The Congress of South African Trade Unions (COSATU) welcomes Parliament’s engaging on legislation to allow workers early access to their pension funds. The Federation supports the Draft Revenue Laws Amendment Bill and the Draft Revenue Administration and Pension Laws Amendment Bill currently before the National Assembly. These progressive Bills provide all workers, public and private, early access to their pension funds as per the engagements and agreements between Treasury and COSATU.
The Bills, are now before the Standing Committee on Finance and are thus open for further enhancements, provide for the following key provisions:
- Workers would be able to access a limited portion of their pension funds without having to resign from their jobs or cash out their entire pension funds.
- This would be binding upon all pension funds, public and private, with all pension funds being required to restructure into a new two pot pension regime.
- It is intended to come into effect on 1 March 2024.
- One third of future pension fund contributions would be deposited into a savings account that workers would be able to access once a year.
- Two thirds of future pension fund contributions would be deposited into a preservation account that workers would access when they retire or are retrenched.
- Workers can transfer 10% up to R25 000 of their existing savings when the Bills come into effect on 1 March 2024 in order to have immediate access to a portion of their savings.
- Workers will retain access to their existing funds that were accumulated up to 1 March 2024 in the event of retrenchment, dismissal or resignation.
These are positive agreements and in line with the majority of demands that COSATU tabled with Treasury and Parliament. They will provide relief, including immediate relief, to millions of struggling workers in both the public and private sectors. They will offer workers a better alternative to resignation when they are drowning in debt or confronted with a financial emergency and need to access part of their pension funds. They will help workers pay urgent bills without having to resign from their jobs and salaries or deplete their entire pension funds and thus be penniless when they retire. They will incentivise workers to save more knowing that when in need they have access to their savings pot once a year. This will boost savings and provide workers a larger pool of funds when they retire and thus be less dependent on others in their retirement.
There are three fundamental areas in the Bills that Parliament needs to amend:
- First is the cap 10% up to R25 000 from existing savings that can be accessed on 1 March. This should be raised to 30% or R50 000 for example to make it more substantive. Whilst R25 000 would have made a difference to workers in 2020 when it was first discussed, it has been badly eroded by massive increases in inflation, electricity and fuel hikes and will no longer have the same impact for workers.
- Second is to retain the existing tax rate workers for early withdrawals. It is beyond shameful that Treasury has proposed to substantially raise the tax rate for early withdrawals to the personal income tax rate. Government should not be profiteering from worker’s indebtedness and misery.
- Workers who are retrenched or dismissed must retain access to their pension funds. This is critical to ensure they are able to save their homes and cars, retain their medical aids and are able to take care of their families. Workers who lose their jobs in this economy will struggle to find work soon.
Parliament needs to amend and strengthen these processive and long delayed Bills. They need to be expedited and passed into a law as a matter of the highest urgency. Parliament and government must not entertain calls by some individuals in industry who calling for further delays in implementing these Bills which have been discussed for nearly 4 years. Workers are drowning in debt and simply cannot afford any further delays.
The Federation and millions of workers look forward to Parliament strengthening these critical Bills and their passage into law.
Issued by COSATU
For further comment please contact:
Matthew Parks
Acting National Spokesperson & Parliamentary Coordinator
Cell: 082 785 0687