National Treasury has published further details around a new retirement system proposed for South Africa that will allow people to access a portion of their savings early in times of a financial emergency.

Treasury has described it as a ‘two-bucket’ system:

The first bucket for longer-term financial security – Members must preserve their contributions and the compounded growth invested. They will not have access to this portion of their funds until they retire.
The second bucket for short-term financial relief – Members may access the fund value for emergencies even while they are employed and a member of the fund.
While the changes have largely been welcomed, analysts have warned that the system will require significant changes to existing legislation as well as an in-depth public consultation process.

Rosemary Lightbody, a senior policy advisor at Association for Savings and Investment South Africa (Asisa), said changes to the current retirement benefit access rules would require amendments to the Income Tax Act, possibly also the Pensions Fund Act, and various other legislation.

In addition, administrators of retirement funds would need to make extensive system changes before a “two-bucket system” can be facilitated.

“We are sympathetic to the hardships endured by South Africans because of the Covid-19 pandemic and the lockdowns, but regrettably, there is no possible “quick fix” within the current legislative framework.

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