Old Mutual has so far spent R2.5bn establishing a new bank for SA that will be primarily app-driven and aimed at the mass market. Image: BloombergOld Mutual has so far spent R2.5bn establishing a new bank for SA that will be primarily app-driven and aimed at the mass market. Image: Bloomberg
JSE-listed financial services group Old Mutual has seen withdrawal applications amounting to R1.7 billion since its fund members could start claiming savings under the two-pot system.
Iain Williams, group CEO, told Moneyweb on Thursday that the group opened its system for transactions on Monday 16 September, and has so far had around 125 000 applications from members who want to access money in their savings pot.
The insurer decided to follow a phased approach since the implementation of the much-touted two-pot system to ensure that its system could handle the expected 600 000 withdrawal applications.
Phase 1 enabled customers to check their personal details and savings balances via the Old Mutual channel on WhatsApp, while the second phase allowed for actual withdrawal applications.
Williamson, who spoke to Moneyweb after the group’s interim results announcement for the six months ended 30 June 2024, said the volumes the group has seen so far are “not at all unexpected”.
“We thought this would be the case. Ultimately, people are entitled to take a portion of what is in the liquid pot. It is a big outflow in the short term, but in the long term the two-pot system is a good, pragmatic solution from the point of SA Inc or the country’s retirement system.”
From 1 September this year, retirement fund members’ contributions have been split into two components – one third will be allocated towards a so-called ‘savings pot’ and two thirds towards a retirement pot that will only be accessible under retirement.
Previously, retirement fund members could withdraw all their retirement fund savings when they resigned. It is expected that the new regime will lead to much-improved retirement fund outcomes as those who resign will no longer be allowed access to their retirement money.
“Hopefully, people will take out the money for responsible reasons. We have certainly endeavoured to provide as much information as possible and refer people to advisors if they feel they’re not well informed,” Williamson says.
Read: Those aged 35 to 44 lead the way in two-pot withdrawals – Sanlam
New growth engines impact short-term results
Old Mutual recorded 7% growth in its adjusted headline earnings per share for the six months to June 2024. Life sales were up 6%, while gross written premiums rose 9% to R13.8 billion. Funds under management increased by 5%, reaching R1.4 trillion in the period.
However, the group’s results from operations – its primary measure of the operating business performance – decreased by 3% compared to the corresponding period in 2023.
Williamson says the short-term results were impacted by the group’s “deliberate strategy to invest in new growth engines” – most notably Old Mutual Bank, which is expected to be launched in the first quarter of 2025.
Old Mutual has so far spent R2.5 billion on establishing the new bank, which will be “digital-first”.
Read:
Old Mutual to open new SA bank in 2025
Old Mutual gets its banking licence
The bank will be primarily app-driven, but customers will still have access to Old Mutual branches around the country, Williamson says.
Target market
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The new bank is targeted at the South African mass market – the “heartland of its mass foundation cluster business”.
“Teachers, nurses, police officers, if I could put it that way,” he adds.
Although Old Mutual did not have a banking licence until April this year, it has operated in the banking space with its transaction Money Account, which has between 400 000 and 500 000 card holders.
Old Mutual will in due course close down its Money Account offering, and the hope is that those account holders will “move over” to Old Mutual Bank.
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Earlier, during its results presentation, Williamson reiterated that Old Mutual is not concerned about entering the highly competitive banking space amid a range of new entrants in the past five years.
“What sets us apart is our multi-channel distribution strategy, which is very deliberate in that it seeks to preserve the ‘moat’ of our business from a defensive posture perspective,” he adds.
“We still have Number One market share – admittedly with some cyclical variation – but we’ve been able to preserve the value.
“The bank is another weapon in our arsenal … We acknowledge the existence of competition from the banks and we believe we are well set up to compete and thrive in that environment.”
