Sibusiso wants to know if he can cash in his retirement annuity in order to keep up with his mortgage payments.
“I am 32 years old and have been unemployed since March 2012 and living off my provident fund since then. In January 2013 I had to make my retirement annuity paid-up because I could no longer make the monthly premiums. I then requested my RA money to be paid out so that I could pay towards my mortgage but was informed I was unable to do so.
I have taken the issue up with the Financial Services Board and SARS all who have given me a negative response. I have now received a final demand from the bank on my mortgage arrears. What recourse do I have?” asks Sibusiso.
Maya replies: Unfortunately the law around a retirement annuity is clear. You cannot draw down on it before retirement. Government’s position is that they have given you a tax exemption on your contributions and therefore have the right to insist that you keep these funds for retirement.
You have no legal recourse with regards to your RA but I would suggest that you speak to your bank about your current situation. You may have to consider selling your home before you are in a position where the bank forces you to sell and you have to accept a far lower offer.
Subsequent to the recommendation to Sibusiso to speak to his bank, he informed us that Nedbank has assisted him even though their lawyers had already issued summons. “Their programme is called Nedbank Assisted Sale (NAS). They sent their evaluator and then put a price on the property. They sent me a mandate contract and have assigned an estate agent to me. I am planning for the possibility of moving sooner than anticipated but my credit health will stay intact until I can afford to buy another property,” writes Sibusiso.
Can old mutual allows me to borrow one third of my retirement annuity because due to the corona virus my company is closed and I’m unable to provide for my family?
This is not a rule by Old Mutual but by government – you cannot access a retirement annuity until the age of 55. I have raised this with National Treasury but they are not budging on this.
Can you borrow from you unity with the new amended pension rules from 1 March2021
Definitely not
It is unfortunate that the law does not provide for Sibusiso’s circumstances. In this scenario, at inception of his retirement annuity the possibility of loosing income source was not foreseen. I assume he was penalised for making his RA paid-up. I hope the retirement reform will make provision for such scenarios so that we are not sceptical about retirement saving.
There needs to be a serious assessment of products that force people to commit to a long-term contract and then penalize them for not being able to continue. Part of the retirement reform process will also need to include some access for emergency purposes