No truth in rumours over nationalisation of pension funds

Rumours that the government plans to nationalise pensions and prevent people from having access to their money until retirement are unfounded according to the Department of Basic Education. Image: Seniors World Chronicle

This announcement comes after rumours alleged that government would take away people's pensions, and prevent them from accessing their funds. The department says the rumours were based on a misunderstanding of government's proposals.

Instead, the department says government has proposed retirement reforms, which will protect employees when they retire.

"The retirement reforms, including those relating to preservation of savings, are aimed at ensuring that pension fund members are better protected and can retire comfortably. Government is proposing important measures to lower charges on the pension funds of workers, to ensure that they maximise their pensions," the department said.

Employees are encouraged to keep their savings until they retire and to convert some of their retirement savings into income at retirement.

Retirement savings not threatened

The department said currently, only an estimated 6% of citizens are able to maintain their lifestyle and replace their income fully at retirement. The department also said that these proposals have not been finalised and are still being investigated.

"National Treasury is currently consulting widely on these proposals through several forums, including with labour unions, industry and the public. It will take government at least two years before the proposals are finalised," the department said.

According to the department, the proposals seek to encourage pension fund members to preserve their money in their own funds (with old or new employers), or with a financial institution when they change jobs, and to allow only limited access to some of the savings until retirement age is reached.

"Government is not proposing that people's current and new retirement savings be kept, saved, nationalised or be used as prescribed assets. Should these preservation proposals become law, the legislation would not be implemented retrospectively," the department added.

The department also said that once the new rules come into effect, pension fund members will still be able to access a portion of their savings contributed after the implementation date of the new rules.

Government also encourages members of provident funds to ensure a major portion of their retirement money remains in an investment fund and is paid out monthly instead of a taking a once-off lump sum when they retire.

"Currently, members of provident funds get their entire accumulated retirement money as cash at retirement and unless this cash is invested to provide an income for the duration of a member's life this arrangement can leave the retired person expose to poverty in later years, because cash that is unwisely invested will run out over time," said the department.