# Pension Funds Amendment Bill

- Link: https://dearsouthafrica.co.za/pensionfab/
- Published: 2021-05-12T15:05:40+02:00
- Author: dearSA

### The Standing Committee on Finance invites you to comment on the Pension Funds Amendment Bill [B30 – 2020].

 * The bill will allow retirement fund members to access up to 75% of their retirement
   savings before retirement as security against a bank loan.

### **153**** **participants (closed 18 May 2021)

[click to view a report on the public participation ](https://dearsouthafrica.co.za/pensionfab/#)

[click to view videos, details and documents ](https://dearsouthafrica.co.za/pensionfab/summary)

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### SUMMARY – from BUSINESSTECH.CO.ZA

The Pensions Funds Amendment Bill currently being considered in parliament could
cause significant damage to the retirement industry, says Glenn Gamsy, chief executive
of GIB Financial Services, a financial advisory consultancy and retirement fund 
administrator.

The bill, which has been proposed by the Democratic Alliance, will allow retirement
fund members to access a portion of their retirement savings in cash before retirement
as a guarantee for a loan.

The DA has proposed that the law be amended to allow retirement fund members to 
access up to 75% of their retirement savings as security for a bank loan, instead
of the current circumstances where members can use their savings as surety to obtain
a home loan only.

Gamsy said that while there is a need to provide households with access to cash 
to ease financial shortfalls – particularly during times when consumers are financially
under significant stress – accessing cash from retirement funds will have a significant
impact on the levels of retirement savings.

“High withdrawals, both from a volume and value perspective, will be disruptive 
on several levels.

“Apart from increasing the administrative burden on retirement fund administrators,
the knock-on effects are substantial and have the potential to impact the economy
given the scope of retirement fund investments in current and planned infrastructure
projects .”

Gamsy said his firm’s other major is the impact this will have on funds available
to members upon retirement.

“At its core, pension fund legislation is designed to safeguard retirement savings
to ensure that consumers can sustain their lifestyles upon retirement. Prudent retirement
planning and saving can literally be a lifesaver at times when expenses remain but
there is little or no additional income.”

The end of a comfortable retirement in South Africa

Gamsy said that South Africans historically have a low savings culture and it is
estimated that only between 6% to 8% of workers save enough to retire comfortably.

Allowing consumers to access 75% of their retirement savings before retirement will
render it virtually impossible for them to maintain a suitable standard of living
when they stop working, he said.

Exacerbating this is the culture of consumerism, conspicuous consumption and instant
gratification and there is no way of guaranteeing that retirement fund cash withdrawals
will be used responsibly.

“This is a complicated issue, and we are fully aware of the economic and political
sensitivities around this debate. However, we are equally aware of the potential
repercussions down the line.”

A retirement fund is a financial asset designed to cushion consumers from retirement
age onwards, Gamsy said.

He added that there is no point in using pension funds to solve an immediate problem
if this results in an inability to fund a lifestyle post-retirement, which will 
see further burdens on the state social security system.

“We are aware that government continues to engage a broad group of stakeholders 
on this matter, and we acknowledge there is an urgent need to provide some form 
of short-term support, but we urge players to take a longer-term view that maintains
the integrity of the pension fund foundation and protects consumers by giving them
a guaranteed retirement safety-net rather than having to rely on government in their
later years.”

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