Delay to retirement reforms unpacked

Financial Advisor at Galileo Capital Warren Ingram, says the legislation is only related to provident funds.

FILE: Pensioners queue outside of a supermarket in Mitchells Plain on the 1st of the month to collect their SASSA grants. Picture: Thomas Holder/EWN.

JOHANNESBURG - Government's decision to halt the implementation of changes to how provident fund money can be paid out has been questioned.

Minister in the Presidency Jeff Radebe announced a halt in the implementation of a law that will oblige people to withdraw only two-thirds of their provident fund when they retire and use the rest to purchase an annuity.

Government claims the legislation is meant to ensure people have an income through their old age.

The postponement is now two years.

Warren Ingram, Financial Advisor at Galileo Capital, says the legislation is only related to provident funds.

"It's critical because most companies nowadays have provident funds and don't really have pension funds anymore and those who don't work for big businesses will have retirement annuity and aren't affected by this legislation."

Asked why it is devastating, Ingram said the people our government should be looking after and trying to help are those who are earning a decent salary.

"Those people look at their provident fund as a way of cashing in money from time to time and unfortunately the way they have to do that is by quitting their jobs."

The financial advisor added that people quit their jobs to access their money.

"It is because you are in financial trouble and you use your provident fund and pay more tax on it immediately, then settle whatever the debt is, and now you have to find a new job."

Congress of South African Trade Unions (Cosatu) has been critical of the legislation and today said it scored only a partial victory after government's climb-down over changes to pension laws.

Cosatu has strongly opposed the changes, claiming they amount to the nationalisation of pensions.

Ingram condemned the trade union federation saying Cosatu should have been fighting tooth and nail to make this legislation happen.

"They should have done it 10 years ago, if they really cared about their members they would have said this is a no brainer, this is the legislation that you enforce. Why is government not doing it is what they should have said 10 years ago."

He added that the people who are better off will become even better off.