1 00:00:00,320 --> 00:00:03,320 Speaker 1: In a recent joint setting of Parliament Standing Committee on 2 00:00:03,440 --> 00:00:08,360 Speaker 1: Finance and Select Committee on Finance, discussions around potential reforms 3 00:00:09,240 --> 00:00:13,440 Speaker 1: in how we can access our retirement where discussed and 4 00:00:13,480 --> 00:00:15,920 Speaker 1: the person in front of that joint setting was a 5 00:00:15,960 --> 00:00:20,320 Speaker 1: Deputy Director General for Tax and Financial Sector Policy at Treasury. 6 00:00:20,560 --> 00:00:23,960 Speaker 1: That's Christopher Exelson joins me on the line now, Christopher, 7 00:00:24,160 --> 00:00:26,000 Speaker 1: a very good afternoon and welcome to the show. 8 00:00:26,239 --> 00:00:28,240 Speaker 2: Hi, I forget thanks having me all right. 9 00:00:28,320 --> 00:00:30,520 Speaker 1: Explain it like you were two or five year old. 10 00:00:30,880 --> 00:00:34,960 Speaker 1: What is allowing limited access to funds that are currently 11 00:00:35,040 --> 00:00:39,200 Speaker 1: strictly preserved until retirement under very strict conditions. 12 00:00:38,760 --> 00:00:41,880 Speaker 2: Mean, So we've moved to this new two parts retirement 13 00:00:41,920 --> 00:00:44,640 Speaker 2: system where we now have two parts. You've got a 14 00:00:44,680 --> 00:00:46,920 Speaker 2: savings part which you can take at any time, and 15 00:00:46,960 --> 00:00:49,000 Speaker 2: you've got a retirement part which really is meant to 16 00:00:49,000 --> 00:00:51,720 Speaker 2: stay there until your retirement. This was a much better 17 00:00:51,760 --> 00:00:54,680 Speaker 2: system in the old system where if you resign from 18 00:00:54,680 --> 00:00:56,720 Speaker 2: your job you could take the full amount of your 19 00:00:56,760 --> 00:00:59,360 Speaker 2: pension in one go. So this gave a little bit 20 00:00:59,360 --> 00:01:02,800 Speaker 2: of access but then preserved in amount in your retirement pot. 21 00:01:03,000 --> 00:01:07,560 Speaker 2: What we were talking about is there's a specific circumstance 22 00:01:07,560 --> 00:01:10,119 Speaker 2: where if someone has used up all of their savings pots, 23 00:01:10,480 --> 00:01:13,320 Speaker 2: they don't have any employment anymore, they've got c retrenched, 24 00:01:13,560 --> 00:01:16,360 Speaker 2: they've used up all their savings, they've got no assets left, 25 00:01:16,680 --> 00:01:19,319 Speaker 2: but they've still got a large amount in their retirement pot. 26 00:01:19,720 --> 00:01:22,040 Speaker 2: We are going to start thinking about in those extreme 27 00:01:22,080 --> 00:01:24,560 Speaker 2: cases we should allow a little bit of access for 28 00:01:24,600 --> 00:01:25,640 Speaker 2: those people to get by. 29 00:01:25,959 --> 00:01:29,600 Speaker 1: All right, So what would be those extreme cases, those 30 00:01:29,800 --> 00:01:32,360 Speaker 1: very strict conditions that would would have to be met 31 00:01:32,400 --> 00:01:35,000 Speaker 1: in order for one to access some of their pension. 32 00:01:35,240 --> 00:01:37,399 Speaker 2: So what we were saying in parliament was that we're 33 00:01:37,400 --> 00:01:41,240 Speaker 2: going to start these discussions. So usually the process that 34 00:01:41,280 --> 00:01:44,040 Speaker 2: we follows we put out a discussion document for the public, 35 00:01:44,080 --> 00:01:46,160 Speaker 2: for industries, to everybody to have a look at. We 36 00:01:46,200 --> 00:01:48,680 Speaker 2: haven't even put out a discussion document there yet. This 37 00:01:48,800 --> 00:01:51,440 Speaker 2: is really the very very beginning. Once we put that 38 00:01:51,520 --> 00:01:54,880 Speaker 2: document out, we can then try and detail those conditions 39 00:01:54,920 --> 00:01:56,800 Speaker 2: and then we can talk about whether they will work 40 00:01:56,840 --> 00:02:00,080 Speaker 2: whether they won't. For example, it might be if if 41 00:02:00,080 --> 00:02:02,800 Speaker 2: you've run out of UIF benefits, or you know the 42 00:02:03,000 --> 00:02:05,200 Speaker 2: clear evidence that you've got retrenched and you've had no 43 00:02:05,280 --> 00:02:08,160 Speaker 2: income for a particular level of time, we need to 44 00:02:08,280 --> 00:02:11,200 Speaker 2: check with industry, whether it is doable, and even whether 45 00:02:11,280 --> 00:02:15,400 Speaker 2: this approach doesn't undermine the original two pot system too much. 46 00:02:15,639 --> 00:02:18,560 Speaker 2: So we've got to find that balance. But it is 47 00:02:18,639 --> 00:02:20,680 Speaker 2: a concern that we have. I mean, there might be 48 00:02:20,800 --> 00:02:23,639 Speaker 2: cases where people will end up with nothing, but then 49 00:02:23,680 --> 00:02:25,520 Speaker 2: it doesn't make much sense if they've got a lot 50 00:02:25,600 --> 00:02:29,480 Speaker 2: less in their retirement parts, but their living destitute without 51 00:02:29,560 --> 00:02:33,200 Speaker 2: being able to survive. So that's the quid pro coos. 52 00:02:33,280 --> 00:02:34,799 Speaker 2: We've got to look at in the balances that we've 53 00:02:34,840 --> 00:02:37,200 Speaker 2: got to find, and we're going to start these conversations 54 00:02:37,240 --> 00:02:39,560 Speaker 2: and we can bring the public along the whole way. 55 00:02:39,639 --> 00:02:42,440 Speaker 2: But the first step is to get that discussion documentary. 56 00:02:42,280 --> 00:02:45,840 Speaker 1: Because I imagine you still need to protect their ability for 57 00:02:46,000 --> 00:02:49,800 Speaker 1: South Africans to retire and retire as comfortably I suppose 58 00:02:50,040 --> 00:02:52,240 Speaker 1: as they could. I think it was an F and 59 00:02:52,320 --> 00:02:55,720 Speaker 1: B survey that recently found that only ten percent of 60 00:02:55,800 --> 00:02:58,480 Speaker 1: South Africans believe that they'll be able to retire comfortably 61 00:02:58,840 --> 00:03:01,000 Speaker 1: at the age of six, and this has been a 62 00:03:01,040 --> 00:03:03,520 Speaker 1: consistent percentage for several years now. 63 00:03:03,680 --> 00:03:05,840 Speaker 2: Yes, and I think that's why the two pot regime 64 00:03:05,919 --> 00:03:09,400 Speaker 2: is a much better approach because you aren't now no 65 00:03:09,480 --> 00:03:12,120 Speaker 2: longer able to take the full value when you resign 66 00:03:12,240 --> 00:03:15,959 Speaker 2: or move jobs. Previously, if you move jobs, the temptation 67 00:03:16,200 --> 00:03:18,800 Speaker 2: was too high. You could take your full retirement fund 68 00:03:19,560 --> 00:03:21,760 Speaker 2: and spend it on something, whether it's on a holiday 69 00:03:21,840 --> 00:03:25,000 Speaker 2: or a car or home improvements, Whereas now it really 70 00:03:25,120 --> 00:03:28,440 Speaker 2: is locked away, and we don't want to undermine that. 71 00:03:28,560 --> 00:03:31,520 Speaker 2: So this isn't about a case of allowing access to 72 00:03:31,560 --> 00:03:34,960 Speaker 2: this retirement pot just when you're going through your regular 73 00:03:35,440 --> 00:03:37,840 Speaker 2: life by moving jobs, for example. It's only in severe 74 00:03:37,920 --> 00:03:41,720 Speaker 2: financial distress, and we're going to make sure that we 75 00:03:41,760 --> 00:03:44,720 Speaker 2: don't undermine it that way. But we recognize that there 76 00:03:44,720 --> 00:03:48,200 Speaker 2: are people who might struggle financially and we will get 77 00:03:48,280 --> 00:03:50,880 Speaker 2: queries in the future. It's not happening yet, so we're 78 00:03:50,880 --> 00:03:54,480 Speaker 2: trying to be proactive here, but in five ten years time, 79 00:03:54,560 --> 00:03:56,680 Speaker 2: we might get a lot of queries of people in 80 00:03:56,680 --> 00:03:58,520 Speaker 2: this position, and we want to make sure that there's 81 00:03:58,520 --> 00:04:01,080 Speaker 2: a framework for us to act and be able to 82 00:04:01,120 --> 00:04:02,200 Speaker 2: provide some release. 83 00:04:02,640 --> 00:04:07,200 Speaker 1: Because even with the two pot system, we see that 84 00:04:07,240 --> 00:04:09,920 Speaker 1: the twenty six twenty seven tax year has already had 85 00:04:09,960 --> 00:04:13,280 Speaker 1: more than one hundred and forty thousand claims received. In 86 00:04:13,320 --> 00:04:16,920 Speaker 1: the first week of March, approximately eighty four thousand already paid. 87 00:04:17,560 --> 00:04:20,080 Speaker 1: It's getting to a point, is it not, Christopher, where 88 00:04:20,360 --> 00:04:22,880 Speaker 1: many households in South Africa are probably coming to rely 89 00:04:23,640 --> 00:04:26,640 Speaker 1: on the ability for them to dip into their pension. 90 00:04:26,960 --> 00:04:30,160 Speaker 2: Yes, and we hope that those withdrawals aren't being made 91 00:04:30,360 --> 00:04:33,760 Speaker 2: for you know, they really are being made for emergencies. 92 00:04:34,120 --> 00:04:36,440 Speaker 2: The last thing we wanted was in this two pot 93 00:04:36,480 --> 00:04:39,720 Speaker 2: system to allow people to in effect use this as 94 00:04:39,720 --> 00:04:43,000 Speaker 2: a thirteenth check or you know, as you get past 95 00:04:43,080 --> 00:04:46,640 Speaker 2: January and you know February things might be tight, and 96 00:04:46,680 --> 00:04:49,360 Speaker 2: then every year you just start taking it. So that 97 00:04:49,480 --> 00:04:51,720 Speaker 2: wasn't what we were trying to achieve. The better part 98 00:04:51,800 --> 00:04:54,080 Speaker 2: of the system is that two thirds of all your 99 00:04:54,080 --> 00:04:58,520 Speaker 2: contributions are now preserved until retirement. So even if you 100 00:04:58,560 --> 00:05:01,680 Speaker 2: take that one third, lot of modeling by industry has 101 00:05:01,720 --> 00:05:04,440 Speaker 2: shown that you will get a better retirement outcome. That 102 00:05:04,480 --> 00:05:07,560 Speaker 2: ten percent number you mentioned is far too low. We 103 00:05:07,680 --> 00:05:10,760 Speaker 2: really do need to improve retirement outcomes. The preservation in 104 00:05:10,800 --> 00:05:13,240 Speaker 2: the retirement pot should get us say, but it is 105 00:05:13,320 --> 00:05:16,560 Speaker 2: concerning to see these very large withdrawals that are made 106 00:05:16,560 --> 00:05:19,080 Speaker 2: by members at the start of every tax. Here we're 107 00:05:19,120 --> 00:05:21,440 Speaker 2: going to have to try and help with financial education 108 00:05:21,880 --> 00:05:23,960 Speaker 2: to show the benefits that if you keep it in 109 00:05:24,000 --> 00:05:27,400 Speaker 2: their compound growth, there's no tax within the fund, you 110 00:05:27,480 --> 00:05:30,279 Speaker 2: can have a much larger amount when you do actually 111 00:05:30,320 --> 00:05:33,520 Speaker 2: get to retirement. So the next port of call is 112 00:05:33,560 --> 00:05:37,640 Speaker 2: trying to help with education, help people understand the negative 113 00:05:37,640 --> 00:05:41,120 Speaker 2: consequences from taking too much from the savings pot. 114 00:05:41,520 --> 00:05:44,719 Speaker 1: Mike on the waterplane saying, please ask Chris, if someone 115 00:05:44,760 --> 00:05:47,640 Speaker 1: resigned and wants to use their pension fund to start 116 00:05:47,640 --> 00:05:49,880 Speaker 1: a business, is there any way that they can have 117 00:05:49,960 --> 00:05:53,080 Speaker 1: access to all of it, I suppose, or a little 118 00:05:53,080 --> 00:05:54,640 Speaker 1: bit more than what you'd be able to allow. 119 00:05:55,080 --> 00:05:57,240 Speaker 2: So at the moment, no, So the only thing you 120 00:05:57,279 --> 00:06:01,080 Speaker 2: can draw on is the savings pot. Conditions on that. 121 00:06:01,440 --> 00:06:03,680 Speaker 2: I just went on for quite a while about how 122 00:06:03,680 --> 00:06:05,880 Speaker 2: you shouldn't draw on your savings pot. But if you 123 00:06:05,960 --> 00:06:07,760 Speaker 2: really wanted to, and if you thought you had a 124 00:06:07,760 --> 00:06:10,159 Speaker 2: good business idea and you wanted to go ahead, the 125 00:06:10,240 --> 00:06:12,640 Speaker 2: money in the savings pot you can withdraw without any 126 00:06:12,640 --> 00:06:16,000 Speaker 2: conditions whatsoever. But that retirement pot and the money in there, 127 00:06:16,040 --> 00:06:18,279 Speaker 2: you wouldn't be able to use. And even under these 128 00:06:18,320 --> 00:06:21,040 Speaker 2: new reforms, it will only be in cases of severe 129 00:06:21,080 --> 00:06:23,720 Speaker 2: financial distress where you might get a small proportion of it. 130 00:06:24,279 --> 00:06:28,000 Speaker 2: We're not looking at opening up that retirement pot for 131 00:06:28,200 --> 00:06:32,160 Speaker 2: using it for things such as purchasing property or starting 132 00:06:32,160 --> 00:06:32,880 Speaker 2: a business, etcetera. 133 00:06:32,960 --> 00:06:35,320 Speaker 1: Yeah, which is in the best interest of South African 134 00:06:35,360 --> 00:06:38,440 Speaker 1: squad frankly, so that when it does hit retirement age, 135 00:06:38,480 --> 00:06:41,440 Speaker 1: they still have something in the pot for them to enjoying. 136 00:06:42,200 --> 00:06:46,359 Speaker 1: The discussions around these potential reforms, you say they expected 137 00:06:46,400 --> 00:06:49,919 Speaker 1: to begin later this year. Any idea on time frames 138 00:06:49,960 --> 00:06:52,120 Speaker 1: and what form they're going to take, Chris. 139 00:06:52,120 --> 00:06:54,240 Speaker 2: Well, So what we normally do is we put out 140 00:06:54,240 --> 00:06:57,120 Speaker 2: a discussion document which could be at any time to 141 00:06:57,200 --> 00:07:00,000 Speaker 2: be frank later in the year, and then if any 142 00:07:00,040 --> 00:07:03,120 Speaker 2: body comments on that discussion document, we usually provide about 143 00:07:03,120 --> 00:07:06,720 Speaker 2: a month's comment period. Anybody who comments it could be 144 00:07:06,760 --> 00:07:10,120 Speaker 2: an individual, institutions, anybody, we invite them to a workshop. 145 00:07:10,320 --> 00:07:12,360 Speaker 2: So we don't normally have a public workshop where we 146 00:07:12,400 --> 00:07:14,640 Speaker 2: put it out to everybody, but if you've commented, you 147 00:07:14,680 --> 00:07:17,160 Speaker 2: get invited and then we have a discussion. We talk 148 00:07:17,240 --> 00:07:20,880 Speaker 2: about the pros, the currents, what people want from the amendment. 149 00:07:21,120 --> 00:07:23,600 Speaker 2: We then go away think about it, try and adjust 150 00:07:24,240 --> 00:07:27,160 Speaker 2: those proposals, and then we try and advise the Minister 151 00:07:27,360 --> 00:07:30,040 Speaker 2: of Finance and say well, this is what we've got 152 00:07:30,080 --> 00:07:32,880 Speaker 2: back from everybody. We'll try and adjust, and then the 153 00:07:32,920 --> 00:07:36,360 Speaker 2: Minister can potentially make an announcement in a budget next year. 154 00:07:36,680 --> 00:07:42,880 Speaker 1: Because I imagine any sort of changes would require a legislative 155 00:07:42,880 --> 00:07:45,000 Speaker 1: process obviously to take place, that will be led by 156 00:07:45,000 --> 00:07:47,679 Speaker 1: the Minister through our platforms in Parliament. 157 00:07:47,800 --> 00:07:50,520 Speaker 2: Right, yeah, so you know we could do that this year, 158 00:07:50,840 --> 00:07:53,320 Speaker 2: potentially advise the Minister if we are ready, because we 159 00:07:53,360 --> 00:07:55,120 Speaker 2: don't want to rush this either. We need to be 160 00:07:55,240 --> 00:07:58,520 Speaker 2: very careful about our attirement systems. If we are ready, 161 00:07:58,560 --> 00:08:01,280 Speaker 2: it could potentially have an announcement in the twenty twenty 162 00:08:01,280 --> 00:08:04,160 Speaker 2: seven budget Febru next year. If not it we'd have 163 00:08:04,240 --> 00:08:07,040 Speaker 2: to postpone it till the following budget. But if there 164 00:08:07,080 --> 00:08:09,320 Speaker 2: is an announcement in the Sebri twenty twenty seven budget, 165 00:08:09,360 --> 00:08:12,480 Speaker 2: then we do draft legislation. It usually gets published around 166 00:08:12,920 --> 00:08:16,200 Speaker 2: June July and that year then we have further consultations 167 00:08:16,200 --> 00:08:19,000 Speaker 2: on that draft legislation and then table it in Parliament 168 00:08:19,040 --> 00:08:23,200 Speaker 2: and then it's in Parliament's hands for further workshops, consultations 169 00:08:23,200 --> 00:08:26,440 Speaker 2: and potentially getting the bill passed. So the earliest something 170 00:08:26,480 --> 00:08:29,520 Speaker 2: could really realistically take places in twenty twenty eight. 171 00:08:29,800 --> 00:08:32,480 Speaker 1: Okay, so quite some time ahead, Christopher, thank you very 172 00:08:32,600 --> 00:08:35,600 Speaker 1: much for your time this afternoon. Christopher Exhelson is the 173 00:08:35,720 --> 00:08:40,400 Speaker 1: Deputy Director General for Tax and Financial Sector Policy at Treasury, 174 00:08:41,080 --> 00:08:44,400 Speaker 1: talking to us following their presentation to the joint setting 175 00:08:44,400 --> 00:08:47,439 Speaker 1: of parliament Standing Committee on Finance and Select Committee on 176 00:08:47,520 --> 00:08:53,000 Speaker 1: Finance around discussions pertaining to potential reforms that I expected 177 00:08:53,040 --> 00:08:54,800 Speaker 1: to begin much later this year.