Workers to wait a bit longer to access portion of their pension

You cannot dip into your pension just yet.  

The National Treasury said on Wednesday that it hoped to finalise legislation that will allow hard-pressed workers to access a portion of their pension funds before the end of the year.

The plan to allow cash-strapped and struggling employees to dip into their pension funds was announced last year as relief for desperate workers hard-hit by the effects of Covid-19 pandemic.  

In December, finance minister Tito Mboweni said changes to legislation governing retirement funds were on the cards to allow for limited withdrawal from retirement funds under certain circumstances.

However, on Wednesday Mboweni and Treasury deputy director-general Ismail Momoniat said workers would have to wait a bit longer to access their pension as the process was complex.

“There is lots of complexities and if we don’t watch it, there will be a lot of rush to the door and we will create liquidity problems. First, it’s going to be a very limited window of access under very specific circumstances ,” said Momoniat.

“The biggest problem we have with our pension fund is that South Africans don’t preserve, as soon as they resign [from] their job they cash out their pensions. And you find that they have very little amounts left. What we anticipate is that once we develop a framework we will table a legislation and we hope to do that before the end of the year.” 

Mboweni said it was important that workers remember that they will one day retire and their living standard would decline by about 70%.

“That 30% will depend on how much we have saved in our pension. So going about obliterating your pension now for current consumption forgetting about your future needs will not help. It's not that government is trying to tell you what to do. It’s a shared burden that one needs to think about,” said Mboweni.

But Cosatu general secretary Bheki Ntshalintshali expressed disappointment at the delays by government to allow workers to access a portion of their retirement savings.

Ntshalintshali said they expected something to have been done in parliament for this move to be achieved as soon as possible.

“Our view is that there are people in the Treasury who are opposed to this, not the minister now, that’s why the matter is delayed. There’s no reason for that because even the minister during his budget speech in February, he indicated that this is the route which must be explored,” Ntshalintshali said.

He said it’s surprising that there isn’t even a bill before parliament looking into the issue. “Within government there’s no urgency, they move very slow, it’s what you get in government where the minister can say this then the officials slow it down... this government is not functioning well,” he said.

“Now we can say to the minister; tell us the process so that we can ensure that nobody sleeps on duty. There’s no bill... we are disappointed that by this time there are no clear indication where we are as the promise alone is not enough,” he said.

Lisa Seftel, National Economic Development and Labour Council (Nedlac) executive director, said the issue has been on the council’s agenda.

“This is on the agenda and the social partners are committed to expedite this measure which will require legislative amendments... the social partners acknowledge that this can only be done through legislative amendments and this by necessity is not speedy.”

Meanwhile, the Treasury said it had to reprioritize its budget in its efforts to source funds to rebuild the economy affected by Covid-19 and the recent looting. Treasury, finance department, the presidency and other government entities were forced to butt heads together to raise billions of rand that would be needed to rejuvenate the country’s economy .

The state has set aside R38.8bn for its relief efforts from the disruption that emanated from the looting of businesses in KwaZulu-Natal and Gauteng earlier this month.  Another R27bn has been budgeted for the R350 monthly temporary grant for unemployed people.

Treasury said it was in talks with the department of social development and the SA Social Security Agency (Sassa) to work out a strategy to launch the distribution of the R350 grant.

“This money is meant to respond to the situation our people now find themselves in. No matter how small it may seem but that R350 goes a long way and we will have to find that R27bln somewhere in the system. Looking after our own is not a cost but an investment,” said Mboweni on Wednesday.

However, National Treasury warned that the country could not afford to pay for R350 grant beyond March 2022 when it expires.

President Cyril Ramaphosa announced several measures to help rebuild the economy on Sunday, including a Temporary Employer-Employee Relief Scheme (Ters) for the industries hardest hit by level 4 lockdown. 

“We are comfortable that we can deal with this additional spending as long as it’s a one-off because we do have confidence that a temporary increase in revenue emanating from terms of trade benefit in respect of SA’s commodities [like mining] can accommodate it at this time,” said Edgar Sishi, the acting head of the budget office at Treasury on Wednesday.