South Africa’s two-pot retirement system is into its third year, and the numbers tell a sobering story. More than R60 billion has flowed out of savings pots since late 2024, with most of it going towards debt, school fees, and just getting by.
This is the opposite of what most experts predicted when the system launched. Expectations centred on a rush of long-deferred big-ticket purchases, like deposits on homes and new cars. Instead, the large majority of withdrawals went towards simple survival – a fact that Leonard Kondowe, National Manager for Rawson Finance, finds particularly revealing.
“You’d expect people to reach for this money when they’re building something – a home, an asset that grows,” he says. “When most of it goes to debt and getting through the month instead, it tells you how much pressure households are actually under. It also means the one use almost everyone predicted, a deposit, is the road far fewer people are taking. Which is a pity, because it is one of the soundest.”
What you’d actually be dipping into
For those unfamiliar with the two-pot system, here’s a quick refresher.
Since September 2024, one-third of what you contribute to a retirement fund flows into a savings pot you can reach before retirement. The other two-thirds are locked away until retirement. You can make one withdrawal from your savings pot per tax year, with a minimum of R2,000 and no maximum.
“The mistake I see most often is people treating the savings pot like an annual bonus,” says Kondowe. “It isn’t. It’s your own retirement money, brought forward. The moment you frame it that way, the decision to use it changes character. You’re not spending a windfall, you’re moving money from your future self to your present one.”
The case for putting it towards a home
Used as a deposit, that money does work that few other withdrawals manage. It goes into an asset that should grow in value over time. It shrinks the bond you need, which lowers your monthly repayment for the life of the loan. And a meaningful deposit can change how a bank sees you.
“A deposit signals commitment, and lenders respond to that,” Kondowe explains. “It can be the difference between an approval and a decline, and it can earn you a better interest rate on the bond itself. Over twenty years, even a small improvement on your rate can save a substantial amount in interest. That’s the genuine upside here, and it’s a real one.”
The costs people underestimate
The catch is that the headline balance in your savings pot is not what lands in your account. Withdrawals are added to your income for the year and taxed at your marginal rate – the rate that applies to your top slice of earnings, which can run as high as 45%. If you owe SARS anything, that’s deducted first too.
There’s a sting in the timing, as well. The fund deducts tax upfront using an estimated rate, but if that estimate falls short for any reason, SARS recovers the difference on your annual assessment – so a withdrawal made today can hand you a further tax bill months later.
Then there’s the cost you don’t see until years later. Money pulled out now is money that stops compounding, and over a few decades that lost growth is steep. Industry estimates put the future value of every R10,000 withdrawn today at several times that figure by retirement, especially for younger savers with the most time on the clock.
“People run the numbers on what they’re getting and forget to run them on what they’re giving up,” says Kondowe. “Before you withdraw a cent, get the after-tax figure, not the balance on the statement. Then ask what that same amount could have become if you’d left it where it was. Only once you’re looking at both numbers are you actually making a decision.”
So how do you weigh it up?
The answer depends less on the rule and more on your circumstances. Tapping the savings pot makes more sense when you’re buying a home you’d be buying anyway, your income is steady, and the withdrawal tops up a deposit you’ve largely saved rather than supplying the whole thing. It makes far less sense if it would empty the pot entirely, or if you’re reaching for it because the home is a stretch you can’t otherwise manage.
“A deposit shouldn’t be the thing that makes an unaffordable home affordable,” Kondowe cautions. “If the only way into the property is to drain your retirement savings, that’s the market telling you something. Stress-test the repayment at a higher interest rate before you commit, and leave yourself room for the costs that come with owning – the levies, the maintenance, the rates.”
A tool, not a windfall
The savings pot was designed as a safety net, and the volume of withdrawals shows how many households are leaning on it just to stay afloat. Against that backdrop, using it deliberately, once, to help secure an asset you’ll own for decades is among the more defensible calls available – provided you go in with your eyes open.
“There’s a real difference between a decision and a habit,” Kondowe says. “Withdrawing once, on purpose, towards something that lasts is a decision. Going back every March because the new tax year has opened is a habit, and it’s a habit that can cost people their retirement.”
Weighing up whether your two-pot savings could help you into a home? A conversation with a Rawson Finance consultant – including a free, no-obligation look at what home loan you might qualify for – is a good place to start before you withdraw anything.
