eighty20 shows a rise in loan defaults among South Africans aged 65 and older.
This trend goes agasint that of the broader population, where default rates have been steadily declining since 2023.
“We saw a sustained rise in the number of defaulters, which is accelerating rather than stabilising,” said Eighty20 director Andrew Fulton.
This makes older consumers unique among the group’s eight tracked segments and highlights the mounting financial strain facing retirees.
South Africans rushing to dip into their retirement funds
The broader outlook for retirement in South Africa is also concerning, with many individuals doubtful about their ability to retire comfortably.
“If you read the research on retirement, it is quite frightening and sobering. FNB finds that only 10% of South Africans believe they’ll be able to retire comfortably at age 60,” Fulton said.
At the same time, there are growing concerns that easier access to retirement funds could worsen long-term financial outcomes.
Fulton warned that many individuals are already undermining their future financial security by withdrawing from their savings pots to meet immediate needs.
“With the two-pot system, what we’re seeing is that a lot of people are making that future situation even worse to pay for today’s needs and expenses, and they’re not replacing that,” he said.
Rising living costs—particularly healthcare—are adding further pressure. Fulton noted that medical expenses for retirees typically increase at roughly double the rate of inflation, placing additional strain on already stretched finances.
Early data from the two-pot system also highlights the scale of financial pressure. More than 100,000 South Africans have already accessed their savings pots in the 2026/27 tax year.
According to Vickie Lange, Head of Solutions Enhancement at Alexforbes, there was a sharp surge in withdrawals at the start of the new tax year.
“More than 140,000 claims were received during the first week of March, with approximately 84,000 already paid,” she said.
“The first claim was submitted at 00:01 on 1 March, underscoring the immediate demand for access to savings,” Lange added.
She noted that most of the activity was driven through the company’s digital systems, with more than 1.3 million logins recorded on its platform over the same period.
Lange said that the strong early uptake highlighte the urgent need among many South Africans to access available funds.
