To allow limited withdrawals from pension funds will actually help people to save more for their retirement, according to a study by National Treasury. The research found that people sometimes resign from their jobs for the sole reason of accessing their pension fund in emergencies, and end up spending everything.

The proposal to split retirement funds into two ‘pots’ and give people access to withdraw from one is expected to solve the problem.

Treasury recently published more information on this and other proposals in a paper entitled ‘Encouraging South African households to save more for retirement’.

The paper deals with the key outstanding proposals of the retirement reforms initiated in 2012 which aim to promote a higher level of savings, expanding coverage and promoting better preservation and more consolidation in the industry to reduce costs and charges for pension fund members.

“The proposed restructuring of retirement savings aims to address the situation where many members of funds find themselves cash strapped (because of not having any alternative or sufficient forms of short-term savings) and then they resign from their jobs to access their retirement savings. Such withdrawals should not undermine the long-term objective of building savings for retirement; hence the design of the two-pot system which includes a preservation requirement to improve retirement outcomes and maintain the integrity and sustainability of retirement funds,” states the paper.

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