A double-edged sword

Investec survey finds resultant spending and savings could grow GDP.

- Ina Opperman

The two-pot retirement system will be implemented on Sunday. Will it give the economy a boost and help South Africans to preserve their retirement savings, or will it lead to notable withdrawals that can hurt the liquidity and depth of local capital markets?

Ayan Ghosh, head of Cross-Asset Investment Strategy at Investec, said while the two-pot retirement system is largely lauded as a progressive regulatory reform that will benefit savers and the broader financial services sector in the long term, it will have far-reaching implications.

"Pension entitlements among South African households expressed as a share of nominal gross domestic product [GDP] is one of the largest across emerging markets, averaging 120% between 2018 and 2022," said Ghosh.

"Research suggests consumers will use capital from the two-pot system to reduce debt and fund living expenses."