Maximising Financial Security: How Financial Brands Can Leverage the Two-Pot System to Educate and Empower Consumers

Maximising Financial Security: How Financial Brands Can Leverage the Two-Pot System to Educate and Empower Consumers

In today’s evolving financial landscape, it has never been more crucial for individuals to take control of their retirement savings. However, understanding the complexities of new retirement systems can be challenging for many consumers. 

The two-pot retirement system, which was implemented in September 2024,which  introduces a new way of thinking about retirement savings, combining both accessibility and long-term security. 

This is where financial brands have an incredible opportunity to step in—not only to educate consumers but also to empower them to make informed financial decisions.

Understanding the Two-Pot System

What is the Two-Pot System?

The two-pot system represents a major shift in how South Africans can manage their retirement funds. It divides retirement savings into two main components: the savings pot and the retirement pot. The savings component, which will hold one-third of a person’s retirement contributions, can be accessed in times of financial need—providing flexibility for emergencies. The remaining two-thirds, housed in the retirement component, is preserved exclusively for retirement. While the vested component retains its original withdrawal rules, any future contributions will be split between the savings and retirement pots. The flexibility offered by this system aims to help people avoid drastic measures—such as resigning from their jobs—to access their retirement savings in a financial crisis. But with great flexibility comes the need for careful planning, and that’s where education becomes crucial. 

(Source: Momentum 2024, Liberty Retirement System 2024, South African National Treasury 2024)

Educational Videos

Despite its potential benefits, the complexity of the two-pot system means that many consumers are still unfamiliar with how it works. In a recent YourView poll, 59% of respondents expressed interest in educational videos to better understand the system. This high percentage indicates a significant knowledge gap, suggesting that consumers are eager for accessible explanations that break down the system in simple terms.

Financial brands can create a series of short, focused videos that cover different aspects of the two-pot system, from the basics of how contributions are split to more detailed content on tax implications or retirement strategies. These videos can be hosted on the company’s website, YouTube channel, or shared across social media platforms.

Personalised Financial Advice

47% of consumers prefer personalised financial advice through one-on-one consultations with financial advisors, according to a recent YourView Poll. This approach ensures that individuals receive tailored advice specific to their financial situations, making it easier to navigate the complexities of the system.

Offering one-on-one consultations allows financial brands to build trust and provide customised solutions that align with the consumer’s long-term retirement goals. It’s an opportunity to develop deeper client relationships and position the brand as a trusted partner in financial planning.

Social Media Updates

45% of respondents expressed interest in social media updates, indicating a preference for quick tips and real-time information. Social media is an excellent platform for delivering bite-sized content that keeps the two-pot system top-of-mind for consumers.
Brands can leverage platforms like Twitter, Instagram, and LinkedIn to share key updates, reminders about important deadlines, or explain new aspects of the two-pot system in easily digestible formats like posts, stories, or infographics.

Detailed Guides and Articles

43% of consumers prefer detailed guides and articles that provide a comprehensive explanation of the two-pot system. These resources are essential for those who want a deeper understanding of how the system works and how it impacts their retirement savings.
Financial brands should consider creating in-depth articles, FAQs, and downloadable guides that break down the various components of the two-pot system. These written resources will help fill the knowledge gap and allow consumers to digest the information at their own pace.

Interactive Online Tools

42% of consumers are interested in interactive online tools, such as calculators or simulators, to visualise how the system affects their savings. This hands-on approach helps individuals understand the financial impact of the system on their future savings and withdrawal strategies.

By offering tools that allow consumers to input their current contributions, simulate savings growth, and estimate potential withdrawals, financial brands can engage users in a meaningful way. These tools can be integrated into websites and apps to enhance user interaction.

Webinars and Workshops

For 38% of respondents, webinars and workshops with financial experts are a preferred way to understand the two-pot system. These live sessions provide an opportunity for consumers to ask questions and receive real-time guidance, making them an effective educational tool.
Financial brands can organise regular webinars to cover key aspects of the two-pot system and offer workshops that delve into more specific concerns, such as retirement planning strategies or tax implications of withdrawals.

FAQ Sections on Websites

A total of 36% of respondents found FAQ sections on websites to be an important resource for addressing common questions. These sections provide a quick and easy way for consumers to get answers to their most pressing concerns without having to wade through extensive documentation.

Brands can benefit from organising and updating their FAQ sections regularly to ensure they cover the latest changes to the two-pot system. Having well-structured FAQs also improves the user experience by making information more accessible.

Email Newsletters

36% of respondents prefer receiving email newsletters with regular updates and insights about the two-pot system. Email newsletters can be used to deliver in-depth articles, updates on legislative changes, or simple tips on how to make the most of the system.
Brands can segment their mailing lists to send personalised content based on consumer preferences, ensuring that recipients receive relevant and valuable information.

Community Forums

36% of respondents expressed interest in participating in community forums, where they can ask questions and share experiences with others. Community forums create a sense of belonging and allow individuals to learn from their peers.
By facilitating online forums or discussion groups, financial brands can foster a collaborative environment where consumers can seek advice, share tips, and engage with experts. This builds a community around the brand and encourages ongoing participation.

Infographics and Visual Aids

34% of respondents showed that they favored infographics and visual aids to simplify their understanding of the two-pot system. Visual aids are an excellent way to present complex financial concepts in a more digestible and engaging format.
Financial brands can use infographics to illustrate how contributions are split between the savings and retirement pots, or show the tax implications of withdrawals. These visuals can be shared on social media, incorporated into articles, or used in educational presentations.

The Strategic Benefits for Financial Brands

Building Trust Through Transparency

In an era where trust in financial institutions is paramount, brands that prioritise educating their customers will be seen as more reliable and trustworthy. By providing transparent, easy-to-understand resources, financial brands can build long-term relationships with their consumers—ultimately encouraging loyalty and retention.

Driving Financial Literacy for Better Retirement Outcomes

By investing in consumer education, financial brands can contribute to a larger societal goal: improving financial literacy and retirement outcomes. As more consumers become empowered to make informed decisions about their retirement savings, the overall retirement landscape will improve. This creates a positive feedback loop, where educated consumers are more likely to seek further advice and engage with the brand’s services.

Conclusion

The two-pot retirement system offers both flexibility and security, but it also comes with new challenges for consumers who are unfamiliar with its intricacies. Financial brands have a golden opportunity to step in and provide the education and resources that consumers need to navigate this new system successfully. From comprehensive guides and interactive tools to personalised advice, the brands that prioritise consumer education will not only empower their customers but also position themselves as leaders in the financial sector.

Methodology

YourView Consumer Panel: YourView is maintained and administered by KLA, which provides research services and insights to numerous South African companies, including blue chip clients in the financial services, telecommunications, and FMCG industries.
Data Collection: 2024/09/17 – 2024/09/19
Population: No quotas applied with a natural fall-out across demographics.
Question: What type of support or resources would you find most helpful for a better understanding of the two-pot retirement system? n – 1019