While Treasury is set to make it easy for people to access their funds, it has to ensure these are not depleted
The recent medium-term budget statement, tabled in November by finance minister Enoch Godongwana, carried the latest signal that big retirement savings changes are on the cards.
Through the other pot, it is looking to allow South Africans early access to their retirement savings to cater for unexpected emergencies. The rule now is that you can only access your retirement savings early when you leave your employer — when changing jobs or if retrenched. Too often people succumb to this temptation, at times even going as far as quitting their jobs for the sole purpose of accessing their savings.
The issue with this proposed system is that people would have a much lower barrier to access their retirement savings early, though they will be able to access less of it.First, people have a “present bias”, which is the tendency to give much stronger weight to financial payoffs that are closer to them in time. Retirement is far off into the future for many, while gaining access to cash is immediate gain for anyone.
To counteract this, we believe it is essential to also have a mechanism in place to help employees stay on track to achieve their savings goals.
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