The South African Federation of Trade Unions (SAFTU) rejects the rules of the second pot (component) of the two-pot (two-component) retirement system. The two-pot pension reform could have been progressive if it were not for the rules applicable to the second pot, which require workers to access it only at the retirement age. This means a worker who is dismissed, retrenched or who resigns, will not access their pensions in lump sum until they become of retirement age.
Under the new pension system, contributions to pension funds will be divided into two distinct pots: the savings pot and the retirement pot. The savings pot will constitute one-third (33,33%) of the total contributions made to a pension fund, with a payable withdrawal capped at R30 000. This portion is accessible to members before they reach retirement age, allowing them to withdraw funds without the need to resign.
Many workers face financial hardships and emergencies before reaching retirement age, and the ability to access a portion of their pension savings can provide much-needed relief. This can help individuals to address their immediate financial needs, such as medical expenses, education costs, or debt repayment, without jeopardising their long-term financial security.
The retirement pot, on the other hand, will preserve two-thirds of the contributions made to a pension fund. This portion is locked until the member reaches retirement age and retires. Upon retirement, the funds in the retirement pot will be disbursed in the form of an annuity. This can include a living annuity, which allows for the reinvestment of retirement savings to provide a continuous income stream during the retirement years.
The rules applicable to the second pot, which we are rejecting, dilute the much-needed pension reform that enables workers to access a portion of their pensions before retirement. For some time now, workers in both public and private sectors have called for access to a portion of their pensions before retirement. This is because financial need and distress had pushed workers into debt, and consequently, early retirement as a mechanism to cash on their pension lump sum for relief. Particularly, this was the case in the public service, where teachers would resign only to start looking for employment after 3 – 6 months of cashing their pensions. So, amongst others, access to a portion of pensions was to relieve themselves of financial distress without having to resign.
However, the two-pot system in its current version is not the reform that workers called for. Whilst providing access to a one-third (33,33%) portion of pensions before retirement, the current two-pot retirement system locks away two-third of pensions (66,66%) from workers until they retire or reach retirement age.
Government, influenced by the business sector, has hijacked the noble demand of workers and appropriated it for the benefit of the capitalist class. In the current pension system, capitalists use the pensions of workers through pension funds for investments. However, when a worker resigns or leaves their work due to any cause, they can access their pensions in a lump sum. The rules applicable to the second pot in the new reform which will kick in at the beginning of September 2024 will lock this money away from workers whilst availing it to capitalists to embark on investment adventures, which, like the investment in Steinhoff, could lead to losses of workers money and its value.
SAFTU demands a revised Two-Pot System that allows workers to access a portion of their pensions before retirement but does not lock away the other portion until retirement.
