Reforms in Retirement Funds Cause Fears Among Workers

Updated on 14 August 2014

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Reforms in retirement funds cause fears among workers

The government has moved in to clarify its retirement reform policy amid workers’ hysteria and mass resignations in a rush to access their pension funds before the state gets its hands on them.

According to Bizcommunityrumours that the government would nationalize pension or provident funds have caused fears among workers that the government would take away their pensions, and prevent them from accessing their funds once they retire.
Mass resignations have already been reported by the Department of Basic Education as teachers start cashing in on their retirement packages. The department says the rumours were based on a misunderstanding of the government’s proposals that could take effect as early as March 2015.
Instead, the department says the has said that proposed retirement reforms will protect employees when they retire. Only an estimated 6% of citizens can maintain their lifestyle and replace their income fully at retirement, said the department.
“The retirement reforms, including those relating to the preservation of savings, are aimed at ensuring that pension fund members are better protected and can retire comfortably. Government is proposing important measures to lower charges on the pension funds of workers, to ensure that they maximise their pensions,” the department said.
Labour federation, Cosatu on Wednesday said government should halt implementation of the proposed retirement reforms until they were properly explained.
But the department said the rumours of nationalizing pension funds were based on a misunderstanding of the government’s proposals and that these proposals have not been finalized but are still being investigated.
According to the department, the proposals seek to encourage pension fund members to preserve their money in their funds (with old or new employers), or with a financial institution when they change jobs, and to allow only limited access to some of the savings until retirement age is reached.
“National Treasury is currently consulting widely on these proposals through several forums, including with labour unions, industry and the public. It will take the government at least two years before the proposals are finalised,” the department said.
The department also said that once the new rules come into effect, pension fund members will still be able to access a portion of their savings contributed after the implementation date of the new rules.
Employees are encouraged to keep their savings until they retire and to convert some of their retirement savings into income at retirement.

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