Durban — Workers who are strapped for cash are one step closer to accessing a portion of their pension funds as the government moves to pass legislation allowing them to do so.
Parliament this week passed the Pensions Amendment Bill which, once signed into law by President Cyril Ramaphosa, will enable workers to dip into a reformed pension system that has come to be known as the two-pot system.
However, financial experts have advised that those accessing their funds should do so wisely.
In the reformed system, workers will have access to a third of their pension savings, while the rest will remain untouched until retirement.
The move has been generally welcomed with many seeing it as a timely remedy for the country’s workforce that is burdened by debt.
Amid the excitement, there have also been calls for caution when accessing funds.
University of KwaZulu-Natal (UKZN) academic Dr Ntokozo Ndimande said there was understandable excitement as many of the workers had been calling through their unions for such a move for a while now, noting how the calls had become louder since 2020.
Ndimande said while this was a positive development it was imperative that the workers spent the money wisely in order to avoid burdening the state in future.
“There is a danger that people may get carried away and seek a flashy lifestyle which will then be self-defeating because people tend to accumulate debt when pursuing this,” he said.
Ndimande, who is a Research Associate in the Macroeconomics Research Unit at UKZN, warned that irresponsible spending should be avoided at all costs. He suggested settling debt or starting new businesses as reasons for the funds to be accessed.
“The truth is if the money is not spent wisely the same people will become a burden on the state if their pensions run out when they retire, which will simply mean a drain on the public purse because everyone pays value-added tax (VAT) which in turn funds the public purse. So the withdrawal should be given a great deal of thought,” said Ndimande.
A political economist from the University of Zululand, Professor Irshad Kaseeram, noted how workers had been under strain from as early as 2008 during the worldwide credit crunch, and how many had never recovered from this.
Kaseeram said that the government’s failure to spend wisely and to manage state-owned enterprises had seen the reluctance from foreign companies to invest in the country. He said this had a ripple effect as more people joined the unemployment line when the country’s economy was not generating jobs.
“What that did was place further pressure on those working and resulted in a rise in borrowing and defaulting. What you have right now is a very low preservation rate on pensions because of debts for many,” said Kaseeram.
He said there would be a massive challenge for the unions if partial access to pension funds were a success story for workers.
“It goes without saying that unions will have to give serious financial life skills workshops, especially to those who are at the bottom end and have limited access to some of the assistance available out there. That kind of intervention by the unions becomes imperative,” Kaseeram said.
Cosatu spokesperson Matthew Parks said the funds would be handy for workers who had been under pressure during the last couple of years.
“This will bring enormous relief to the workers who have been battling to keep up with the rising living costs and it’s a development that we welcome because extra money into the pockets of workers has major effects on a number of people who rely on them,” said Parks.
As part of ensuring responsible spending, Parks added, the federation was running a series of workshops across the country to ensure that their members spent their money wisely. He cited instances when workers had resigned from their positions in order to access their pensions because of heavy debt burdens, saying the move would bring an end to that. Parks added that they hoped the intervention would see many of the workers break free from the grip of loan sharks who were making their lives difficult.
Sunday Tribune