The overwhelming message at the Asisa convention was that retirement savings are for retirement and the ability to withdraw money earmarked for retirement early is going to be made more difficult in the coming months through legislation.
Provident funds are to be retired so to speak and the ability of an investor to access retirement funds before retirement are to be made more difficult with a proposed restriction on the amount that can be withdrawn before retirement. Under the proposed framework at least 2/3 of all your retirement savings will have to be used to purchase a pension for life irrespective of your circumstances, be it the loss of your job, a divorce or for any other reason.
Transfering funds from one pension fund to another has always been a problem when changing employment with the investor, under normal circumstances either leaving his pension in place and becoming a deferred pensioner or using the funds to purchase a retirement annuity. The deferred pensioner issue results in you receiving numerous pensions from different retirement funds and were previously taxed separately but the new legislation will be dealing with this issue which allowed people to effectively be treated as individuals numerous times and being removed from the tax register.
In the case of divorces, there are changes which would involve the non member ex spouse having to purchase a retirement product with his/her portion of the retirement savings granted in the divorce settlement. There is bound to be a lot more debate on the issues and the Government needs to take into account peoples changing circumstances which may necessitate the withdrawal of retirement funds before retirement. One area that is also being looked at is retirement annuities which disallow any wthdrawal, under any circumstances before the age of 55.
Any proposed legislation in the retirement is bound to draw both praise and criticism from the public as well as the financial services industry which is currently undergoing some significant restructuring. If you have comment, feel free to send an email to advice(at)pensionfund.co.za