Jobless? Just cash in your pension
THE TIME MOST PEOPLE USE THEIR SAVINGS Government’s new proposed tax law tries to curb this trend – with resistance.
are union members.
Alta Marais, head of pensions research and policy at the Financial Services Board, says there are roughly 5.8 million provident fund, 4.2 million pension fund and 4.1 million retirement annuity members in South Africa. Some members belong to more than one of these vehicles.
The reforms that kick in next month only relate to compulsory annuitisation (in other words, what happens at retirement). Members will still have access to their benefits upon resignation or retrenchment and won’t be compelled to preserve these funds prior to retirement.
But can compulsory annuitisation work without compulsory preservation?
Compulsory preservation is necessary to stop the erosion of pension fund benefits, but given the high unemployment rate in South Africa, this is a very complex issue, Nick Jacobs, chairperson of the Multilect Funds Board of Trustees, says.
Where people lose their jobs and are unable to find another, they don’t really have any other option but to cash in their retirement savings to try and make ends meet, he says.
Unfortunately, this is the economic reality for many South Africans. Jacobs says while National Treasury would like to introduce regulation to compel employees to preserve their benefits in the long run, it will cause an uproar as many employees find it difficult to get another job.
“We need an upsurge in the ability to employ people and I am not seeing that happening,” he says.