New pension system on the cards can be introduced in South Africa

The National Treasury is expected to table proposed changes to South Africa’s pension system before the end of December for public comment, says the Congress of South African Trade Unions (Cosatu), BusinessTech reports.

The country’s largest trade federation says it has held extensive engagements with Treasury around the proposed changes, with an official Amendment Bill expected to be tabled in parliament in February 2022, following the discussion document.

The proposals will effectively introduce a new pension system that will allow people to access a portion of their savings early.

In an August presentation to parliament, the National Treasury’s head of tax and financial sector policy Ismail Momoniat said that the proposed system would allow for limited withdrawals but still allow for fund preservation and ensure that people still have enough money for retirement.

Momoniat described the new retirement plan as a ‘two pot’ system:

- The first pot for longer-term financial security –  Members must preserve their contributions and the compounded growth invested. They will not have access to this portion of their funds until they retire.

- The second pot for short-term financial relief – Members may access the fund value for emergencies even while employed and a member of the fund.

Momoniat gave an example of anywhere between 10% to a third of the savings being accessible early, with the rest of the money continuing to be saved for retirement.

The actual split across the two savings pots and how much can be withdrawn is expected to be detailed in Treasury’s discussion document released later this month.