Business Times reports that the Government Employees Pension Fund (GEPF) has warned of a temporary liquidity crisis if public servants resign en masse to cash out their pension funds.
According to labour federation Cosatu, draft pension fund reform legislation released by the Treasury last week was inadequate and could trigger a resignation rush by public servants who were hoping to be allowed immediate access to a portion of their retirement savings. The Treasury released the Draft Revenue Laws Amendment Bill introducing a “two-pot” system that would make retirement savings more flexible to accommodate unforeseen circumstances and discourage workers from resigning simply to access their retirement funds. However, the amount workers have already accumulated would be regarded as “vested” and not accessible for withdrawal except in the case of resignations. In terms of the draft legislation, the “savings pot” containing the one-third that could be accessed by a member once every 12 months would only start accumulating from March 2023, the date the Treasury envisages the reforms becoming law. Cosatu’s Matthew Parks said the federation was fielding questions from civil servants who warned they would resign and cash in on the eve of the promulgation of the law if they were not allowed some sort of access to their money. “There will be a run on retirement funds in March next year if this is not clarified; workers are bleeding. Public servants will resign to cash out; we are trying to prevent that scenario. Treasury forgets this is workers’ money, it’s not their money,” he warned. Contacted for comment, the GEPF indicated: “Large-scale resignations would pose liquidity constraints on any fund and would carry the secondary effect of a negative shock on asset prices at the dates of withdrawal. This is due to pension funds basing the investment strategy on a long-term view of the pension obligations. Given the GEPF volumes, a high number of resignations would carry a risk of liquidity pressures in the short term.”
- Read the full original of the report in the above regard by Dineo Faku at Business Times (subscriber access only)
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