Within the next twelve months, individuals will be receiving their retirement payouts monthly not as a once-off lump sum as it is currently, if the new proposed reforms go according to plan, a spokesperson from the National Treasury, Xolisa Dodo told Transform SA in a telephone interview.
Part of the Taxation Laws Amendment Act, the proposed changes were aimed at ensuring that pension fund members were protected and could retire comfortably, Dodo revealed. It has been established that only about six percent of South Africans are able to maintain their lifestyle and fully replace their income when they retire.
Highlighting the shortfalls of lump sum payouts, Dodo noted: “One of the challenges of the current system is that it makes it too easy for workers to cash out their retirement savings when they leave their employer or change jobs.”
Transform SA learnt from three financial institutions that the majority of their members who were paid withdrawal benefits when leaving their work opted to take the cash rather than preserve it. “Most of them go on a spending spree as if they have won a lottery and leave nothing for the rainy day,” an official from one of the entities said.
Workers would be able to access fully all the money they would have saved up to the date when new law comes into effect or the new rules taking effect, Dodo explained.