Nic Smit, Product and Pricing Executive at Bidvest Life
The two-pot system is designed to give South Africans access to a limited lump sum from their retirement savings once a year, to help tide them over financial emergencies. It is a supportive and practical initiative, but the sheer volume of savings being withdrawn is highlighting two things.
Firstly, it shows just how stretched millions of consumers are. As at early-2026, the total value of withdrawals stands at more than R60 billion, with the most common reasons provided being debt consolidation, school fees, and basic living costs.
From this, a concerning trend is emerging: Many are treating their savings pot as an annual financial top-up – like a 13th cheque – rather than a last-resort safety net. The reality is that these savings are neither a loan nor a credit facility and, in our challenging economy, it is difficult to replenish them.
The second insight is that more education around other financial safeguards, like income protection, is needed.
For you as advisers, conversations around accessing funds under the two-pot system provide an opportunity to discuss the risks that are contributing to the need for a withdrawal. You can ask questions like “What would happen if illness or injury prevented you from working for a period of two weeks or more over the next year?” and “How long could your household realistically survive without a monthly income?”
If your client’s answer is that they would face a financial emergency, poor saving behaviour may not be the cause. In many cases, the absence of income protection is a leading factor.
This makes your role as an adviser more important than ever.
The fact is that temporary inability to earn an income due to illness or injury happens much more often than many people realise. Bidvest Life research shows that a 30-year-old male is six times more likely to experience an injury or illness that prevents him from working for two weeks or more, than he is to pass away before retirement1, and the Bidvest Life 2024 Claims Report shows that 52% of income protection claims during the year were made by policyholders who had claimed previously2.
These numbers prove that temporary illnesses or injuries are most often not one-time events. They are likely to recur and, if it becomes a norm to use retirement savings as a stopgap, these short-term health incidents become a recurring threat to future financial resilience.
But, when a client’s income is protected, temporary illness or injury need not automatically trigger a financial crisis. Monthly payouts help to ensure that commitments can still be met. Debt repayments can continue. School fees can be paid and food put on the table – all without ‘stealing’ from their savings.
Many consumers do not realise that, when they use their retirement savings to fund immediate financial emergencies, the long-term cost can be significant. Each withdrawal dilutes the future value that compounding would have created. In effect, a client who accesses their savings pot to solve today’s cash crunch is borrowing from their future self – sacrificing the compounded growth that their retirement years will depend on.
Ultimately, the need to access a retirement payout often stems from a lack of immediate alternatives. By placing income protection at the heart of every client’s financial plan, you can help ensure that their retirement savings remain untouched when temporary illnesses or injuries happen.
Your role is essential in helping your clients understand the gravity of the choices they are making. By guiding them through these considerations, you empower them to make more informed decisions, ensuring they don’t solve today’s financial crunch by compromising their long-term financial independence.
ENDS
PS Ed’s note: Enjoy EBnet’s Exec Meet & Greet with Nic Smit here.
