The Congress of South African Trade Unions (COSATU) welcomes work done over many years and much effort by COSATU and its Affiliates to achieve the first stage of the Two Pot Pension Reforms that will now come into effect on 1 September, notwithstanding remaining areas of concern, especially with regards to high levels of taxation and the amount of relief workers can access.

Whilst we did not achieve all that we had proposed and negotiated for, we are nonetheless pleased that for the first time workers will now have choices on how their pensions are used to serve their needs during their careers and in retirement.  Workers will no longer need to resign to access relief from their pension funds.  We encourage workers not to resign at any stage in an economy with a 42% unemployment.

On 1 September, workers will be able to access 10% up to R30 000 from their existing savings as well as once a year, a third of future savings.  Workers will retain full access to existing savings.  Whilst this will not be enough to resolve all of workers’ debts and needs, it is a positive step forward laying the foundation for further reforms to alleviate workers’ poverty and indebtedness.

The Federation has now proposed to Treasury give critical interventions to ease the burden on workers for the negotiations that will soon commence with Treasury and be tabled at Parliament for the next round of reforms that must come into effect in 2025.  These include to:

• Reduce the tax burden on low- and middle-income workers, in particular when access the savings component of the Two Pot Pension System.  This also needs to lead to further engagements on how the tax regime could be made more progressive to ease the burden on millions of struggling workers.
• Allow workers access to a greater portion of their existing savings to enable them to reduce their debt burden and settle other critical financial emergencies.  Workers need to be allowed a choice as to how much they keep in their accumulated vested pot and how much they would want to transfer to their preservation and savings pots.
• Ensure workers who lose their jobs retain full access to all their savings in order to ensure they can save their homes and property and take care of their families whilst they search for work.
• Allow workers to utilise their pensions for education loans as this is an investment in the career path and earning potential of themselves and their children.

COSATU is deeply concerned that SARS is moving to deduct any tax arrears owed by workers from their pension funds.  Workers are drowning in debt and should not be frustrated or disappointed by SARS raiding their long-sought relief to address the state’s fiscal pressures.  COSATU is seeking an urgent meeting with Treasury and SARS on a more sensitive and sympathetic approach for SARS to engage workers on what tax they may owe, its verification and a more humane payment plan that considers workers’ individual financial pressures as provided for under law.

The Federation is deeply dismayed that some pension funds are planning to profiteer and charge excessive administrative fees for workers accessing their long-sought relief.  This is unacceptable and condemned.  COSATU is calling upon these pension fund boards to intervene and ensure these are stopped and a fairer approach is taken to administrative fees.  COSATU will be tabling proposals to Treasury and Parliament to amend the law as well to set caps on what administrative fees can be charged to stop this naked profiteering.

COSATU and its Affiliates will work with pension funds and government to improve the levels of financial and consumer education as part of efforts to protect workers from being exploited by lenders.  As workers consider withdrawing their immediate relief on 1 September and the funds that will be available in their savings pot in future, they should take into account the potential tax implications.

These are the first set of reforms to ensuring workers’ pension funds are geared to supporting workers and their families both during the working life and in retirement.  We look forward to further reforms to ensure that the needs of workers are placed at the centre of these discussions and to ensure we are victorious.

Issued by COSATU

For further information please contact:

Matthew Parks(COSATU Parliamentary Coordinator)

Cell: 082 785 0687

Email: matthew@cosatu.org.za