The South African Federation of Trade Unions (SAFTU) said it did not approve of the two-pot (two-component) retirement system.
The federation said the system could have been progressive if it were not for the rules applicable to the second pot, which only allows workers to access their money on retirement.
President Cyril Ramaphosa signed the Pension Funds Amendment Bill into law last week. The new system is expected to take effect on September 1, giving legal certainty to the retirement industry, which has been preparing for the changes.
The new system will allow members of retirement funds to access part of their retirement savings without having to resign or cash out their pension funds.
However, Saftu’s spokesperson Trevor Shaku pointed out that a worker who was dismissed, retrenched or resigns will not be able to access the pension in lump sum until reaching retirement age.
According to the new law, contributions to pension funds would be divided into two distinct pots, the savings pot and the retirement pot. The savings pot would constitute one-third (33,33%) of the total contributions made to a pension fund, with a payable withdrawal capped at R30 000. This portion would be accessible to members before they reach retirement age, allowing them to withdraw funds without the need to resign.
Shaku said the fact that workers would be able to access a portion of their pension savings would provide much-needed relief under the financial hardships facing workers.
“This can help individuals to address their immediate financial needs, such as medical expenses, education costs, or debt repayment, without jeopardising their long-term financial security. The retirement pot, on the other hand, will preserve two-thirds of the contributions made to a pension fund.
“This portion is locked until the member reaches retirement age and retires. Upon retirement, the funds in the retirement pot will be disbursed in the form of an annuity,” the spokesperson added.
Shaku said SAFTU had difficulties in accepting the rules that were applicable in the second pot, because they dilute the much needed pension reform to enable workers to access their pensions before retirement.
“This is because financial need and distress has pushed workers into debt, and consequently, early retirement is a mechanism to cash on their pension lump sum for relief.
“Particularly, this was the case in the public service, where teachers would resign only to start looking for employment after 3 – 6 months of cashing their pensions.
“However, the two-pot system in its current version is not the reform that workers called for. While providing access to a one-third (33,33%) portion of pensions before retirement, the current two-pot retirement system locks away two-third of pensions (66,66%) from workers until they retire or reach retirement age.”
Shaku accused the business sector of hijacking the noble demand of workers and appropriating it for the benefit of the capitalist class. He further accused business of using workers’ pensions through pension funds for investments.
“The rules applicable to the second pot in the new reform which will kick in at the beginning of September 2024 will lock this money away from workers whilst availing it to capitalists to embark on investment adventures, which, like the investment in Steinhoff, could lead to losses of workers money and its value,” he said.
Shaku said SAFTU wanted a revised two-pot system that allows workers to access a portion of their pensions before retirement but does not lock the remaining portion until retirement.
The Star