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Moneyweb reports that according to a study by National Treasury, allowing limited withdrawals from pension funds will actually help people to save more for their retirement.
The research found that people sometimes resigned from their jobs for the sole reason of accessing their pension fund in emergencies, and ended up spending everything. The proposal to split retirement funds into two ‘pots’ and give people access to withdraw from one of them is expected to solve the problem. Treasury recently published more information on this and other proposals in a paper entitled ‘Encouraging South African households to save more for retirement’. The paper deals with the key outstanding proposals of the retirement reforms initiated in 2012 which aimed to promote a higher level of savings, expand coverage and promote better preservation and more consolidation in the industry so as to reduce costs and charges for pension fund members. Treasury noted that government would also introduce legislation to enable automatic or mandatory enrolment of employees to a pension fund to expand coverage for more vulnerable workers, such as contract and temporary workers. The paper specifically mentions domestic workers and Uber drivers as examples. According to the authors of the paper, SA households do not save sufficiently for retirement, nor for their short- to medium-term needs. “Household savings average just above 2% of GDP per annum, most of which is contractual savings for retirement funds. However, aside from the low level of savings for retirement, members tend not to preserve their savings, and commonly access them when leaving their jobs. As a result, replacement values at retirement are low.”
- Read the full original of the report in the above regard by Adriaan Kruger at Moneyweb
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