June was the last month in which employers and employees could access the Unemployment Insurance Funds’ Temporary Employee/Employer Relief Scheme benefits, and Cosatu is expecting more employers to retrench workers now these benefits can no longer be accessed. Yet, the government continues to drag its feet in adopting retirement benefit reform proposals that have been in the pipeline for years.
“But it is almost mid-July now,” says Jan Mahlangu, retirement funds coordinator for Cosatu. “Workers aren’t asking for a favour but an income replacement through accessing their retirement funds, as a result of the lockdown, but nothing concrete has come out of discussions so far.” Cosatu wants to avoid the worst-case scenario in which workers resign to access their savings, as they would lose their jobs, cash out all their savings, and potentially pay tax on their withdrawals. Withdrawals over R25,000 on resignation are taxed. On retrenchment, members can access up to R500,000 tax-free.“We are seeing workers resigning from their jobs as a result of pressures and frustrations, to access their entire retirement funds benefits, which is not a solution.
Sanlam’s annual Benchmark survey says when it considered the average salaries of these members, it found that if members could access these savings as a monthly income, the money would last less than six months.Viresh Maharaj, managing executive of Sanlam Corporate Distribution, says although such a release will provide some form of relief, the maximum they will have access to is R50,000.
The Benchmark survey indicates that 26% of employers/funds had suspended retirement fund contributions and 91% of consultants had at least one client who had already done so.“A three-month suspension was the most popular period, followed by six or more months, which is indicative of the uncertainty of the return to normal. We expect many of these suspensions to be rolled over.