Treasury balks at immediate withdrawal proposal in Pension Fund Amendment Bill
Share this article:
THE NATIONAL Treasury has rejected a number of proposals in the Pension Fund Amendment Bill 2020 that could allow workers to access a portion of their retirement savings immediately.
Parliament yesterday presented a collective of written submissions made by political parties, retirement funds, trade unions, civil society groups and the Treasury on the bill.
Presenting a summary of the submissions to the standing committee on finance, Parliament’s legal adviser, Noluthando Ntlokwana, said the retirement funds industry was against the bill. However, Ntlokwana said there was general sympathy towards the objectives of the bill of providing relief to those members of pension funds who were in financial difficulties because of the Covid-9 pandemic.
“Cosatu and Fedusa support the provision for pension funds to be utilised as surety for workers in applying for loans. This builds upon the existing home loan provisions in the Pension Funds Act,” Ntlokwana said.
“Cosatu believes that whilst allowing workers access to their funds, limits are needed to avoid their complete depletion. They are proposing that the limits be reduced to 30 percent instead of 75 percent provided for in the bill.”
Retirement savings by South Africans have been extremely low for many years and have not shown any signs of improvement. The recent 10X Investments South African Retirement Realities Survey found that 49 percent of people surveyed said they did not have a retirement plan.
The Treasury’s head of tax and financial sector policy, Ismail Momoniat, said some submissions in favour of the bill lacked substance and technical socioeconomic impact analysis.
Momoniat said there were a “lot of consequences” in allowing immediate withdrawals, because they would have an impact on gross prospects of other pension fund members.
“This bill has absolutely no detail and is seriously flawed. It will impact on the tax system and this will cause a great risk to the retirement system,” he said. Momoniat said they were in support of “limited withdrawals” as per Treasury’s proposed “two-pot system”, which would allow for fund preservation.
He said the Treasury was “very close” to signing an agreement that would allow people to withdraw from pension funds, with a limit of a third, or up to 20 percent, under certain conditions, in three to five years.
“We are pretty close on this proposal, and I’m confident that by the time of the medium-term budget we can release a bill for comment,” Momoniat said.
“We still have a few more consultations, but this process requires a lot of technical work.”
Momoniat also touched on the controversial green paper on comprehensive social security and retirement reform.
He said this would not only apply to people who earn wages, but also to contract workers, such as Uber drivers, who will be given much more coverage under this new system.
“Linked to that is a proposal that anyone who is employed must put aside money in a system of auto-enrolment, because there are many people who work but still don’t contribute to a retirement fund,” he said.
“So we want to have an auto-enrolment, which may later become a form of mandatory reservation.”