More than R43-billion has been withdrawn under South Africa’s Two- Pot retirement system – and over R11-billion collected in tax revenue.
These figures were revealed as part of SARS’ preliminary review into the implementation of the Two-Pot retirement system, which came into effect in September 2024. Although the system aims to provide employees with greater access to short-term savings, the sheer volume of early withdrawals surprised even tax authorities.
While the consumer market may have received a short-term boost, this shift raises serious considerations for the protection of long-term savings. As the world of work evolves, forward-thinking employers are seeking new ways to offer meaningful long-term support. One standout option? Umbrella funds – a retirement savings solution that reduces employer administrative and compliance burdens.
An umbrella fund allows multiple unrelated employers to participate in a single retirement savings structure, offering the scale and efficiencies of a larger fund.
The Two-Pot retirement system has shone a light on employer compliance or lack thereof. In the lead-up to its rollout, several retirement funds and SARS discovered instances where employers had failed to pay retirement contributions deducted from employees’ salaries. Employers who offer retirement fund benefits must be fully committed to their compliance responsibilities. Contributions need to be paid on time, records need to be accurate and employees should be informed and engaged.
Members of umbrella funds (employees) should be encouraged to understand where their savings are invested, what the available investment options are and whether participation in the relevant fund will allow them to achieve peace of mind at retirement.
An experienced employee benefits consultant is an invaluable resource in this process. They help benchmark fees, decode layered pricing models and ensure the selected provider’s offering aligns with the employee’s needs. They can also help design and manage an employee engagement strategy around retirement benefits. Their industry insights help avoid costly missteps and ensure that the chosen umbrella fund offers measurable value.
