By 16 September, the Momentum Group said it had received 112 449 two-pot withdrawal applications to a cumulative value of R1.7 billion. The Group said it had paid 81% of all withdrawal applications and this percentage was rising steadily.
Dumo Mbethe, CEO of Momentum Corporate said: “Our ability to process and pay withdrawals from the very first business day of two-pot, on September 2, demonstrates Momentum Group’s commitment to serving our clients, making sure they receive their funds without unnecessary delays – despite the challenges brought by the sheer scale of this transition and volumes of claims received. Our digital solutions and AI bots across the Group helped to manage the load on our employees – a great example of how AI can improve our lives. Currently more than 80% of withdrawal requests have been processed via digital channels.”
While this early engagement with the two-pot system has revealed much about clients’ immediate financial needs, it has also provided valuable insights into broader trends across the South African retirement landscape, the group said.
According to Momentum, one of the key trends observed since the two-pot launch is the age distribution of applicants. Initially, most requests came from the 40-to-49-year age group, which made up almost 40% of applications. “It is worrying that individuals who are closer to retirement are withdrawing from the savings pot as they may not have enough time to make up for the shortfall,” said Mbethe. However, as the days passed, applications from the 30-to-39-year age group increased relative to the other age groups – closely reflecting the demographics of national contributors to retirement.
Momentum said income distribution data further sheds light on the state of financial wellbeing among applicants. By 13 September, close to 60% of applicants indicated that they were from low-income groups, earning too little to pay personal income tax. It is interesting to note that 10% of applications were made by individuals indicating that they are at a taxable income of R500 000 or more per year.
“It is worth highlighting that a positive development has emerged in the form of increased client engagement with financial advisers. According to the Momentum Unisa Financial Wellness Index 2023, only 15% of South African households are financially literate. This highlights the importance of providing clients with the necessary tools and advice to make informed decisions.
“Momentum Group’s dedicated adviser teams and retirement benefit counsellors played an essential role during the withdrawal process, offering personalised support in reception areas and helping clients navigate their options. As a result, some individuals who initially sought to withdraw their retirement funds decided not to proceed after receiving the relevant advice and/or using the Group’s tax calculators. In fact, some clients took steps to reactivate dormant policies or invest in new retirement annuities, signalling a growing awareness of the importance of long-term financial planning,” it said.
According to Momentum, these early trends suggest that while the two-pot system has provided some clients with much-needed financial relief in tough financial conditions, it has also prompted deeper conversations about retirement savings and financial security. “As the two-pot system continues to gain traction, we encourage South Africans to engage with a trusted financial adviser, and to consider alternative routes than drawing on their retirement savings, given the significant tax implications and negative impact on future retirement planning,” said Mbethe.
PERSONAL FINANCE