MEDIA RELEASE 

26 August 2024

SUMMARY: The Association of Mineworkers and Construction Union (AMCU) has embarked on a national campaign to warn its members about the dangers of the Two-Pot retirement reform system set to kick off at the beginning of September. The Union argues that what appears to be advantageous for workers is actually a scheme to increase short-term government revenue and long-term capital. It points out that this constitutes a serious interference in the rights and conditions of employment of workers, while calling on all workers to unite in rejecting it.

The retirement reform process tabled at the National Economic Development and Labour Council (NEDLAC) in 2012, first focused on the distinction between pension funds and provident funds. In 2023, during the National Budget Vote, government announced that the so-called Two-Pot retirement fund system would be implemented to address insufficient retirement savings and early withdrawals.

As from 1 September 2024, provident fund savings will be divided into two “pots”, namely a pot preserved for retirement and a pot from which workers can withdraw money immediately. Withdrawals from the savings component will be allowed only once per tax year, and the initial limit for such withdrawals will be 10% of your retirement savings up to a maximum of R30 000.

These withdrawals will be considered as an income by the South African Revenue Service (SARS) and therefore taxed at the individual’s marginal tax rate. There will also be a flat-rated administration fee of R700 per withdrawal payable to Financial Service Providers (FSPs).

“We are extremely concerned about this scam to make government more money”, said AMCU President Joseph Mathunjwa. “It is clear that this government is misleading workers to think that they can get money in these difficult times, even though they might not get a single cent”, he said.

“If, for example, you withdraw the maximum of R30 000, you will pay R10 800 in tax and a flat rate of R700 admin fee”, he explained. “This means that you will only get out R18 500, and then there will also be bank charges”, he added. “Even worse, if you owe SARS money, they will take all the money and you might even end up getting zero”, he said.

“It is clear that this system is designed to make money for government – first on income tax, then on VAT [Value-Added Tax] when workers spend their hard-earned money, and then again in the longer term when workers are prevented from accessing their money as a lump sum”, Mathunjwa said.

AMCU has embarked on a national awareness campaign to make its members and workers in general aware of these dangers. This includes letters written to its regional offices in all nine provinces, as well as the distribution of posters, flyers and other materials to popularise this perspective.

“We are requesting all our members to get proper advice from a registered financial planner before believing any scam like this, in which they might not get a single cent”, he said. “Even more importantly, workers must remember that withdrawals from their pension funds can provide short-term relief but might lead to financial difficulties later in life” said Mathunjwa.

“We feel strongly that this is a clear interference in our conditions of employment. We fought hard for these rights during bargaining processes over the past decades. We call on them to stop this scam. It is clear that government just wants to boost their treasury, on the back of workers money. The same government who undermined the collective bargaining process by cancelling the Public Sector Wage Agreement. All the federations in NEDLAC that claim to represent workers have betrayed us. They represented their own interests—not us. We will ask all members not to withdraw money to support this scam,” he said.

“It is only the government that will benefit from this scam. Workers, through their loss of life and limb, after all the sweat from their brow, will get nothing,” said Mathunjwa. “What is happening with the UIF [Unemployment Insurance Fund]? Why is the government so determined to get workers’ money? We will not stand for it. We call on all workers to unite in rejecting this scam,” Mathunjwa concluded.

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For more information or media interviews, contact AMCU President Joseph Mathunjwa.