Pensioners urged to explore alternatives despite promises of early access to retirement funds
Households eyeing the early pension payment have been urged to explore alternatives means to see their buck stretched a little further.
This after former finance minister Tito Mboweni got the ball rolling on amendments to the Pension Funds Act that would see South Africans make limited withdrawals from their retirement funds.
Government hopes to ease the financial pressure on cash-strapped households by allowing early access to pension funds.
The rising cost of food, fuel and the impact of the Covid-19 pandemic continues to have far-reaching implications on some South Africans.
Mboweni’s successor Enoch Godongwana bolstered government’s commitment to give pensioners a lifeline during the February 23 Budget Speech.
CEO at Retirement Investments and Savings for Everyone (Rise) Deresh Lawangee agrees that the funds will go a long way.
“The Covid crisis has highlighted the need for emergency funding for households the concept is that you’re preparing for this wonderful retirement but whilst they’re working towards that wonderful retirement, there are short-term needs so the model doesn’t work for those individuals.
“So what the proposed changes are is to allow you to access one-third of your retirement fund on a 12-month cycle. The other two-thirds will have to be preserved for when you retire.
“Ordinary households are welcoming the change because there is a need to have access to capital - banks are not very good at extending credit lines. There’s definitely a need, where the system is not catering for short-term finance for ordinary households, so this will definitely alleviate that issue,” Lawangee adds.
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While it may bring some relief, Lawangee warns there is no template.
“The problem with legislation is that you try to set legislation for everyone and sometimes it doesn’t quite fit for some people but is good for other people.”
The changes to the Pension Fund Act is expected to be a lengthy process.
“At the moment, National Treasury has released a White Paper for industry comment on how the proposal will work and obviously the Finance Minister announced that we can expect the draft legislature to be implemented. We’re not sure how it’s going to be implemented and when.
“Our suspicion, given the complexity of the legislation, it might take two or three years to fully implement,” says Lawangee.
The retirement fund administrators believe the best bet for pensioners would be to explore other investment avenues.
Listen to Lawangee below:
