Saipa unhappy with govt's U-turn on pension laws

Saipa says govt’s decision could make people more vulnerable to losing all of their retirement funding.

Minister Jeff Radebe joined by acting Cabinet Spokesperson Phumla Williams addressing the post Cabinet media briefing held at the Imbizo Media Centre in Cape Town. Picture: GCIS.

JOHANNESBURG - The South African Institute for Professional Accountants (Saipa) said it's worried about government's U-turn on new pensions laws.

Yesterday, Minister in the Presidency, Jeff Radebe, announced cabinet has decided to delay, by two years, a new law that would only allow people to take out one third of their provident fund savings when they retire.

But Congress of South African Trade Union (Cosatu) is opposed to the legislation and had threatened to call a national strike if the laws were implemented next month.

The institute's Ettienne Retief said government's decision could make people more vulnerable to losing all of their retirement funding.

"It could have significant impact when we allow them to access these funds for other than retirement purposes. But we must not forget that pension fund and retirement annuity already have these requirements, so why it is that provident fund should be different."

At the same time, the Democratic Alliance (DA) said the African National Congress and government are bending to Cosatu's will at the expense of policy certainty.

DA leader Mmusi Maimane said the decision sends the wrong message.

"Because if you were an investor in South Africa, you'd be concerned about the fact that a law could be tabled and then it could be reversed by Cosatu. If it's true about this law, it will be true about any other thing."

HOLOMISA SHOOTS DOWN THE MOVE

United Democratic Movement leader Bantu Holomisa doesn't believe cabinet's move is sincere.

"They want to make sure that they go to the elections using these unions. After elections it's clear they're going to bring this thing back."

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

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Warren Ingram, Financial Advisor at Galileo Capital, said 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."

Head of product development at Allan Gray, Richard Carter, said it's disappointing that government has made this sudden change at the last minute.

"We've made a bigger problem out of what was, and used that as an excuse to pull back. It is disappointing because it seems to be more of an emotional and a heated issue."

At present, provident members can cash in all their savings when they resign or retire.

Due to come into effect on 1 March, the new law would only affect contributions after that date.