THE decision by South African lawmakers to amend legislation to allow people the opportunity to withdraw their pension savings early, may come as a welcome lifeline for some, but trade union Solidarity has criticised the ‘rushed pace’ of amendments.
As some South Africans eagerly await the September 1, 2024, initiation date for the Pension Laws Amendment Bill to withdraw from their retirement savings, Solidarity has raised concerns about some provisions of the two-pot system which is being finalised.
It believes that forging ahead with the two-pot system which will enable people to access their pensions earlier, offered too little time for the government to test and develop a comprehensive system properly. There is also a concern that not enough attention had been paid to the technical aspects in the bill.
Solidarity’s deputy general secretary for strategy, Marius Croucamp, said their biggest concern was that the amendments posed a risk to the preservation of retirement fund money.
“There are fears that people are not saving enough for retirement as it is, and that they tend to use their pension money paid out to them when they change jobs. The proposed two-pot system will make the process to access pension money earlier even easier.” he said.
Croucamp said the earlier availability of pension money would have a negative impact on many employees because there was no provision to make up for the withdrawn funds to be replaced at a later stage.
He said there were also unanswered questions about the system pertaining to the tax implications thereof.
“The ANC government has indicated that they intend to obtain tax benefits from the access to the savings pot of the retirement money. Withdrawals from these pots will be taxed against the individual’s marginal tax rate, which could potentially lead to a significant increase in the tax burden of some individuals. The race against time to implement these changes amid valid uncertainty and practical challenges is a danger light that is of great concern to Solidarity.”
“Members of the public and Solidarity members are encouraged to study the implications of these changes and to prepare themselves well for the impending changes in the pension landscape,” Croucamp said.
The Public Servants Association (PSA) on the other hand, has welcomed the proposed amendments to various pieces of legislation governing Public Sector pension funds, as published by the National Treasury.
The PSA said the amendments were crucial to implementing the two-pot retirement-system changes in the public-sector pension funds, ensuring the long-term sustainability and efficiency of the pension system for public servants.
While acknowledging the importance of these legislative changes, the PSA warned public servants that pension funds were intended for retirement and should not be squandered.
The association said: “It is imperative that measures are in place to safeguard the integrity and purpose of these funds, ensuring that the intended purpose of providing financial security during retirement years is served. We remain committed to collaborating with relevant stakeholders to ensure that these proposed amendments strike the right balance between flexibility and responsibility, safeguarding the interests of public-sector employees and retirees.”
goitsemang.matlhabe@inl.co.za