R57 Billion Disbursed, But Warnings Mount Over South Africa’s Two-Pot Pension System

South Africa’s long-awaited two-pot pension system has paid out over R57 billion to more than 3.5 million workers since its launch, but the celebration is being tempered by deep concerns over access, fairness, and financial abuse.

What started as a bold reform aimed at easing working-class financial pressure has become a focal point of criticism from labour unions, retirement experts and anti-corruption watchdogs alike.

The system, which officially kicked off in September 2023, allows employees to access a portion of their pension funds annually, while preserving the bulk until retirement. That’s the headline. But for many, the fine print paints a more complicated picture.

What Is the Two-Pot Pension System?

In simple terms, the new pension structure splits workers’ retirement contributions into two “pots”:

• Savings Pot (33%) – Can be accessed once a year for emergencies or financial relief.

• Retirement Pot (66%) – Locked away until retirement age, even in cases of retrenchment or resignation.

This reform was largely aimed at addressing the crisis of people quitting jobs just to cash out their pensions, often ending up impoverished in old age.

A Lifeline, With Limits

Prof Lucien van der Walt from Rhodes University calls the system a step in the right direction, but one that’s far from perfect.

“It’s better than being trapped in financial freefall,” he said, noting that many previously raided their full pensions early out of desperation. But, he cautioned, “you will lose some of the money through taxes when you withdraw. This is not like taking money from an ATM.”

The taxation component has raised alarm among workers already under financial strain, especially when admin fees and withdrawal taxes reduce the actual payout.

Praise and Pushback from Labour

Cosatu, the ANC-aligned trade union federation, has applauded the rollout, calling it “one of the most transformational reforms since 1994.”

According to Cosatu’s Matthew Parks, the sheer volume of calls and claims showed how desperately South Africans needed financial relief.

“This is a form of dignity, access to your own money, during times of crisis.”

But Cosatu also used the opportunity to call out what it described as rampant employer theft.

More than 7 700 employers, many from municipalities, cleaning companies and private security firms, were found not paying over pension contributions, despite deducting them from workers’ salaries.

“This is not an admin error. This is theft. We want prosecutions,” Parks declared.

SAFTU: A Raw Deal for the Retrenched

The South African Federation of Trade Unions (Saftu) slammed the “locked” second pot as fundamentally unjust.

“This means a worker who’s retrenched or fired can’t touch their pension until retirement. That’s unacceptable,” the federation said in a statement.

Saftu argues that in a country with unemployment above 30%, tying relief to retirement age ignores the lived reality of millions.

Caution from Financial Experts

Retirement fund operators like Allan Gray and Old Mutual back the system as a good idea — with guardrails.

They warn that withdrawing funds too often will shrink future payouts and hurt retirement quality. In other words: relief today may cost you comfort tomorrow.

Even the African Christian Democratic Party (ACDP) has weighed in, urging workers to use withdrawals strictly for emergencies, warning of shrinking pensions and long-term poverty.

Corruption Risks and Scams

Corruption Watch has flagged the potential for scams, fraud, and cyber breaches in the system.

“People should verify all communication with their pension fund provider and report anything suspicious,” the watchdog urged.

Given South Africa’s record of cyber vulnerabilities and state capture-era fraud, experts say this new flow of billions requires tight monitoring and transparent oversight.

What Happens Next?

The rollout is far from over. More fund managers are still onboarding to the system, while calls grow for regulatory tweaks, including broader access in the case of retrenchment and clearer rules on employer accountability.

Van der Walt believes the system will need adjustment over time, especially in how it balances relief and preservation.

“It’s an important reform, but not a perfect one,” he said.

The two-pot system has given millions of South Africans access to emergency relief, yes, but also sparked heated debate about fairness, tax burdens, worker protections, and corruption risks.

It’s a reminder that no reform exists in a vacuum. And while R57 billion is a big number, the real measure of success will be whether workers can retire with dignity, not just survive the present.

{Source: The Citizen}

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