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The Congress of South African Trade Unions (COSATU) notes the release of Treasury’s two pot pension and savings reforms proposal (Revenue Laws Amendment Bill). The Federation welcomes the overall objective of the Bill in response to COSATU’s 2020 demand for financially struggling workers to be allowed to access when needed, limited portions of their pension funds.  The Bill proposes that from March 2023, pension funds be structured in a two-pot system.  One pot amounting to a third of the pension fund, would be a savings pot that workers could access once a year when in financial need.  The other two thirds would be placed in a preservation pot for workers to access upon retirement.

This is a positive response to COSATU’s demand for a sustainable mechanism for financially struggling workers to be allowed limited access to their pension funds when in need.  We believe that it can help reduce the need for indebted and struggling workers to resign and cash out their entire pension funds as frequently occurs currently.  It may help to encourage workers to save more, knowing that they can access one third in cases of emergencies.  This may then help to ensure more workers retire in comfort and less in poverty.

COSATU is however concerned about three (3) possible fundamental omissions in the Bill and will be engaging with Treasury and Government to ensure that they are addressed.  COSATU believes that this pension and savings reform must apply to all workers, both public and private sector workers.  All workers are struggling, including public servants who did not receive an increase in 2020, they are highly indebted and supporting relatives who have lost wages and jobs.

The Bill needs to provide for immediate relief to embattled workers when it comes into effect in March 2023 and not simply apply to savings going forward.  Workers are in debt now and need relief now not in the distant future.  If this is not addressed, many workers will simply resign and cash out their entire pension funds as happened previously when government rushed compulsory annuitisation and ignored workers’ real struggles.

Workers need to continue to be allowed access to their full pensions and savings when they lose their jobs or are forced to resign due to family commitments (e.g. relocation).  Pensions are workers’ hard-earned savings.  Workers are currently allowed full access when they lose their jobs.  This right cannot be taken away from them in such situations.  It will be untenable to tell workers that they cannot access their savings when they have lost their jobs and are desperate to save their families’ homes, cars, and possessions and to feed their children.  This situation is more untenable in an economy with an unemployment rate of 45% and where workers struggle to find work for years.

COSATU will be engaging with Treasury and hopes that these key concerns of workers will be addressed and will continue to inform its affiliate unions and workers of developments in this regard. 

Issued by COSATU