JOHANNESBURG – The NATIONAL Treasury has not supported the Pension Fund Amendment Bill which aims to enable financially troubled workers to access their retirement savings through loans, the head of the fiscal and financial policy of the Treasury, Ismail Momoniat.
This was even as workers were going through a period of severe financial hardship caused by the effects of the Covid-19 pandemic due to pay cuts, staff cuts and illness and death in families, said yesterday the Cosatu union at the parliamentary finance committee.
Momoniat told the committee that the purpose of the pension reform was to encourage savings and reduce poverty, as South Africa had a very low savings rate and the household savings that took place were mostly contractual thanks to the deduction of contributions to the pension fund from salaries.
He said that pension fund reform was needed because the many loopholes in pension regulations allowed people to cash in their full pension, the governance of many funds was poor, there were too many pension fund and the aim was to encourage more annuities so that people could receive a regular monthly income in their old age.
He said it was essential that any access to retirement savings did not undermine the fund’s long-term goals, and the Treasury feared members would wipe out their funds by being allowed to take out loans.
Momoniat said the bill was also likely to increase employee indebtedness, and he did not specify how that indebtedness would be treated or repaid.
The bill would also mean that pension funds, which typically invest for the long term, as well as in critical infrastructure, would have less money to invest due to the obligation to repay those loans, Momoniat said. The bill was also to be accompanied by a series of fiscal and other measures, he said.
A spokesperson for the Association for Savings and Investment in South Africa (Asisa) – the organization’s members are investment service providers for the pension fund industry – said the The bill would have very limited success, as the regulations of the national credit law specify that a person who takes out a loan must have the capacity to repay it. Asisa said the bill “will not have good results.”
Some 60 percent of all pension members whose funds are administered by pension funds using the services of Asisa members had less than R50,000 in their pension funds, and reduce it by any percentage for a short-term loan was not in line with the purpose of a pension fund.
Cosatu’s deputy parliamentary coordinator, Matthew Parks, told the committee that their members face great distress due to one of the world’s most severe economic disasters and that the bill’s proposals are urgent.
He said the proposed limit of 75% of the loan amount on pension funds should be reduced to 30%, so as not to deplete future employee pension funds.
Parks also told the committee that many workers could not afford to take on more debt, as proposed in the bill, and that the union’s proposal was that the bill allow members to take out a loan or take out a loan. ” make a simple withdrawal from the pension fund.
He said the government should also consider not levying a tax on these loans, given that they would be issued to help people in financial difficulty.
He said the union believed more consultations were needed on the bill and that the National Treasury should draft its own bill if necessary, but the union hoped a final act could come into effect on Oct. 1 of next year.[email protected]