Financial authorities have warned that the proposed Pensions Funds Amendment Bill could have a harmful impact on financial savings in South Africa.

The bill, which was tabled by the opposition Democratic Alliance, will allow retirement fund members to access a portion of their savings in cash before retirement as a guarantee for a loan.

The bill makes provision for this by amending the current Pension Funds Act to allow pension fund members to obtain a loan, secured by a guarantee from a registered pension fund, to alleviate financial pressure during an emergency.

In this case, the bill makes direct reference to the Covid-19 emergency or any other emergency similar to the pandemic.

Regulatory groups including the Banking Association of South Africa, the Association for Savings and Investment South Africa, and the National Treasury have warned that if a member ends up defaulting on a loan, it would substantially erode their retirement savings.

In an overview of responses before parliament on Tuesday (24 August), the groups also warned of a historically poor savings culture in South Africa.

“Incurring substantial indebtedness could certainly have a significant impact upon the pension fund member’s financial security over the long-term, including potentially into the retirement years.”

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