Pretoria – Retirement reforms proposed by government are aimed at ensuring that pension fund members are better protected and can retire comfortably, National Treasury says.
“We have noted public concerns that are fuelled by rumours that government will take away people’s hard-earned pensions and prevent them from accessing their funds. These rumours are based on a misunderstanding of Government’s proposals,” said Treasury in a statement.
“We would like to assure citizens that government has no intention to nationalise people’s pension/provident funds or prevent them from accessing their money.”
Treasury said government was proposing the measures to lower charges on the pension funds of workers to ensure that they maximise their pensions.
Government wants to encourage workers to keep their savings until they retire and to convert some of their retirement savings into income at retirement.
Currently, only an estimated 6% of South Africans are able to maintain their lifestyle and replace their income fully at retirement.
National Treasury is currently consulting widely on the matter through several platforms, including labour unions, industry and the general public.
“It will take government at least two years before the proposals are made into law,” noted Treasury.
National Treasury tweaked its proposal on how much a taxpayer can have access to funds once it becomes compulsory to preserve savings.
Treasury had suggested that after legislation is introduced, people will be allowed one withdrawal per year for each perseveration fund (applying up to 10% of the value of savings). Now it is proposing one withdrawal a year per person so as to reduce the number of withdrawals.
One of the challenges of the current system is that it makes it too easy for workers to cash out their retirement savings when they leave their employer or change jobs.
For example, Old Mutual states that 93.5% of members who were paid withdrawal benefits in 2013 opted to take cash rather than preserve their benefits.
“This means that individuals end up not having enough money for their retirement because the money is not given sufficient time to grow. Government’s proposals seek to encourage pension fund members to preserve their money in their own funds (with old or new employer), or with a financial institution when they change jobs, and to also allow some access to the funds,” it said.