Millions of public servants are set to access a portion of their pensions from today as part of the Revenue Laws Amendment Law amidst concern from labour unions that it will not benefit workers in the long term.
President Cyril Ramaphosa signed the Revenue Laws Amendment Bill of 2023 into law in May.
The system comprises a savings and retirement component for contributions made after 1 September 2024, while historical retirement benefits will be housed in a vested component.
However, the General Industries Workers Union of South Africa condemned the introduction of the two-pot system as “a neo-liberal retirement fund reform that benefits finance capital at the expense of workers.”
“The Two-Pot Retirement Fund system is designed to advantage and benefit both the government and finance capital. The government is shifting the burden of retirement provision onto workers,” said Giwusa president Mametlwe Sebei.
The South African Federation of Trade Unions said “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,” the union said in a statement.
In a meeting with the Portfolio Committee on Public Service and Administration on Thursday, the Government Employees Pension Fund revealed that it was ready to cater the 10% accessible share of retirement savings to its 1.3-million public servant members as of September 1.
Tebogo Marite, Allan Gray’s communication specialist, said people should aim to accumulate at least three times their monthly salary.
“You are unlikely to receive R30 000 in your bank account. The funds will form part of your gross income for the tax year and will be taxed at your marginal tax rate, which means you will only receive the after-tax amount.
“You could be pushed into a higher tax bracket for the year of assessment,” Marite said.
Mark Kingeon, SARS head for leveraged legal products, also said it was important to note that SARS should be approached because the accessible money was also taxable. He said it was understandable that people wanted to tap into the available savings due to financial distress but encouraged saving towards retirement. COSATU, which has welcomed the two-pot scheme raised concern about taxation.
“COSATU is seeking an urgent meeting with Treasury and SARS on a more sensitive and sympathetic approach for SARS to engage workers on what tax they may owe, its verification and a more humane payment plan that considers workers’ individual financial pressures as provided for under law,” said the union’s spokesperson Matthew Parks
