If you’re a member of our retirement fund, you’ll know about the two-pot retirement system. Since September 2024, your retirement contributions have been split into two buckets: a retirement component (which you can’t touch until you retire) and a savings component (which you can access, once a year, in amounts of at least R2,000). It was designed as a safety net for genuine financial emergencies, and for many people, that’s exactly what it has been.

But here’s where we need to have an honest conversation.

 

The savings pot was never meant to be a spending pot

The fact that you can access your savings component doesn’t mean you should. Think of it less like a savings account and more like a fire extinguisher, there for emergencies, not for everyday use.

The problem is that life throws a lot of things at us that feel like emergencies but aren’t. A holiday that’s overdue. A car upgrade. School fees you didn’t budget for. While all of these are real, dipping into your retirement savings to cover them is a bit like using the fire extinguisher to cool down your coffee. It works. But now you don’t have it when you really need it.

 

Let’s talk real numbers

Here’s where it gets important, and we want you to really sit with this.

Imagine you have 15 years until retirement, and you withdraw R50,000 from your savings component today. Maybe it feels manageable. R50,000 is R50,000, after all.

But that R50,000, left inside your retirement fund and growing at a reasonable average return of 10% per year, would be worth approximately R209,000 by the time you retire. You’re not just spending R50,000. You’re spending R209,000 of your future self’s money.

And that’s only part of the story.

 

The double hit at retirement

This is the part that catches most people off guard, and it matters enormously.

When you retire, you’re allowed to take a portion of your retirement savings as a cash lump sum. Many people count on this, whether to pay off the bond, clear a car loan, or handle a big expense right at the point they stop earning a salary. It’s a moment of real financial relief, and a lot of retirement plans are built around it.

Here’s the thing: your savings component is that lump sum. When you withdraw from it before retirement, you’re not just reducing your monthly pension income. You’re spending the cash you were planning to have in hand on the day you retire.

So that R50,000 you needed today? At retirement, it would have become R209,000, sitting there, ready to clear a chunk of your debt and give you a clean financial start to your retirement years. Instead, it’s gone. And your future self is left to manage without it.

 

Sometimes you have no choice. And that’s okay

Let’s be clear: sometimes life genuinely leaves you with no other option. A job loss, a medical emergency, a family crisis: these are real, and the savings component exists precisely for moments like these. There is no shame in using it when it’s truly necessary.

But before you make that call, it’s worth pausing to ask yourself a few honest questions. Have you looked at cutting back on expenses, even temporarily? Could a short-term personal loan bridge the gap, one you could repay over a few months without touching your retirement savings? Is there support available from family, your employer, or a community fund? And have you spoken to a financial adviser who can help you see the full picture?

The savings component should be the last door you open, not the first.

 

Protecting what you have is just as important as building it

We tend to think of saving as something you do, a deposit, a debit order, a decision to put money away. But saving is also about the decisions you don’t make. The withdrawal you hold off on. The temptation you resist.
Before you think about what more you can put in, take a moment to think about what you already have, and what it could be worth if you leave it alone to do its work.

Sometimes the most powerful financial decision you’ll make is the one you decide not to make.
 
If you’re unsure about your two-pot savings component or want to understand your options better, please reach out to your financial adviser or speak to your HR department. You can also contact us at retirement@prescient.co.za for more information.

 

Disclaimer:

The Prescient Retirement Funds (“the Funds”) are registered with the Financial Sector Conduct Authority and approved by the South African Revenue Services for tax purposes. The Funds are administered by Prescient Fund Administration (Pty) Ltd (Reg. No: 2023/697717/07, “Prescient Fund Administration”). Prescient Fund Administration is an approved retirement benefits administrator (Licence No: 24/810) under section 13B of Pension Funds Act, 24 of 1956 and a Juristic Representative of Prescient Fund Services (Pty) Ltd, an authorised Financial Services Provider (Licence No: 43191) under the Financial Advisory and Intermediary Services Act, 37 of 2002. This document was written by the Prescient Retirement Funds for information purposes only and does not constitute advice or a solicitation for investments. Members may need to seek professional financial advice before making an investment decision. It is subject to copyright and may not be altered, copied or reproduced in whole or in part without the written permission of Prescient Retirement Funds. The Funds and their trustees, and / or Prescient Fund Administration cannot be held liable for damages or loss suffered as a result of any action taken based on the information in this document.

Whilst we have taken reasonable steps to provide accurate and up to date information in this publication, we do not give any warranties or representations, whether express or implied, in this respect. The information is subject to change without notice. The information contained in this publication is provided for general information purposes only and none of the information constitutes an offer or solicitation for business, a recommendation with respect to our services, a recommendation to engage in any transaction or legal, tax, financial, investment or accounting advice. No action should be taken on the basis of this information without first seeking independent professional advice. We shall not be liable for any loss or damage whatsoever arising as a result of your use of or reliance on the information contained herein.