DURBAN - MEMBERS of retirement funds should be able to access a portion of their pension to enable them to absorb some of the financial pressures that are brought about by unforeseen circumstances, including job losses.
This is the view shared by economists and labour following the release of a paper by the National Treasury titled “Encouraging South African households to save more for retirement” for public comment.
The paper provides proposals aimed at enabling limited access to retirement fund savings pre-retirement, enhancing longer term retirement outcomes by improving preservation and inclusively improving retirement outcomes via the mechanism of auto-enrolment. Many have expressed support for the system, citing the number of people who experienced financial hardships because of Covid-19 due to many companies closing shop over lack of economic activity in the country.
Alexander Forbes expressed its support of the “two-pot” system, saying it would make a positive impact on people’s lives by providing a practicable and responsible solution to the real needs faced by members.
“We anticipate that the proposed ‘two-pot’ system will place further emphasis on the need for retirement funds to better connect with members to provide information, education and advice at critical stages in their lives to optimise both their short and long-term financial outcomes,” it said.
It noted that ultimately, the “twopot” system provides the opportunity for employers and funds to reimagine their benefits and investment strategies to impact people’s lives by finding a meaningful balance between short and long-term needs.
“Going forward, there are still a number of matters to consider in order to implement the ‘two-pot’ system effectively and Alexander Forbes will fully participate in the call for public comment to share our insights with National Treasury.”
The government said it was sympathetic towards the difficulty many South Africans were facing due to the Covid-19 pandemic and has engaged with the regulators and other key stakeholders to work out relief measures for consumers.
“Even though retirement savings should preferably only be used for their intended reason, namely retirement provision, government recognises that there might be a need to allow some access to accumulated retirement savings before retirement,” read the statement.
The Treasury stated that one pot should be preserved until retirement (two-thirds), while the other would enable pre-retirement access (one-third).
“The government is of the view that preservation of contributions must accompany such restructuring to ensure sufficient retirement provision and avoid old-age poverty as well as reliance on the state,” the statement continued.
Cosatu’s Sizwe Pamla said the proposed changes to retirement were long overdue.
“We have been pushing for these changes since May 2020 because we realise the devastating impact that Covid-19 had on the workers. That is why we are happy that the Treasury has now come up with the discussion document.”
He noted how the Australian government had kept the economy running using a similar method, enabling workers to service their debt when the country was on lockdown.
“The fact of the matter is that many workers are in debt, and we believe such an approach would go a long way in addressing this problem and keep the economy running,” he said.
He committed the labour union to engage with the discussion document and make their submissions at the National Economic Development and Labour Council (Nedlac).
The Federation of Unions of South Africa (Fedusa) also expressed its support for pension fund members to access a portion of their money before retirement.
Fedusa president Masale Selematsela said they welcomed the move, but stressed that the policy change should be applied with caution.
“With employees from the private sector they should get a third of their pension fund money as some of them have lost their jobs.
“But no government department closed shop because of Covid, so in such a case each application should be treated individually and scrutinised because we don’t want people to draw their pension just for flimsy spending,” said Selematsela.
Economist Dawie Roodt said while he agreed with the proposal it should be phased in gradually as it could render financial markets unstable.
“Imagine if tomorrow a thousand people said they want to draw from their savings, this would have a severe impact on the markets,” said Roodt.
He applauded the government for the proposal, saying it would impact positively on workers locked in debt.
The policy proposal is up for comment until January 31, 2022.
THE MERCURY