Surge in over-50s tapping two-pot retirement system

Insurance company Momentum Group has flagged a high rate of two-pot system withdrawals among members older than 50, after paying R5.4bn in claims in the year ended June.

The two-pot system allows people to dip into their savings before they reach retirement age or qualify for early retirement benefits.

After the release of the group's results this week for the year ended June, Momentum CEO Jeanette Marais said 350,000 people had made withdrawals from their pension, and it was concerning that 19% of those who did so were older than 50 — flagging a possible depletion of funds close to their retirement.

“It means that they are 10 or 12 years from retirement, yet they are in such financial distress at the moment that they came and took money out of their pension fund. It is virtually impossible to make up for that capital that they have taken out in the 10 years or so that are left. That remains a concerning issue,” she said.

Marais said more than 90% of those who made a withdrawal in March had also done so a year earlier, when two-pot was first introduced. “If you lose your job and you sit without an income and there is money tied up in a pension fund, you are going to access it because you need to live. I think that is another reality of the unemployment rate in South Africa, and ... the economic rate is not growing so people cannot afford their living standards,” she said.

We interviewed members, and [asked]: ‘Will you come claim again across all incomes?’ And the terrifying fact is that more than 70% were saying, ‘yes, I’m going to come claim again’. People want to pay off debt ... but it’s a lot more complicated than that, because ... if you speak to banks, they’ll tell you they didn’t see a huge reduction in formal debt

—  Michelle Acton, executive for retirement reform at Old Mutual,

A recent survey by Old Mutual showed that individuals earning R200,000 a month and above are claiming from the two-pot system.

Michelle Acton, executive for retirement reform at Old Mutual, said the survey found that 45% of members claiming were withdrawing to pay off debt, 18% to cover school fees, 11% to pay off a bond, and 6% to buy groceries.

“We interviewed members, and [asked]: ‘Will you come claim again across all incomes?’ And the terrifying fact is that more than 70% were saying, ‘yes, I’m going to come claim again’. People want to pay off debt ... but it’s a lot more complicated than that, because ... if you speak to banks, they’ll tell you they didn’t see a huge reduction in formal debt,” she said.

This week Momentum reported a 41% rise in headline earnings — to R6.2bn — with operating profit increasing 52% to R5.48bn, while return on equity increased to 21.2%, up from 15.5% the previous year.

Marais said the results reflected a strong start to a three-year target of growth strategy and the ability to deliver value to shareholders.

“We are a strong player in the retail life insurance and investments market in the retail affluent market in South Africa. That market is dominated in terms of distribution by independent financial advisers and that is an area where we are also a market leader,” she said.

Momentum's businesses units include Momentum Insure, Momentum Investments and Guardrisk. It has a footprint in the Indian market through an investment in Aditya Birla Health Insurance Company, a health insurance business.

Speaking during the results presentation this week, Marais told analysts competition in the insurance sector is widespread, with telcos and banks also offering insurance products. She ruled out the possibility of opening a bank, saying the group would stick to its strengths, but was considering growing its focus into areas such as the SME market.

“It is interesting that we have some competitive advantages we can do a lot more with. There are certain markets — such as the SME market for corporates — that we are not yet the biggest player in,” she said.

Marais bemoaned the government’s inaction in dealing with poor service delivery, saying it is hampering economic growth. This was 0.8% quarter-on-quarter in the second quarter of 2025, marking the strongest quarterly growth since the second quarter of 2023.

She said South Africa needs to start putting pressure on the government to deliver services to consumers and the private sector, because until the economy grows, everyone will be under pressure.

“[A few days ago] the ANC had thousands of people convene at FNB Stadium, trying to come up with a new plan to fix our municipalities. That is a travesty. People have never stopped paying their rates, yet nothing has been done on ageing infrastructure.”

Expertise has been lost at many municipalities, she added. “I think we need start keeping government responsible to deliver on what we pay them to do, not to mention the situation we have with crime. We have reached a point to say to the government, it has been long enough, it has been enough.”