Page 35 - MiNDSPACE Issue 1 2022 - Old Mutual Corporate

In addition, it will create financial strain further down the line for those who take some of their money before retirement, especially if they're close to retirement
– they'll struggle to make up the amount they have withdrawn.
Even so, there will always be a percentage of retirement-fund capital that can only be accessed on retirement, allowing members to achieve a measure of preservation during their working life.
THE EFFECT ON INVESTMENT IN THE COUNTRY
However, if South Africans can freely access a portion of their retirement savings, it could have a short-term impact on investment in the country.
Our retirement-fund environment (excluding the Government Employees Pension Fund) has about R2 trillion in assets. If you were to provide access to, say, 30% of that, you would have R600 billion being withdrawn from various asset classes.
There may also be a price impact on actively traded, liquid assets like bonds and equities; but quite a
lot of money in retirement funds is also invested in illiquid assets like private equity and infrastructure.
It’s impossible to liquidate such assets quickly without significantly impacting asset prices. On a practical level, the retirement-fund ecosystem, as it stands, is simply not built for this.
Finally, there’s the question of access rules. There would have to be a set of criteria or conditions under which a fund member could tap into their savings. Who will determine those criteria? If it’s the employer or the retirement-fund administrator, they would have to set up infrastructure to govern that. It would mean hiring people and building systems similar to a bank’s credit- check department.
expertSPACE retirement
The cost of that admin and bureaucracy would
have to come from somewhere. Inevitably, it would come – directly or indirectly – from the fund members’ retirement savings. M
OLD MUTUAL’S VIEW ON EARLY ACCESS TO RETIREMENT SAVINGS
ISSUE 1 2022 | 31
a
W
t
c
h
IMAGES: GALLO IMAGES/GETTY IMAGES AND SUPPLIED
GO TO CONTENTS