Australia

Australia has a social security programme and a mandatory occupational pension programme, known as Superannuation. Certain beneficiaries of the social security programme received two Economic Support Payments of AUD750 (about R8 900) each in April and July 2020.

Meanwhile, the minimum annual withdrawal rate from the Superannuation programme were temporarily halved to allow pensioners more flexibility. Members who had lost their jobs or had working hours reduced, as well as sole traders who faced financial difficulties, were allowed to access up to AUD10 000 (R118 000) of their retirement savings before 1 July 2020. Thereafter they were allowed access to an additional payment of another AUD10 000 for a limited period. All these payments were tax-free.

Bermuda

Bermuda amended its compulsory occupational pension programme to allow members of defined contribution occupational defined contribution pension schemes to access a portion of their savings. Those under the country’s normal retirement age (65) are allowed once-off withdrawals of up to BMD12 000 (about R185 000), while retired members may request once-off withdrawals of up to 25% of their total savings.

Canada

The Canadian government introduced a tax-free once-off payment of CAD300 (about R3 660) to everyone who is eligible for the Old Age Security pension, plus an additional CAD200 (about R2 440) to those who also qualify for the country’s Guaranteed Income Supplement. Other measures to help seniors include lowering the compulsory minimum withdrawal amount from Registered Retirement Income Funds (similar to an annuity) by 25% to help pensioners to withdraw only what is needed, and temporary extensions of the country’s Guaranteed Income Supplement (GIS) and Allowance benefits for some pensioners.

Combined, these initiatives mean that the Canadian government allocated CAN2.5 billion (around R30.5 billion) to help pensioners and senior citizens weather the pandemic.

Chile

Chile’s pension system consists of a mandatory individual account programme, a legacy social insurance programme and several non-contributory programmes (requiring no payment or contribution from its beneficiaries). In May 2020, the government introduced a special cash transfer programme called Emergency Family Income to support the socio-economically most vulnerable households, including those where at least one member aged 70 or older receives an old-age solidarity pension.

Two months later they went a step further by allowing members of the country’s mandatory individual account pension programme to withdraw up to 10% of their savings.

Estonia

In April 2020, Estonia started allowing employers and employees to temporarily suspend contributions to the country’s mandatory individual account scheme.

Eswatini

As in South Africa, the Financial Services Regulatory Authority (FSRA) in neighbouring Eswatini made changes in May 2020 to allow contributions to be temporarily suspended.

However, unlike South Africa, the changes also allowed members of registered retirement funds early access to their retirement savings while remaining active members, subject to strict criteria. For instance, salary workers who saw a temporary reduction in their pay could supplement this from their retirement savings by withdrawing a maximum of 10% of their total withdrawal benefits. They could also only be paid once a month (i.e. no lump sums or double pay cheques) and the amount was limited to either the reduction in net salary or SZL3 000 (about ZAR3 000) per month, whichever is lower and depending on FSRA approval.

India

Beneficiaries of both India’s National Social Assistance Programme and equivalent regional/state-run schemes were paid their pension benefits three months in advance. The national Employees’ Provident Fund now also employees who have lost their jobs to withdraw 75% of their retirement savings or the equivalent of three months’ salary, whichever is less, as an advance from the fund while remaining active fund members.

Malaysia

On 1 April 2020, the contribution rate to Malaysia’s national Employees Provident Fund were dropped from 11% to 7% of members’ monthly income for workers who are younger than 60. They were, however, allowed to opt out and continue to contribute 11%. Those under 55 were allowed to withdraw up to MYR500 (about 1 870) a month from their retirement savings for 12 months.

Peru

Peru allowed participants in its mandatory individual account programme to make a once-off early withdrawal. The amount varied according to individual account balances. Employee contributions (which are typically 10% of gross salaries) to the programme were suspended in April 2020.

The Peruvian government has also introduced advance payments of certain social security benefits, including its non-contributory old-age pension.

United States

Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in March 2020, allowing Americans to withdraw from their Individual Retirement Accounts (IRAs) or 401(k) retirement plans. The account holder, their spouse or a dependent had to have either tested positive for Covid-19 or been impacted financially by the pandemic.

Withdrawals of up to $100 000 (R1.5 million) are allowed without incurring the usual penalties for early withdrawal. Benefits are taxable, though, but this tax can be paid over three years. If the payout is repaid within three years, which is not compulsory, tax already paid can be reclaimed.

So how does South Africa compare?

In South Africa, while programmes like the Covid TERS directive and UIF payments attempted to provide some relief, retirement savers have not been allowed any early access to their pension savings or to change their minimum or maximum withdrawal amounts.

The Financial Sector Conduct Authority (FSCA) has allowed employers facing hardship to temporarily suspend contributions to their pension funds. But the reality is that the pandemic has had a catastrophic impact on our already vulnerable economy and this measure alone is unlikely to provide the relief needed where it’s needed. Not surprisingly, there are calls for more creative responses, like allowing access to a portion of the members’ retirement savings.

There is ongoing discussion of the role retirement funds could play in solving our economic problem. They are big capital holders, and deploying of a portion of this capital to infrastructure and investment as part of their long-term investment strategy should go a long way towards job creation and economic recovery in the country.

Read our interview with Malusi Ndlovu, Old Mutual Corporate’s Director of Large Enterprises and Markets, on the proposed Regulation 28 changes to the Pension Funds Act to find out what they could mean for your retirement savings and South African economy.