Cabinet tries to calm pension fears

Image courtesy stock.xchnge

Government gave assurances on Thursday that proposed pension reforms will not see the state take over pension funds or prevent workers making withdrawals when they change jobs.

“There is no intention on the side of government to nationalise these things. I want to state emphatically, no, no, no,” Minister in the Presidency Jeff Radebe told journalists following Cabinet’s regular Wednesday fortnightly meeting.

He conceded: “From government’s side I don’t think we communicated this thing appropriately.”

Following a warning by the Congress of SA Trade Unions (Cosatu) last week, Radebe said Cabinet had noted that misguided fears about the reforms had prompted some people to resign from their jobs and withdraw their retirement funds.

“There is anecdotal evidence that some workers are resigning from work on fears that government will from next year prevent them from withdrawing their retirement savings when they change jobs, and that government wants to take over retirement funds,” he said.

“While government wants to encourage workers to preserve their savings until retirement, no laws have changed to stop withdrawal when workers change jobs.”

Finance Minister Nhlanhla Nene last month issued a statement explaining that government believed it was currently too easy for workers to withdraw cash from their retirement savings when they changed jobs.

Treasury’s planned preservation reforms – which include higher taxation on early cash withdrawals – were aimed at encouraging workers to leave sufficient money in their pension funds to provide for eventual retirement.

He pointed out, however, that the reforms would not be retrospective and would not prevent cash withdrawals.

Cosatu last week called for a moratorium on the changes until workers had more clarity on the implications.

Cosatu president Sidumo Dlamini said the federation’s leaders would meet Nene next week to ask that an element of voluntary participation be worked into the reforms.

Dlamini warned that union members did not understand the changes government wanted to make and were withdrawing their pension funds for fear that these would be nationalised.

Sapa

today in print