You are Here > Home > My Retirement > Treasury’s solution to early withdrawal

Treasury’s solution to early withdrawal

Sep 9, 2021

Treasury’s solution to early withdrawalAs part of its ongoing retirement reform process, National Treasury is proposing the introduction of a two-bucket retirement system to provide for shorter and longer-term needs.

John Anderson, executive at Alexander Forbes, says it may work along the same percentages of annuitisation at retirement, where up to one-third can be taken as a lump sum. Up to one-third of contributions could go towards an accessible savings mechanism and two-thirds preserved for retirement.

The one-third would be made available throughout an individual’s lifetime while the other two-thirds would be subject to mandatory preservation and could only be accessed at retirement.

This arrangement would, however, apply only to new contributions from the implementation date.

Further detail will be provided by National Treasury, with the aim for this to apply as early as 2022.

Vested rights are always upheld, so people with existing funds could still fully access those when leaving a job.

Currently most members of retirement funds contribute 15% of their salaries towards the company fund. If 5% went to the flexible bucket and 10% went to compulsory preservation, Anderson says it would significantly improve the current retirement position of most members as it would create forced preservation.

If the two-thirds are maintained over a 30-year career, it would provide a reasonable income replacement ratio at retirement.

What is still unclear is whether Treasury will allow a once-off early withdrawal from existing retirement funds to provide some financial relief in the face of the pandemic.

Anderson says that for most lower-income earners who are under financial pressure, the average balance in their retirement fund is less than R50 000.

Even if National Treasury allowed a 10% withdrawal for example, it would not be significant in terms of financial relief.

“The problem is that people simply have not saved enough, and withdraw when changing jobs,” says Anderson.

This article first appeared in City Press.


  1. I would like to receive information on money to be money wise and how to save monry or even how to invest


Submit a Comment

Your email address will not be published. Required fields are marked *

Maya Fisher-French author of Money Questions Answered

Previous Articles

Five ways to boost your income and financial knowledge

Angelique Ruzicka shares five ideas for how you can improve your financial knowledge and possibly boost your income. Boosting your income, especially during a pandemic, can feel nigh on impossible, especially when costs are going up and you’ve been told there’s no...

Financial tools to keep you on track in 2022

Advances in technology mean that it’s now so easy to keep track of your finances and achieve savings goals, using smartphone apps, websites, and other online financial tools, says Angelique Ruzicka. If you’re still using Excel or some other rudimentary means to keep...

What will the rand do in 2022?

Ryan Booysen, MD at DG Capital Forex, stares into his crystal ball to predict where the rand will go in 2022. The rand ended 2021 on the back foot, after the Omicron announcement and subsequent global kneejerk reaction of isolation and red-listing the country. And...

SARS gets serious over non-compliance

Jashwin Baijoo, Legal Manager, Africa Tax and Compliance at Tax Consulting SA, warns all non-compliant taxpayers that SARS could be coming for them sooner rather than later. In media statements in recent months, the South African Revenue Service (SARS) has made clear...

Should I use my retirement lump sum to settle my debt?

A question that I often receive is whether it's a good idea to use one's lump sum on retirement to pay off short-term debts, such as car debt or one's credit card. For example, Ntombise recently wrote to me: “I have just retired from work and expect a lump sum...

Reflecting on the year that was

Victoria Reuvers, Managing Director at Morningstar Investment Management South Africa, looks at how financial markets performed in 2021. As a runner, the change in seasons gives me time to reflect. Autumn is my favourite season, and always reminds me that change is...

Immediate access to retirement funds unlikely

Retirement reform paper calls for comment but no move on immediate access. Retirement fund members hoping to access their retirement funds for urgent financial relief will be disappointed by the retirement reform paper issued by National Treasury last month. In the...

The 2022 survival budget

As if the last two years were not tough enough, there is no silver lining awaiting us in 2022. In 2021 we absorbed further fuel-price increases, a 15% hike in electricity costs, and an interest-rate increase of 25 basis points – and this is only the start. It is...

Using critical illness insurance to supplement medical cover

Many financial advisers are using life products to supplement medical costs. While current legislation does not allow for cover like critical illness insurance to be marketed as a product to cover medical costs, for most policyholders, that is exactly what it is used...

Savvy ways to use your bonus

Many companies are cash strapped due to the impact of Covid-19, but if you are one of the lucky few who got a bonus or windfall this year, it will be tempting to spend it to celebrate surviving another tough year. However, money experts recommend being a bit cautious,...

Pin It on Pinterest

Share This