So National Treasury are working out a way to access your retirement fund in an attempt to help those that are financially destitute in the aftermath of the COVID19 epidemic.
The current position
If you leave your employment you can cash in on your pension or provident fund. It comes with a tax penalty giving you an exemption on the first R25 000 and then punishing you on a scale above.
Retirement annuities left behind
So, if you are self employed you would have to set up a retirement annuity as a provision for your future pension. If you went out of business you cannot cash in. There is a clear discrepancy.
Preservation is the target
Treasury is aiming to encourage you to preserve your retirement funding. The main incentive is the tax deductibility of up to 27,5% of contributions against your taxable income. National Treasury is aiming to close the access to retirement funding when leaving your employment. Aligning with the position of the retirement annuity.
COVID19 exposes a real problem
Whilst providing for your retirement one day is a sound strategy and should be encouraged in every way there is a dichotomy that COVID19 has brought forward. Immediate needs are more important than the future.
If you are in a position where you have lost your income and you have expenses to meet like your bond and you have money in your retirement annuity, how do you ever reason with losing your house? How do you justify not being able to access long term savings when you have dire needs for the short term?
Kick the can down the road
The normal argument is accessing your retirement savings now leaves you with a long term problem down the road. COVID19 has taught us that things are not normal and now is more important!!
Retirement funding should be an option
We should be given the option to access our retirement funding at our discretion. Yes, educate the pros and cons but leave the decision to the owner of the fund, If they are coming to take my house away and I have a retirement fund which can save me and perhaps leave me with a contingency fund whilst I try to find a new source of income. I would rather take my chances now and deal with the long term consequences later. Who knows where we will end up with this pandemic.