Mixed reaction from workers over two-pot retirement fund

Lauded by some as a system that’s going to benefit workers in the long term, while others warned about far-reaching implications. But with President Cyril Ramaphosa having signed the two-pot bill into law, it’s all systems going come the first of September.

We focus on how the two-pot system will impact government workers, many of whom earn meagre salaries such as teachers, nurses and police officers.

It’s a new dispensation that’s going to challenge the financial status of many South African households. While aimed to provide a solution for those struggling financially due to a lack of rainy-day funds, for workers like Constance Mahlangu, it’s unchartered territory.

“We have not been consulted about this and we don’t have full information about what is it that’s going to happen. We’re just being told that there is a two-pot system whereby we’re able to access some of our money but we don’t have full information about what is going to happen after that. So, we need full information and they need to come to us and train and show us the importance of taking our money before retirement.”

Cosatu first proposed the system in 2020, when workers were in the doldrums after the Temporary Employee Relief Scheme payments during the COVID-19 pandemic and lockdown restrictions.

That led to many private and public entities downsizing or closing shop, but what the workers were expecting failed to materialise.

While Cosatu has given the system a thumbs up, it acknowledged that more consumer education regarding the system is necessary.

The Educators’ Union of South Africa issued a warning to all government employees. It says that while the two-pot system may appear attractive at first glance, it could lead to significant financial losses for many employees and is fraught with risks.

A sentiment shared by the Police and Prisons’ Civil Rights Union (Popcru).

Popcru has discouraged its members from accessing the pot withdrawal system, saying it will result in them retiring without adequate savings.

Popcru spokesperson, Richard Mamabolo says it had proposed a tax-free seed capital which mustn’t be capped at R30 000.

“We reject the two-pot system in its current form and would continue to canvas for the following…the delaying of the two-pot system pending further proposals from all its stakeholders, to allow members to access the actual 10% of their pension fund, to allow members to access their pension fund savings tax free. The 10% seed capital must not be kept at R30 000, it must actually be 10% of the members pension fund. So, we also want members to receive all of their pension fund contributions upon resignation.”

The Democratic Nursing Organisation of South Africa (Denosa) says the decision has sparked fear and anxiety among its members. This while the nursing sector is still experiencing several resignations.

Richard Banda, Denosa spokesperson has urged for caution.

“Everyone wanted to resign before the 1st of September simply because they wanted to access their own pension fund, which is what actually we’ve advocated for and what they’ve been wanting to get from the government. Now the concern is, if the government can see the high rate of this particular resignation they don’t get to accede that these people actually, this two-pot system is not what they want, they want their money so that they can ease the burden they find themselves in. And it was going to better if the government make this system optional.”

On September the 1st the system will come into effect and workers like Constance Mahlangu can only wait to see what impact the new system will have on them going forward.

Video: Two-Pot Pension System – Tax implications of tapping into retirement savings: Edward Kieswetter