Pre-retirement withdrawals from pension funds for emergencies only possible in 2022 – Treasury

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Limited pre-retirement withdrawals from pension funds for emergencies may only be allowed in 2022 after the law has been changed, the National Treasury has said.

In a statement on Wednesday, Treasury advised retirement fund members not to contact their funds until the law allows emergency withdrawals.

Pre-retirement withdrawals for emergencies not legal yet

“Members of retirement funds are advised NOT to contact their retirement funds to withdraw funds (unless retiring, resigning or retrenched), as these retirement funds are legally not empowered to allow pre-retirement withdrawals until the law is enacted,” it said.

“It is expected that any changes to the law would only become effective next year at the earliest, and some of the medium-term provisions may take even longer to take effect. The government remains committed to encouraging South Africans to save more, both for their retirement and for shorter periods before retirement.”

Currently, pension fund members can only withdraw their funds when they retire, resign, or get retrenched. In late July, former Finance Minister Tito Mboweni indicated that the government was in discussions to allow pension fund members affected by COVID-19 to make limited early withdrawals.

“I am now determined more than ever before to ensure the officials in the National Treasury speed up this matter,” he emphasised.

Consultations are ongoing

However, National Treasury now says this may take some time because consultations with trade unions, retirement funds, regulators and other stakeholders are still ongoing.

“Any consideration for early access will require legislative and fund-rule amendments because the current law and policy prohibits any pre-retirement access to retirement savings unless an employee resigns or is retrenched,” it explained.

“It is expected that the earliest that any changes would become effective for a new withdrawal mechanism is 2022. However, the withdrawal process will not cover the Government Employees Pension Fund (GEPF), as it is not regulated under the Pension Fund Act, and hence no COVID-related withdrawals will be allowed.”

Besides consultations as well as legislative and fund rule amendments, the proposed law would also require retirement fund administrators to change their systems.

Treasury concluded, “Design work and consultation are ongoing. Further announcements and the public release of the proposed measures for public comment and consideration will be made shortly, before or at the 2021 MTBPS.

“It is envisaged that the necessary legislative amendments will be introduced in Parliament thereafter.”

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