National Treasury has called on those who are eager to withdraw a portion of their retirement savings for their Pension Funds to be patient while the process to change the law to allow for it unfolds.
It says the process to change the law will be completed next year. Currently, the Pension Fund Act allows workers to have access to their Pension Fund money only when they retire, resign from their job or when they are retrenched.
Consultations about changing the law to allow access to money during emergencies and extraordinary circumstances have begun.
National Treasury says an update will be given during or before the next Medium Term Budget Policy Statement in parliament in October. And, only thereafter will the process to amend the law begin.
In the meantime, government is calling on hard-pressed workers to stop contacting their Pension Funds until the process is finalised next year.
End of July the Federation of Unions of South Africa (FEDUSA) welcomed then Finance Minister Tito Mboweni’s public announcement that National Treasury will draft legislation that will allow workers limited access to their pensions.
Tax-free
One of the suggestions that FEDUSA 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.
