The new financial year allows South Africans to revisit their two-pot savings again.
Many are resorting to withdrawing money from their retirement funds to help cover day-to-day expenses, emphasising the financial strain many are experiencing.
Based on the medium-term budget policy statement (MTBPS) estimates released, people might be taking out more money from their retirement this year than they did last year, despite the withdrawal rates decreasing.
What is the two-pot system?
The two-pot retirement system was first implemented in September 2024 and was established by the Revenue Laws Amendment Bill, which allows individuals to access a portion of their retirement savings without having to cash out the entire pension fund.
Although contributions to retirement funds are not taxed, those who intend to withdraw from the savings pot must be registered for tax, as it will be deducted from the withdrawn amount.
A warning about withdrawing
Rob Southey, head of asset consulting at Momentum Corporate, said that for younger people in particular, the consequences of withdrawals are still years away as they may not yet fully comprehend what will happen. He warned that if they withdraw their entire savings pot each year, the investment’s value at age 65 will be significantly lower.
Increases
During the 2026 Budget Speech, Finance Minister Enoch Godongwana announced that the 2025-26 revenue estimate for the two pot savings system increased from R2 005.3 billion in 2025 to R2 006.9 billion in 2026.
Comparing the amounts from this fiscal year, the total revenue estimate has increased by R1.6 billion more than last year. There is also a total increase of R21.3 billion against the 2025 budget revenue estimation of R1 985.6 billion.
According to the South African Revenue Service’s (Sars) compliance efforts, the organisation has contributed R11.6 billion to this significant increase, accounting for 54.5% of the total uplift by the end of January 2026. From the R11.6 billion, a total of:
- R7.1 billion has been allocated towards cash revenue withdrawals
- R3.6 billion has been taken out for debt recovery, and
- R4.5 billion to prevent revenue-leakage.
The reality is that household consumption has increased more than last year by 3%.
This is one of the main reasons people have had to withdraw from the two-pot retirement savings, as broader economic issues, along with the impact of tax policy decisions and compliance outcomes, have left them with limited options.
ALSO READ: Two-pot retirement system: consumers drawing as much and as often as they can
Employment tax withdrawals
Sars recorded “exceptionally high withdrawals” when the two-pot system was first introduced, which led to elevated pay-as-you-earn (PAYE) collections. However, the current withdrawal rates have reduced because the initial rush has declined.
In January 2026, PAYE collections totalled R636.2 billion, which is a 7.8% increase of R45.9 billion, slightly below the expected growth rate of 8.4%.
Growth
Sars is expecting to contribute close to R14 billion, which is about 65.7% of the total revenue, by the end of this year.
Sars commissioner, Edward Kieswetter, is confident that the revised revenue estimate, “is grounded in current economic trends and the organisation’s focus on service and compliance.”
NOW READ: Two-pot retirement system: how other countries make it work
About the Author
