COSATU urges speedy law amendment for workers to use portion of pensions for loans

Image credit: Twitter/COSATU

Labour federation COSATU has called for a speedy amendment of the Pension Funds Act to allow workers in financial distress to use part of their pensions as security for loans.

The Democratic Alliance (DA) tabled a Private Member’s Amendment Bill in Parliament in November last year to initiate this amendment.

“The Bill serves to amend the Pension Funds Act of 1956 to enable pension fund members to access a portion of their pension fund before retirement as guarantee for a loan,” the party explained in March this year.

2022 target

Speaking to SABC News on Thursday (18 June), COSATU’s Parliamentary Coordinator Matthew Parks said the amendment process must be concluded as soon as possible so that it comes into effect in 2022.

He cited the COVID-19 pandemic’s impact on workers as the main reason for COSATU’s support for the Bill, adding that many workers have lost their jobs.

“There is a Private Member’s Bill currently at Parliament. COSATU feels this is a good platform to engage and address some concerns and provide workers limited access to their pension funds to enable them to survive for another day,” Parks explained.

“It is important to get the balance between giving workers relief and also ensure the sustainability of pension funds so that when workers retire they have sufficient funds to take care of them. The point is something needs to be done urgently, government needs to move with speed.”

Treasury opposed to Bill

In March, the National Treasury expressed opposition to DA’s Bill, saying there is already a high level of indebtedness in South Africa.

“The biggest problem is that South Africans don’t save enough and are highly indebted,” Treasury Deputy Director-General Ismail Momoniat told Parliament.

“While we think that there is a role for some limited withdrawals, the bigger issue is to get preservation so people don’t cash out each time they change their jobs, to close that loophole.”

DA MP Dion George however said the Act already allows pension fund members to leverage their pensions to acquire home loans, proving that the new amendment can still work.

He said the Bill proposes a limit of 75 percent of the value of the pension funds that can be used a loan guarantees.

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