COSATU welcomes the release of draft legislation to allow workers early access to their pension funds by National Treasury

12 June 2023

The Congress of South African Trade Unions (COSATU) welcomes the release of the Draft Revenue Laws Amendment Bill and the Draft Revenue Administration and Pension Laws Amendment Bill by Treasury. These progressive Bills provide for all workers, public and private, early access to their pension funds as per the engagements and agreements between Treasury and COSATU.

The Bills, which are still drafts and thus open for further enhancements, provide for the following key provisions:

Workers would be able to access a limited portion of their pension funds without having to resign from their jobs or cash out their entire pension funds.

This would be binding upon all pension funds, public and private, with all pension funds being required to restructure into a new two pot pension regime.

It will come into effect on 1 March 2024.

One third of the pension funds would be deposited into a savings account that workers can access once a year.

Two thirds of the pension funds would be deposited into a preservation account that workers can access in the event that they are retrenched or when they retire.

Workers can transfer 10% up to R25 000 of their existing savings when the Bills come into effect on 1 March 2024 in order to have immediate access to a portion of their savings.

Workers will retain access to their existing funds that were accumulated up to 1 March 2024 in the event of retrenchment, dismissal or resignation.

These are positive agreements and in line with the majority of demands that COSATU tabled with Treasury. They will provide relief, including immediate relief, to millions of struggling workers in both the public and private sectors. They will provide workers a better alternative to resignation when they are drowning in debt or confronted with a financial emergency and need to access part of their pension funds. They will help workers pay urgent bills without having to resign from their jobs and salaries or deplete their entire pension funds and thus be penniless when they retire. They will incentivise workers to save more knowing that when in need they have access to their savings pot once a year. This will boost savings and provide workers a large pool of funds when they retire and thus be less dependent on others when their retire.

Existing tax laws incentivising pension contributions and deducted from early pension withdrawals will continue to apply.

There are some areas that need further engagements and refinements with Treasury. This includes the cap 10% up to R25 000 from existing savings that can be accessed on 1 March. Ideally this should be raised to 30% or R50 000 for example to make it more substantive. Second is to ensure that workers who are dismissed and not only retrenched are also included in the category of workers who have access to their preservation pot for future post 1 March 2024 savings. Third is what could constitute a fair compromise for workers who are forced to resign to take care of a seriously ill relatives or if the family is required to relocate to a different province. This will need further thought on the practicalities of this. Treasury has committed to further pension reforms engagements in a second phase bill.

Once public comments have been taken into account, the Bills will then be submitted to Parliament for consideration by August. Parliament will then need to ensure the Bills are processed and adopted by the end of November. This can be done as these are tax and revenue bills and are normally processed during such tight timeframes without issue. They will then be sent to the President for assent. SARS will need to adjust its taxation systems and pension funds adjust their investment portfolios in time for the 1 March 2024 implementation date. It is critical that the 1 March 2024 implementation date is retained as workers are struggling and have been looking forward to this relief. COSATU will continue to work with Treasury, Parliament and the Presidency to ensure this relief reaches workers and 1 March 2024 is maintained.

Issued by Matthew Parks, Parliamentary Coordinator, COSATU, 12 June 2023