Government relaxes pensions withdrawal rules

Government has decided to allow people to have access to their long-term savings as the country faces its worst economic crisis.

Finance minister Tito Mboweni made the announcement when tabling the mini-budget yesterday. 

Mboweni said the move to allow workers to have access to their fund before retirement under certain circumstances is to ensure social protection.

“We are happy to announce a historic agreement with all Nedlac constituencies for the annuitisation of provident funds beginning in March 2021, which will enable all workers to continue to enjoy tax deductions on their contributions. We thank the labour constituency for identifying appropriate annuity products for low-income workers.

 “The Nedlac constituencies also agree to accelerate the introduction of auto-enrolment for all employed workers, and the establishment of a fund to cater for workers currently excluded from pension coverage, as an urgent intervention towards a comprehensive social security system.

Government will present legislation next year to allow for limited pre-retirement withdrawals under certain circumstances linked to mandatory preservation requirements,” Mboweni said.

Labour unions have been opposed to the reforms that were introduced by government to limit workers from accessing their pension funds before retirements. Mboweni warned that government borrowings were high at R2.1bn a day.

“We must be careful to avoid the fate of countries like Argentina and Ecuador that defaulted on their debt this year. Countries that find themselves in default see sharp GDP contractions and currency depreciations. On current trends, more of our taxes are being transferred to bondholders, rather than to critical services for our people,” Mboweni said.