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Hard-hit South Africans might be allowed to withdraw pension money soon, Mboweni says

Finance Minister Tito Mboweni.

Finance Minister Tito Mboweni.

South Africans who have been hit hard by the pandemic may soon be allowed to withdraw a part of their pensions.

On Wednesday, Finance Minister Tito Mboweni said that Treasury has had discussions – “ad nauseum” – with business and unions at Nedlac on a proposal for limited withdrawals from retirement funds for those who lost part of their income during the Covid-19 pandemic.

Currently, retirement fund members can only withdraw from pensions when they retire, resign or get retrenched.

“I am now determined more than ever before to ensure the officials in the National Treasury … speed up this matter.”

Mboweni said that workers should be able to access a percentage of their pension fund “in this time of difficulty”.

But he added that the money should be used for specific purposes. “[Maybe] to finish up bond payments, or sort out debt.

“This is proving to be a complex problem to solve if we are to ensure preservation of savings,” Mboweni said.

“Government continues to engage with trade unions, regulators and other stakeholders to discuss how to allow limited withdrawals linked to tightening preservation by closing current loopholes, and also to expand coverage so that all those employed or earning an income are required to put aside a small proportion for saving for their future.”

Cosatu welcomed Mboweni’s announcement, but urged him to act faster.

“We hope government will table this Bill in Parliament as soon as possible so that it can be processed and finalised immediately. It is critical that workers be allowed access to their retirement savings because companies and the private sector in general [have] been offered various incentives and tax breaks to bail it out, while workers continue to struggle,” the labour federation said in a statement.

The minister publicly approved of the proposal in last year’s Medium-term Budget Policy Statement.

“I understand the desperate need for cash by people, but there is a consequence,” said Izak Odendaal, investment strategist at Old Mutual Wealth. “You miss out on growth and end up with smaller retirement lump sums.

“The big thing about pension is you benefit from compound growth over many years. You interrupt growth by taking the money out.” 

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