Life seldom goes according to plan. One moment you’re pouring everything into a relationship, a bond or a growing family; the next, you’re facing a retrenchment, a health crisis, or a relationship breakdown. Sometimes, the timing is unfortunate and it all happens at once.
During personal upheaval, the emotional parts of the brain take charge while the rational ones shut down, pushing us to act on instinct instead of reason. That’s when our financial judgement becomes impaired – and in a country with high divorce rates, unstable work and constant financial pressure, years of saving can vanish in a handful of split‑second financial decisions.
Stats SA’s Marriages and Divorces Report, published in April 2025, records 22 230 divorces in 2023 – 42% of which came from marriages that lasted less than 10 years, with many spouses in their late thirties and forties. Over roughly the same period, the official unemployment rate sat around 33%, with 8,2 million people unemployed and an expanded rate above 43%.
When a divorce, new relationship or retrenchment hits at that stage of life, it often affects a household that is still supporting children, still paying off a bond, and not yet fully funded for retirement. That is exactly when a severance payout, divorce settlement or new partner’s income feels like the obvious way to plug a temporary gap. But during such emotionally charged life stages, decisions about preservation, withdrawals and beneficiaries are almost never made in a calm, clear-eyed way; they are made under pressure, which can sabotage long‑term planning.
Retrenchment: the fork in the road
Few life events test judgement like retrenchment or a job loss. When your salary stops, anxiety spikes, and so does the temptation to tap into retirement savings.
The problem is that a withdrawal is not just a once‑off dip into capital; it is a permanent cut to your future income. If you take R200 000 from your fund at 45, you lose that capital and the 20 years of growth it would have earned to 65 – in a balanced portfolio, that can mean arriving at retirement with hundreds of thousands of rand less, even before you factor in the tax paid on the withdrawal.
But withdrawals can be a double whammy. First, you lose your capital. Then you lose the growth that capital would have earned. If you take R200 000 from your fund at 45, you forgo 20 years of compounding – potentially doubling or tripling that loss by retirement.
Just because you lose your job, doesn’t mean you get a break from the tax man. In South Africa, all retirement fund lump sums – including severance benefits – are taxed on a cumulative basis, and every withdrawal you take before retirement eats into the limited tax‑free amount available later. Members who cash out early often discover, too late, that they have sacrificed both future growth and the more generous tax treatment they would have received if they had left those funds intact until retirement.
A job loss doesn’t arrive in a vacuum, nor at a convenient time. If you lose your job, you might have a bond, school fees and other monthly commitments. Suddenly the only large, liquid cash is lying in the retirement fund. At that point, you might decide to take just enough to buy a few months of breathing room while you look for something else and leave the rest invested, or empty the pot to plug every short‑term hole. The first decision leaves your retirement plan dented but workable; the second converts a career setback into a permanent pay cut for your future self.
Under the two‑pot system, one‑third of new contributions go into a more accessible “savings pot” and two‑thirds into a “retirement pot”, with withdrawals from the savings component taxed at your marginal rate and repeated withdrawals eroding value further through fees and foregone growth. Trustees and employers who treat retrenchment as a structured intervention point – with enforced cooling‑off periods, default preservation and one‑on‑one guidance – can materially reduce the long‑term damage.
Marriage, divorce and blended families
If retrenchment brings fear, marriage brings optimism. People merge households, commit futures, and assume they will “sort out the admin later”. Yet in a system where beneficiaries, marital regimes and wills determine who actually receives retirement benefits, leaving the paperwork for “later” is when the most expensive mistakes are made.
StatsSA’s divorce data shows how concentrated these risks are. In 2023, roughly 4 in 10 divorces ended within the first decade of marriage, with median ages in the early forties. These are peak earning years, and they are also the years when many parents are still supporting children and paying off home loans. A settlement that trades retirement savings for immediate assets – for example, keeping the house but cashing out the pension – can feel like stability but leaves both spouses under‑funded for the 20‑plus years they are likely to spend in retirement.
Blended families add further complexity. Outdated beneficiary nominations, unreviewed wills or a failure to understand how retirement funds are distributed on death can leave surviving partners exposed and trigger disputes with former spouses or adult children. Decisions by the Pension Funds Adjudicator and the courts repeatedly show how death‑benefit disputes arise because nomination forms and wills were not updated after a divorce, remarriage or new dependents.
Those who handle these life changes with a clear head tend to be more resilient. Couples who align their saving habits, ring‑fence obligations to children from previous relationships, and update beneficiaries and wills are far better placed to keep compounding on track and avoid financial stressors later in life.
