allworld.mediaNews from all over the world
Union warns civil servants about the dangers of multiple withdrawals from pension savings under the two-pot system
Read more
IOL
iol.co.za

Union warns civil servants about the dangers of multiple withdrawals from pension savings under the two-pot system

The union has cautioned civil servants against constantly using pension savings through the two-pot system to cover rising living expenses and increase debt. It emphasized that temporary financial relief could result in employees having significantly less money by the time they retire.

Previously, the publication IOL reported that the two-pot pension savings system in South Africa is increasingly being used by middle-class households to combat the rising cost of living and debt obligations, with many members making repeated withdrawals from their savings.

According to new data from Momentum Corporate, 52% of members eligible to withdraw from the savings component have already taken advantage of this option. The union stated that while multiple withdrawals may provide short-term financial support, they substantially reduce the amount available to employees upon retirement.

The union noted: 'Although withdrawing from the accessible savings component may provide temporary relief, it can have a significant and long-term impact on an employee's financial situation in retirement.'

Debt driving repeated withdrawals

The PSA expresses serious concern over reports that debt is what prompts middle-class individuals in South Africa to repeatedly withdraw from pension savings.

It added that workers risk falling into a vicious cycle by using their pension savings to pay off debts, subsequently accumulating new debts and making further withdrawals.

The union strongly urged civil servants to consider alternative options, such as analyzing monthly expenses, coordinating repayment schedules with creditors, and seeking financial advice before turning to their pension savings.

It advised: 'Employees should seek financial advice, analyze their monthly spending, negotiate debt repayment with creditors, and explore available debt management measures before using pension savings. Withdrawals should only be considered after exhausting these alternatives and in the presence of genuine, urgent financial need.'

'The PSA is particularly concerned about repeated withdrawals. Using pension savings to pay off debts, then accumulating new debts and making another withdrawal, creates a destructive cycle that gradually undermines the employee's retirement security.'

Similar stories

Debts force South African middle-class representatives to repeatedly withdraw funds from pension savings
Read more
iol.co.za

Debts force South African middle-class representatives to repeatedly withdraw funds from pension savings

The two-container pension system in South Africa is seeing an increase in withdrawals as middle-income households use their savings to repay debts, cover living expenses, and pay for education.

According to new data provided by Momentum Corporate, 52% of participants eligible to withdraw from their pension component have already made such payments. The study found that affluent middle-income households are most prone to repeated withdrawals, while many lower-class individuals cannot access the money because their savings fall below the minimum threshold of R2000.

The data shows that 44% of all withdrawn funds were directed towards debt repayment, 23% towards daily needs, and 20% towards education.

Financial pressure drives withdrawals

Our company, Momentum Corporate, notes that salary increases are not keeping pace with the rise in debt and overall expenses for the established middle class. Nashalin Portrag, Head of FundsAtWork & Distribution at Momentum Corporate, stated that the primary reason for these withdrawals is financial pressure.

Portrag explained that many members of the lower and developing middle classes cannot withdraw money at all because their savings do not reach the minimum amount required by law of R2000. The middle class, on the other hand, usually has enough savings to use as an emergency reserve fund amid the constant rise in the cost of living.

He added that rising interest rates, inflation, and the need to service existing loans have pushed people to use savings within the two-container provision system to maintain financial stability.

According to Momentum Corporate, there is a discrepancy between people's intentions and what actually happens. In 2025, 74% of participants stated they would only use their pension component in case of real necessity. However, by 2026, only 48% of eligible participants had not made a withdrawal, representing a 26% gap between good intentions and financial reality.

Age and life stage are also important. For example, mid-career millennials are most likely to make repeated withdrawals because they have to balance mortgages, debts, and raising children. Meanwhile, Generation X representatives typically withdraw funds once and do not use them again, whereas baby boomers, with greater financial stability and approaching retirement, tend to leave their savings untouched.

The key message for financial advisors, fund managers, and employers is that participants are not intentionally ignoring their future but are taking steps necessary to overcome current difficulties.

Popular