Withdrawing from your retirement: Short-term relief with long-term consequences

South Africans have limited access to their retirement savings—and any withdrawal comes at a price.

The two-pot system, introduced by the National Treasury in 2024, allows individuals to withdraw a limited amount from their retirement funds once a year.

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Old Mutual senior programme manager Massing Thabo Hollo explained that while it may feel like a lifeline for people under financial pressure, it can have a significant impact on retirement outcomes.

In the short term, withdrawing reduces the interest you earn. Over time, that loss can compound, leaving you with a retirement shortfall.

There are also tax implications: the South African Revenue Service takes a portion of each withdrawal, meaning many people receive less than they expect.

“You won’t get R30,000. It’s R30,000 minus the tax element, which can be as high as 45% of the income you take out.”

Hollo said one of the key concerns is that people are withdrawing from their retirement savings simply to manage day-to-day expenses, rather than for longer-term needs.

“It’s heartbreaking. People are literally using these funds just to get by—to make it through daily life.”

He stressed the importance of weighing the long-term consequences before withdrawing, and encouraged individuals to explore alternative options.

“It’s highly unlikely that you will recover as quickly as you would have if you had not withdrawn.”

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To listen to Qina in conversation with CapeTalk and 702’s Africa Melane, click the audio player below: