The Federation of Unions of South Africa (FEDUSA) says it welcomes Finance Minister Tito Mboweni’s public announcement that National Treasury will draft legislation that will allow workers limited access to their pensions. FEDUSA says Treasury should speed up the process.
The Federation’s General Secretary Riefdah Ajam says,” FEDUSA calls on National Treasury to waste no time in drafting legislation to allow workers access to a portion of their pensions under limited conditions. We acknowledge the economic hardships suffered by workers in both the private and public sectors due to the poor economic climate and the negative impact of the COVID-19 pandemic. This limited access to pensions will assist workers to reduce levels of indebtedness and eliminate the need to access retirement savings through harsh measures such as resignations.”
One of the suggestions the Federation proposes is when workers access their pension funds it must be tax-free.
” FEDUSA further calls on government to allow this limited access to pensions tax-free so that workers have more disposable income to cover debts such as bond repayments, amongst other commitments.”
As FEDUSA we are mindful of the low saving culture in our country and therefore call on government to allow a once-off limited access to pensions tax-free. Workers could then have the option of speeding up the repayment of their partial withdrawals by making additional contributions permissible under the Pension Funds Act.” adds Ajam.
Using pension access in a responsible manner
The Federation has however cautioned that withdrawals from pension funds must be used responsibly.
” Alternatively, they may be allowed to treat the partial withdrawals as an interest-free loan payable over a reasonable period of time. Any notion of taxing this emergency provision will be seen as double jeopardy and an insult to those workers who have endured the hardships. We trust that workers will use access to their funds in a responsible manner, mindful of their retirement savings goals and call on retirement funds to increase products that promote a savings culture, especially towards retirement for all South Africans,” Ajam emphasised.
Discussions at an advanced stage
Mboweni said discussions are at an advanced stage between government and stakeholders on the possibility of allowing workers to access their retirement funds to enable them to pay off their debt. In a virtual media briefing on Wednesday, Mboweni said he would ensure that National Treasury speeded up this matter.
“I am now determined more than ever before to ensure that the officials in the National Treasury speed up this matter. A portion of their retirement fund, workers should be able to access in this difficult time maybe to finish off their bond repayments, maybe to sort out whatever debts they might be in. But I must warn at the same time people must ensure that they use this facility for purposes of relief making better their own situation.” – additional reporting by Amina Accram.