A study conducted by the Personal Finance Research Division of the Bureau of Market Research analysed how South African consumers utilised pay-outs under the two-pot retirement system following the implementation of the policy. The research, based on data from VeriCred Credit Bureau (VCCB), SARS, the South African Reserve Bank, and Statistics South Africa, provides valuable insights into spending patterns and financial behaviour following the pay-outs. The findings reveal that a significant portion of the R43.4 billion in claims processed from 1 September 2024 to 31 January 2025 was used to settle outstanding debt and facilitate new credit purchases, particularly in the automotive sector.

Key Findings:

• Debt repayment prioritised: Many consumers used their two-pot withdrawals to settle outstanding debts. A decline in overdue balances for clothing, furniture and general retail accounts suggests that funds were directed towards clearing financial obligations rather than discretionary spending. Overdue balances for cellular phone contracts and education loans saw an initial decline but later rose again, indicating that the withdrawals may have been used for one-time payments rather than long-term debt servicing.
• Limited impact on savings: Analysis of banking data showed no significant increase in household savings, indicating that the funds were largely spent rather than saved. Despite the potential for additional liquidity to bolster financial security, the data suggests that consumers did not prioritise long-term savings.
• Increase in vehicle purchases: Used car registrations spiked in September and October 2024, reaching the highest levels since the start of record-keeping in 2012. The data suggests that many consumers used their withdrawals as deposits for vehicle financing. While lower interest rates in September and November may have also played a role, the timing of the increase in used car purchases strongly aligns with the peak two-pot withdrawal periods.
• Retail sales saw modest growth: General dealer sales rose in September and October 2024, reflecting increased consumer spending on essential goods. However, spending on clothing and furniture remained in line with seasonal trends, suggesting that withdrawals were not a major driver of discretionary purchases. Sales in other retail categories, such as clothing and furniture, showed some increases, but these may largely be attributed to Black Friday promotions rather than two-pot withdrawals.

The research indicated that the additional liquidity provided by the two-pot system was primarily allocated towards immediate consumption, debt repayment and asset acquisition rather than long-term financial security. While some consumers used their funds to manage debt responsibly, others leveraged the withdrawals to access new credit, particularly for vehicle purchases. The rise in vehicle financing debt suggests that some individuals took on new credit obligations, using the withdrawals to facilitate financing arrangements. The findings highlight the financial priorities of South African households, emphasizing the need for continued financial literacy and responsible debt management strategies. Given that the two-pot withdrawals did not lead to significant increases in savings and were primarily used for immediate financial needs, policymakers and financial institutions may need to focus on educating consumers about long-term financial planning. Encouraging responsible use of retirement savings withdrawals remains a crucial aspect of ensuring financial stability.

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