SA considering retirement savings withdrawal

Retirement fund members in South Africa might be allowed to withdraw some of their savings in cash without resigning when the two-pot retirement system kicks in, according to the latest National Treasury proposal.When Treasury published the proposed rules for the new retirement system in July, some were disappointed.The draft regulations proposed three pots: one for retirement, one for savings and a "vested pot" to house all the money saved by the time the new system kicks in. You can withdraw money from the savings pot, but the retirement savings and the money in the vested pot remain off limits until you retire.This has since changed, according to a parliamentary presentation by Treasury on Tuesday.According to its latest proposal, a once-off withdrawal from the vested pot may now be allowed when the new system takes effect.This is in response to criticism, including from labour unions, on its new regulatory proposals.Treasury said many people welcomed and supported the two-pot system during the public consultation process. But some flagged that not being able to access money in the vested pot will result in workers resigning."A lot of the comments welcomed and supported the two-pot system. However, there were concerns that workers will resign if immediate access is not allowed. We accept the comment. We will consider allowing once-off seeding capital from accumulated benefits into the savings pot to enable members to have some access," said National Treasury's retirement fund director, Alvina Thela.Treasury said the government is open to allowing once-off access as long as it does not have adverse implications on the affected funds' liquidity and the costs of implementing these withdrawals are not imposed on members. That means retirement fund members can access their current savings without prejudice if this latest proposal becomes final legislation.Another contentious issue was whether members may withdraw money from their retirement pots when they are retrenched. LimitTreasury said that because retrenchments are beyond the members' control, the new proposal is to allow "limited income-based" withdrawals from the retirement pot. This income will be provided for a limited period in the form of annuity income with a maximum amount that can be withdrawn per year.But such withdrawals will be subject to certain conditions. One of them is that money in the vested and savings pots must already be depleted and UIF benefits exhausted before members will be allowed to access savings in the retirement pot. That means they will be required to prove that they have no other alternative income source."We partly accept the dilemma here, especially given our high unemployment rate, when a member gets retrenched because that event is not in the member's control," said Thela.Treasury also wants to delay the introduction of the two-pot retirement system by another year. It initially wanted the system to be implemented by March next year.After receiving public comments, Treasury said some flagged that the date was not feasible given the system changes required to administer the two-pot retirement system. Retirement funds needed at least 12 months to prepare their systems for this, and the Financial Sector Conduct Authority would still need to look at amended fund rules before they can be ready to go. So, Treasury has proposed postponing the implementation date to 1 March 2024.Thela said Treasury also needs to go back to the drawing board and provide more details on how to make it feasible to include public sector funds in the two-pot retirement system. Also, how the new system will apply to defined benefit funds like the Government Employees Pension Fund (GEPF) since their benefits are based on a defined formula, and not their contributions. -Fin24

SA considering retirement savings withdrawal

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SA considering retirement savings withdrawal

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