The fund has previously communicated on the announcements made by National Treasury on early access to retirement savings and compulsory preservation. We have since received several queries from members, especially on how and when they will be able to access a portion of their savings.

It is important to note that National Treasury’s proposals are not only aimed at providing some financial relief to members in the case of emergencies, but also at encouraging more savings towards retirement.

In December 2021, National Treasury released papers for public comment, which provide a broad outline of the said proposals: 2021121401 Two-pot system retirement proposal and auto enrolment.pdf (treasury.gov.za).

What is being proposed by Treasury?

The first paper, “Encouraging South African households to save more for retirement”, outlines a “two-pot” system that proposes how future contributions will be split and the portion of savings a member will be able to access (accessible pot) and which portion a member must preserve/save (preservation pot) until retirement age (55). See below illustration on how the proposed system will work from the new legislation implementation date.

Compulsory Preservation

• Two thirds of the total future net contributions will be invested in the preservation pot.
• Members may not access the savings in the preservation pot until reaching retirement (age 55).
• The savings in the preservation pot must be used to provide a monthly pension.

What about vested rights?

It is made very clear by Treasury that vested rights will be protected. This means that the savings (plus growth on these savings) accumulated up until the implementation date can still be accessed as per the current rules, including the option to access a lump sum when resigning and at retirement, subject to 1 March 2021 provisions.

What are the cost and tax implications?

In the papers issued, Treasury makes proposals on the cost implications and tax treatment of these withdrawals and we are expecting that further clarity will be provided on this once the final proposal has been published.

What are the timelines and when can we expect new legislation to be implemented?

The deadline for public comments on the papers issued by Treasury, is 10 February 2022 with the final proposal set to be published with the Budget review in March 2022. The earliest anticipated date for the implementation of this new legislation therefore is 1 March 2023. Retirement funds will also require sufficient time to introduce the proper systems to accommodate these withdrawals, once legislation has been implemented.

Taking all these factors into consideration, we may only see the earliest effective date for members to be able to access a portion of their funds beyond 1 March 2023.

The NFMW supports the efforts by National Treasury to provide financial relief to members while providing a way to ensure that long-term retirement savings for our members are secured and grow.

Further details on the final proposal will be provided once it becomes available and we will, as always, ensure that members are updated on any new developments.

Mr Leslie Ndawana
Principal Executive Officer.