Early pension withdrawals by people battling financially are not yet legal.

This after former finance minister Tito Mboweni said recently that the National Treasury was in talks to allow those who lost their income during the Covid-19 pandemic to make “limited” withdrawals from their retirement funds.

In a statement issued on Wednesday, the Treasury said members should not contact their retirement funds to withdraw money (unless they are retiring, resigning or retrenched), as these funds are legally not empowered to allow pre-retirement withdrawals.

“It is expected that any changes to the law would only become effective next year at the earliest, and some of the medium-term provisions may take even longer to take effect.

“The government has been engaging with trade unions, retirement funds, regulators and other stakeholders to discuss how to increase savings and improve preservation and allow limited withdrawals, without creating liquidity and investment risks,” the Treasury said.

The government has been working on a more structured two-bucket system that will enable the restructuring of future contributions, the Treasury said.

“One bucket is to be preserved until retirement, and the second bucket will allow for pre-retirement access during emergencies or extraordinary circumstances.

“While these measures cover pension and provident funds, a harmonised approach on withdrawals is also being considered for retirement annuities.”

The Treasury cautioned that implementing any new system would take time because in addition to consultation, legislative and fund rule amendments would have to be done and fund administrators would have to change their systems.

“Design work and consultation are ongoing. Further announcements and the public release of the proposed measures for public comment and consideration will be made shortly, before or at the 2021 medium-term budget policy statement. It is envisaged that the necessary legislative amendments will be introduced in parliament thereafter.”

It also pointed out that members of the Government Employees Pension Fund (GEPF) would be excluded from making Covid-19 related withdrawals from their pension funds because GEPF is not regulated under the Pension Funds Act.

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