In Touch | Access to pensions a good thing

If you woke up this morning and were told you had access to a portion of your retirement fund or pension what would your response be? Would you see this as a solution to your money problems or a recipe for disaster? As things stand a person receives a third of the pension as a lump sum when they retire and then receive the rest as monthly payments until death.

This arrangement means that up until you retire or resign you will not have access to any portion of the funds saved up during all the years you have been employed and contributing to the pension fund. The proposal by minister of finance Tito Mboweni last week is again reviving the discussion about workers having access to their pension funds while they are still working. If I remember correctly, Zwelinzima Vavi, while he was still with Cosatu, suggested something similar many years ago, but it never really took off. At this stage the view shared by Mboweni is still just that, a view and it has not really led to a real push towards amending the law to allow this.

There are still many finer details to work out to see whether this would help the people greatly or hamper them or lead to a disaster down the line. Why would a 65-year-old really need a lot of money when his children by then would be grown up and self-sufficient and the things he could do had narrowed down because of advanced age? Why struggle through the prime of your life sacrificing a lot to provide for your family, only to be given millions when most of the work you needed the money for, is done? What use would it be to be able to buy a Mercedes Benz when ones eyes and body would not be able to enjoy to its fullest what it brings? Keeping all that money until the twilight of my life helps who, exactly?  I guess you have now figured out which side I am leaning towards on this issue.

I am for the changing of the law to allow people to have access to their pension funds while they are still working. I would propose a percentage of not more that 15% of the reserves accumulated. This would stop people resigning when their financial problems become too much to bear so that they can have get their pension fund. As we have seen, this move has not worked out well for many who took this option. Within a few years of no income they are back to where they started and many then go back to work and start afresh and some never really regain their financial health. This move, as proposed by Mboweni and others, would have avoided exactly this kind of scenario. Those people would have received the lump sum they needeed to solve whatever crisis they faced and still continue earning a monthly salary and get a chance to rebuild their fund again. Others would use that lump sum to start a new business. While they work they also grow the business so that they have an even bigger nest egg without having to get loans at pernicious rates. I know there are always downsides to everything and you can name many, but the bottom line is that this is inherently a good move and it should be allowed to be debated fully and implemented.