Early pension withdrawals a sign of the times.

[Dave A]

This is a rather disturbing story. We're experiencing a flood of early pension withdrawals. However, I don't think the reasons are as simple as put out in this story.

Cash-strapped South Africans are making unprecedented premature withdrawals of their provident and pension funds in a battle to service debts.

The country's overall current debt is R1 139-billion compared to the R297-billion of 10 years ago.

In basic terms, South Africans are spending almost 83 percent of their monthly income servicing debt - up from 60 percent in 1998.

Cosatu fears that the economy could be ruined as workers are "running scared" and taking their retirement packages because of rumours that the government wants to freeze their pension funds by 2010.

The National Treasury is aware of the phenomenon, which trade unions believe has been driven by a combination of high levels of debt and fears that the government planned to nationalise pension savings.

The SA Clothing and Textile Workers' Union said that last year alone, more than R277-million was paid out to more than 7 000 workers who resigned to cash in their provident or pension funds.

The phenomenon has also hit other industries, including mining. "Workers have now found a new way to settle their debts by cashing their retirement savings," said National Union of Mineworkers general secretary Frans Baleni.

This was especially prevalent among white-collar workers on gold mines.

Koos Bezuidenhout, CEO of mining union Uasa, said the cashing-in of pensions was "creating a nation of poor people who will rely on state grants to survive".

The union has had more than 500 applications in the past three months of people intending to cash their pension money.

Cosatu retirements fund co-ordinator Jan Mahlangu said: "We will soon embark on educational roadshows with the government to discourage people from falling victim to this."
full story from IOL here

Union concern for the distant retirement prospects of employees is quite touching. But I suspect their real concern is for their lucrative slice of administration income.

Here are a few more possible contributing factors:

• Emigration - surely I don't need to say too much here.
• Greedy administrators - just look at the cars they drive. They are doing it with your money.
• Too many poor pensioners already - The evidence is in; living off a capital sum of R500k just doesn't go as far as it used to twenty years ago. Is R5 million going to be much better in twenty years time?
• Today is what counts - We live in an age where tomorrow will just have to take care of itself. We are measured by where we are today.
• Lack of ethics - The longer you leave a pile of money in somebody else's hands, the higher the likelihood that it wont be there when you're supposed to get it back.
• Shorter life expectancy - How many people do you know that did not make it to pensionable age already?

There are probably more...

[Dave A]

And just in case anyone thinks I'm being paranoid about union interest in pension funds, here is a current story:

One of the biggest retirement funds in the country says it could lose an investment worth a potential R531 million if a trade union succeeds in one of its claims that the fund's right to the shares has lapsed.

This arises out of a dispute between the Chemical Industries National Provident Fund and Ceppwawu Investments, the investment arm of Cosatu-affiliated Chemical, Energy, Paper, Printing, Wood and Allied Workers' Union (Ceppwawu).

A sum of R375 million has been offered by Ceppwawu Investments to settle the dispute, which is what the union investment company said was the full amount actually owing.

However, this was not seen as acceptable to the fund, which said it would be left R156 million short in terms of the investment subscription agreement.
full story from Business Report here

[Yvonne]

Heard a rumour that the govt. was going to force pension/ R.A. savings for all employees, including domestics and gardeners - everyone who has employment!
by 2010 - sliding scale - substantial %.

With inflationary increases almost impossible for employers to meet annually, how on earth would small business cover inflation plus a forced pension.

Can you imagine the average employee already hard pressed to meet even the most basic costs having a forced pension/r.a. payment thrust on them?

Our company took the potential possibility of a compulsory R.A. or pension into account many years ago, and provided an R.A. to our employees and gave a double increase at the time, so that the pension fund did not come out of their "paycheck", now we have employees literally "demanding" that the R.A. be stopped, they want "their" money!

If a forced pension comes into being - I for one am going to be veheminently opposed if it is expected that the employer has to bear the cost!

Though I know in advance we will not have an option if it is passed into labour law.

Yes rumours start the "run" on funds, but there is definitely no "smoke without some truth behind it", time will tell!

Yvonne



David is so right, I for one am personally concerned about ethical issues, and also about what the value of our R.A.'s are going to be when we get paid out!
Basically our R.A.'s are our only investment for our retirement. I for one do not want to see those funds in a Govt. pot.

[duncan drennan]

I think it was Trevor who first raised the issue of a compulsory pension in this years finance speech. I don't think that RA's will be incorporated into this, though there will be an interesting clash of contracts and law when people face costs for reducing the RA payments when they are expected to contribute to the national pension fund.