COSATU notes the release of Treasury’s two pot pension and savings reforms proposal
3 August 2022
The Congress of South African Trade Unions (COSATU) notes the release of Treasury’s two pot pension and savings reforms proposal (Revenue Laws Amendment Bill). The Federation welcomes the overall objective of the Bill in response to COSATU’s 2020 demand for financially struggling workers to be allowed to access when needed, limited portions of their pension funds. The Bill proposes that from March 2023, pension funds be structured in a two-pot system. One pot amounting to a third of the pension fund, would be a savings pot that workers could access once a year when in financial need. The other two thirds would be placed in a preservation pot for workers to access upon retirement.
This is a positive response to COSATU’s demand for a sustainable mechanism for financially struggling workers to be allowed limited access to their pension funds when in need. We believe that it can help reduce the need for indebted and struggling workers to resign and cash out their entire pension funds as frequently occurs currently. It may help to encourage workers to save more, knowing that they can access one third in cases of emergencies. This may then help to ensure more workers retire in comfort and less in poverty.
COSATU is however concerned about three (3) possible fundamental omissions in the Bill and will be engaging with Treasury and Government to ensure that they are addressed. COSATU believes that this pension and savings reform must apply to all workers, both public and private sector workers. All workers are struggling, including public servants who did not receive an increase in 2020, they are highly indebted and supporting relatives who have lost wages and jobs.
The Bill needs to provide for immediate relief to embattled workers when it comes into effect in March 2023 and not simply apply to savings going forward. Workers are in debt now and need relief now not in the distant future. If this is not addressed, many workers will simply resign and cash out their entire pension funds as happened previously when government rushed compulsory annuitisation and ignored workers’ real struggles.