Pension cash-out stirs Parly debate
Pauline Dikuelo | Monday August 22, 2022 06:00
The Finance ministry this week tabled legislative changes that will allow deferred pensioners to cash in their benefits to pay for loan and mortgage defaults as well as medical bills associated with terminal illnesses.
The changes to the Retirement Funds Act are being debated in Parliament.
Presenting the amendments, Finance Minister Peggy Serame said the encashment of benefits would for now be limited to deferred members, as extending the same to active members and pensioners was a complex affair requiring actuarial valuations into a distant, uncertain future.
The Non-Bank Financial Institutions Regulatory Authority (NBFIRA) defines deferred members as former members of pension funds who will become entitled to a pension, annuity, or payment from a provident fund at a later date. Typically, these are workers who were contributing to a pension fund and left that particular employer before attaining retirement age. The benefits are held as deferred pension and began paying out when the member reaches retirement age.
“My ministry, through NBFIRA, is conducting a study to review the effect and impact of allowing encashment concessions for active members and pensioners on the pension system in Botswana,” she said. “The results of the study are expected in November 2022 and the adopted changes from the study.'
The latest amendments follow an outcry from ordinary citizens and legislators for members of pension funds to be allowed access to their benefits to deal with the financial difficulties brought about by COVID-19.
Debating the changes, legislators said while welcome, the proposed amendments should be quickly extended to active members, who are defined as members who are actively contributing to the pension fund under the organisation they are employed.
The legislators said active members should alternatively be allowed to use their accrued benefits as security for other forms of financial assistance.
Mahalapye West MP, David Tshere said such changes could act as a motivation for the early exit of older employees.
“This might encourage the old people to retire, get their share and start businesses, whilst creating employment for the youth. “We need them to leave those positions and employ the youth who are the most affected when it comes to unemployment,” he said.
Jwaneng-Mabutsane legislator, Reatile Mephato argued that the proposed amendment bill should have included a commencement date for the consideration of active members.
“We have to agree that Batswana want this bill, even though it left out some. “There should have provision to give active members loans or act as security for those loans. “There is still room for the retirement cash to be security for loans,” he said.
At present, active pension fund members can only receive their benefits when they reach retirement age and begin drawing the monthly payouts.