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SA Will Allow Early Access to Pension Funds From March
South African lawmakers decided to allow savers early access to their pension funds from next year, a measure that the nation’s biggest insurer expects to lead to a deluge of withdrawals.
“It is the decision of the committee that we proceed with the date of March 1, 2024,” Maswanganyi said. “The modalities will be left up to the minister and the department, South African Revenue Service and other entities, on how they approach the pension fund administrators.”
The pension reforms have been on the agenda for almost a decade, but gained momentum after the coronavirus pandemic upended the economy and pushed the unemployment rate to a record high. That led to mounting calls on the government to make retirement provisions more readily accessible. South Africa had 3.34 trillion rand ($181 billion) of retirement assets at the end of September, according to data from the Association for Savings and Investment South Africa.
The National Treasury and the retirement industry had sought to delay implementation of the law until 2025 to enable the state revenue agency and pension industry to put relevant systems in place. Old Mutual Ltd., South Africa’s biggest insurer by assets, said in September it’s bracing for a flood of requests by clients to access their savings by upgrading its IT systems.
The bill will now go before the National Council of Provinces for concurrence, before being presented for presidential assent. It will only become law once all the steps are complete.
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Ninety One Ltd., South Africa’s biggest privately owned fund manager, warned last week that the introduction of the two pot system carries risks. Chile allowed a series of early pension withdrawals in the wake of the Covid-19 pandemic, but since then, individuals have been unable to build back their savings, leaving them funding consumption at the expense of their retirement, Chief Executive Officer Hendrik du Toit said Nov. 15.
Read More: How Chile’s Pension System Became a Covid Piggy Bank: QuickTake
“The two pots system is there to help people in times of need, so I do understand that and the complexities of implementation though are very substantial, but it’s very dangerous,” he said. “We should think about creating an economy which allows people to retire with dignity, which means they should have productive jobs, earn enough, and save enough.
Only 6% of South Africans can afford to retire comfortably, which is defined as receiving a pension of at least 75% of their final salary, according to South African-based money manager Momentum Investments, which manages more than 608 billion rand ($33 billion) of assets.
South Africa’s savings rate dropped to 17.3% of gross domestic product by 2022, from 19% in 2021, as high inflation pushed costs, while a constrained economic environment impaired earnings. South Africa trails global peers, which have a savings rate of as much as 28% of GDP, according to data from the World Bank.
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Doomed to failure. Personal savings and mortgage bond free old age retirement just doesn’t feature in the SA context, nor is there a basic State Pension scheme to fall back on when times really get tough, and for this reason poverty in retirement will not recede. SA lives beyond on tick and has done so for decades, in oblivious expectation of the right to live far beyond one’s means. Retirement funds are there for the purpose of retirement, and not for paying monthly accounts while still working and receiving a regular income. And to cap it all the ANC’s abject failure to attract sufficient overseas investment in SA thereby creating long term meaningful employment for the unemployables has finally come to roost creating a can of worms that will end up, as always, being kicked down the road. How can sustainable economic planning be done when for every 1000 – 1200 entrants that come annually on to the the labour market there are only 300 jobs? Beggars belief!
Huge social problem looming down the track in this lunacy is allowed to go through
Yay – I do love a free lunch!
We deal with devils Agoa means selling farm products to America and buying cheap chicken on steroids that we don’t need, lets make more deals with china, remove duties on their imports they have all the machines we need to make products that we import which we could make and sell inside Africa and create our markets, lets stop importing pieces of car parts to assembly and pretend we are building cars, Europe imports cheap cars from Japan, lets finish our minerals and sell them, what ever we buy outside Africa should be stripped and rebuild massively and sold to African markets with government capital schemes, in china those without clever minds have clever hands so we need to stop dropping the pass mark in schools but create parallel technical schools to cater for low marks students, a students who knows 40 % of the subject matter can not be employable or gain intelligence by being forced to colleges, BEE / EMPLOYMENT EQUITY have passed its sell by date and it puts a huge strain on production quality and innovation, pensioners should be experts in their field who can be employed on a consultancy basis not bodies off loaded from the value chain at a specific age to be a burden to society hence the term black tax