Pretoria – Government has no intention to nationalise people’s pension (or provident) funds, or prevent them from accessing their money, says the Department of Basic Education.
This after rumours alleged that government would take away people’s hard-earned pensions, and prevent them from accessing their funds.
The department says the rumours were based on a misunderstanding of government’s proposals.
Instead, the department says government has proposed retirement reforms, which will protect employees when they retire.
“The retirement reforms, including those relating to preservation of savings, are aimed at ensuring that pension fund members are better protected and can retire comfortably. Government is proposing important measures to lower charges on the pension funds of workers, to ensure that they maximise their pensions,” the department said.
Employees are encouraged to keep their savings until they retire and to convert some of their retirement savings into income at retirement.
The department said currently, only an estimated 6% of citizens are able to maintain their lifestyle and replace their income fully at retirement.
The department also said that the proposals have not yet been put into law.
“National Treasury is currently consulting widely on these proposals through several fora, including with labour unions, industry and engagements with the general public. It will take government at least two years before the proposals are made into law,” the department said.
According to the department, the 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.
“Government is not proposing that people’s current and new retirement savings be kept, saved or nationalised or be used as prescribed assets.
“Should these preservation proposals become law, the legislation would not be implemented retrospectively,” the department added.
The department also said that once the new rules come into effect, pension fund members will still be able to access a portion of their savings contributed after the implementation date of the new rules.
Government also encourage members of provident funds to take a major portion of their retirement money as monthly pension payments instead of a once-off lump sum.
“Currently, members of provident funds get their entire accumulated retirement money as cash at retirement and unless this cash is saved such that it provides income for the duration of a member’s life this arrangement can leave retirees vulnerable to poverty in later years,” said the department.