BL Premium reports that a major battle is in the offing between Cosatu and the retirement industry over worker access to retirement savings, with the labour federation rejecting as inadequate the limited access in the draft legislation published by the National Treasury last week on the envisaged two-pot system.
The draft legislation is earmarked to come into force in March next year. It provides that all of the amount accumulated before the promulgation of the legislation will be regarded as “vested” and will not be accessible for immediate withdrawal, except on resignation. Only one-third of retirement savings accumulated in the savings pot after promulgation will be accessible. It will therefore take some time for the one-third savings pot to build up into a sizeable amount. A prime aim of the proposal is to ensure the preservation of retirement funds in the context of a low savings rate in SA. This would be secured by two-thirds of retirement savings only being accessible on retirement. The one-third savings pot – as accumulated going forward – would be accessible for a single annual withdrawal of no less than R2,000. Cosatu argues that workers in financial distress need immediate access to the one-third of savings accumulated up until promulgation and a union delegation hopes to meet Treasury this week to raise their concerns. “The bill needs to provide for immediate relief to embattled workers when it comes into effect in March 2023 and not simply apply to savings going forward. Workers are in debt now and need relief now, not in the distant future. If this is not addressed, many workers will simply resign and cash out their entire pension funds as happened previously when government rushed compulsory annuitisation and ignored workers’ real struggles,” Cosatu’s Matthew Parks said. However, the retirement industry has warned that a rush of claims for immediate access to one-third of funds could not only pose liquidity problems for retirement funds, but would also be an administrative nightmare.
- Read the full original of the report in the above regard by Linda Ensor at BusinessLive (subscriber access only)
- Read too, Two-pot system will not make any pension savings immediately available, at Moneyweb
Get other news reports at the SA Labour News home page