Trade union Cosatu has welcomed the signing of the “two-pot” retirement system which will enable workers to make a withdrawal from their retirement without having to resign.
On Saturday, President Cyril Ramaphosa signed into law the Revenue Laws Amendment Bill of 2023 which establishes the system which becomes effective from September 1, 2024.
Matthew Parks, acting national spokesperson for labour giant Cosatu, said the union celebrated the historic signing of the bill.
“Workers are highly indebted due to slow economic growth, the rising costs of living and having to support relatives in an economy battling a 41% unemployment rate.
“The current pension laws are excessively inflexible, only allowing workers access to their pension funds upon retirement, losing their job or resignation,” Parks said.
He said as a consequence, many workers opt to resign to cash out their entire pension funds, leaving them unemployed and with no savings left.
“The two-pot reforms provide a progressive compromise and fair balance where workers will have access to a portion of their pension funds whilst remaining employed,” added Parks.
Parks said that this will allow workers to access 10% or up to R30 000 of their existing savings when the law comes into effect on September 1 and from then on once a year, access to a third of future savings.
SA Federation of Trade Unions (Saftu) said that they welcomed the signing of the system into law.
“This legislative change has been long-awaited by workers who want to access a portion of their pension before retirement,” Saftu said in a statement.
Civil society groups have called on workers to be cautious when making withdrawals from their pension.
Evashnee Naidu, the KwaZulu-Natal provincial director of Black Sash, said that every individual needs to carefully understand how the “two-pot” system affects them when they eventually retire.
“Workers must understand the process and costs and what the impact will be on their withdrawal on retirement if they make any withdrawals during the lifetime of their retirement fund.”
Naidu said that the system is punitive, where individuals paid higher tax rates, as per their PAYE rate.
“It’s only available once in every tax year and it has to be for an emergency.
What is starkly obvious, though, is that you will definitely get a lesser portion of your retirement if you participate in any withdrawals, which will impact your ability to retire well.
“The social security system also is not universal and this will prevent people with a certain level of income (post-retirement) from accessing grants. The two-pot system is purely for emergencies and unforeseen circumstances and must be seen as a last resort.”
Guy Chennells, chief commercial officer of Discovery Corporate and Employee Benefits, said that retirement funds need to be wary as July 15 is the final date for all retirement funds to submit their rules amendments for registration.
“Failure to register rule amendments for two-pot implementation with the Financial Sector Conduct Authority (FSCA) by 1 September will mean no savings withdrawal claims can be paid from the fund.”
Chennells added that claims volumes in September will be 50 to 80 times higher than a normal month of exit claims.
“Employees will be making a withdrawal. If they have problems accessing their money, they will look to their employers for answers.”
Nicolette van Vuuren, a partner at Webber Wentzel, said that the reform is particularly helpful for industries with high staff turnover, like hospitality. “Employees would leave their jobs just to access retirement savings, often to access cash to service debts.
Now, they would be able to access their savings pot without resigning. Whilst the access to the savings pot my not significantly reduce members’ debt, it will allow them to access their savings pot once a tax year (subject to tax).”
The Mercury