Money too tight to mention? Should you dip into your retirement fund?
- National Treasury in discussions with Nedlac around plans to limit withdrawals from retirement funds - Treasury says it is aware the issue is a 'complex' one. - Andrew Davison, Chair of Investments Committee of the Actuarial Society of South Africa says there are pros and cons to withdrawing money from your retirement fund
Money's too tight to mention for many South African right now, but does your current financial predicament mean you should look at an early withdrawal from your pension fund to see you through a tight spot?
Last week National Treasury announced it was in discussions with Nedlac on a proposal for limited withdrawals from retirement funds, for those losing part of their income during the Covid pandemic.
Admitting it was a 'complex problem to solve', Treasury said it was considering options around allowing limited withdrawals.
Andrew Davison is chair of the investments Committee of the Actuarial Society of South Africa
He says it's a 'tricky' issue, but ultimately one in which people are seeking access to their own money.
There's no free money being handed out ...they're using savings that they would have needed for the future.Andrew Davison, Chair - Investments Committee of the Actuarial Society of South Africa
But, Davison says a decision to dip into one's pension fund, should not be taken lightly:
Potentially in the future, they will have less money and it could be at a time when they have fewer other options of where they can get money.Andrew Davison, Chair - Investments Committee of the Actuarial Society of South Africa
Davison says in a situation where people are facing immediate financial stress, it is a mechanism that can help.
It's got pros and cons, he says.
He also adds, that depending on the type of savings plan you have, your options when it comes to withdrawal may differ.
In a retirement annuity, you can't access the money until you get to 55.Andrew Davison, Chair - Investments Committee of the Actuarial Society of South Africa
In a retirement annuity through your employer, you can only access your fund when you change jobs.Andrew Davison, Chair - Investments Committee of the Actuarial Society of South Africa
Davison says it's worth remembering that many policies will tax policyholders for withdrawing money prematurely from their pension funds.
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