The National Treasury will soon publish a discussion document on the details of its proposals for retirement fund reform before further announcements are made in the 2022 February Budget.
This was a promise made by Finance Minister Enoch Godongwana on Thursday when he tabled the Medium-Term budget Policy Statement (MTBPS) in Parliament.
There has been a raging debate about the Pension Funds Amendment Bill which aims to allow workers who were in financial distress to access a portion of their retirement savings.
Thousands of workers are going through a period of severe financial distress caused by the effects of the Covid-19 pandemic because of salary cuts, retrenchments, and illness and death in families.
The retirement funds industry has expressed general sympathy towards the objectives of the Bill to provide relief to those members of pension funds who were in financial difficulties, but wants it done in the right way.
Godongwana reiterated the National Treasury’s position on the issue, saying the government was taking careful considerations around the legislative amendments so as not to collapse the critical pension funds industry.
He said they were proposing measures to boost household savings by increasing preservation before retirement and to increase flexibility through partial access to retirement funds through a “two-pot” system.
“In terms of this system, individuals would be able to access contributions to the one pot, while contributions to the other pot would be saved until retirement.
“These measures would require legislative changes and further consultation. Limited withdrawals would also depend on affordability and liquidity of funds,” he said.
Treasury has previously warned of a “lot of consequences” in allowing immediate withdrawals, because they would have an impact on gross prospects of other pension fund members.
In August, Treasury’s head of tax and financial sector policy, Ismail Momoniat, said they were “very close” to signing an agreement that would allow workers to withdraw from pension funds, with a limit of a third, or up to 20 percent, under certain conditions, in three to five years.
The Federation of Unions of South Africa (Fedusa) yesterday called for the fast-tracking of the policy and legislative process of accessing portions of pension funds.
Fedusa general-secretary Riefdah Ajam said political intervention must be applied, considering that the legislative process on average takes two years to finalise.
“Hunger and desperation remain the damaging consequences of this pandemic and cannot wait for another two years – the urgency is now.
“However, Fedusa cautions the government not to further insult workers by focussing on the tax opportunities and double dipping at the interim access point and then again at retirement,” Ajam said.
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