Controversial new pension laws pit ANC alliance partners against each other
ANC-supporting workers will have to choose between loyalty to the party and having immediate access to the retirement money they have worked so hard for.
This is the tough stance taken yesterday by Cosatu following the signing into law by President Jacob Zuma of bills that discourage workers from having immediate access to their retirement savings when they resigned or stopped working.
The Tax Laws Amendment Act and the Tax Administration Laws Amendment Act seek to compel workers to preserve their retirement savings for the long haul instead of splurging them on luxuries as soon as they are paid out.
The legislation, expected to come into effect on March 1, standardises the tax treatment of all retirement funds, and limits tax-free withdrawals.
But Cosatu, the biggest union federation in the country, is vehemently opposed to it.
"Workers will have to take a decision whether ANC victory in the coming local government election is more important than their wages.
"What it means is that a decision will have to be taken whether workers campaign for the victory of the ANC [in the municipal elections] or wage a campaign to stop the government from nationalising their wages. Which campaign is more important?" asked Cosatu spokesman Sizwe Pamla.
Whether the ANC will contest this year's local government elections without the support of Cosatu's almost 2million members will be known after a meeting of its central executive committee soon.
At its recent national congress, Cosatu resolved to support the ANC's election campaign. But it also passed a resolution stating that workers' wages must not be "nationalised".
"Cosatu does not support the ANC for charity - we do so for workers' interests," Pamla said.
Cosatu accused the ANC of "extraordinary arrogance" and of "abandoning the people-driven and people-centred approach to development".
Cosatu said that, by enacting the legislation, Zuma had signalled the beginning of strained relations between the two alliance partners.
According to the new laws, workers will be restricted to drawing two-thirds of their provident fund assets as annuity payments on retirement instead of being entitled to take the full amount as a lump sum in cash.
A Treasury official said the unions' fears were unfounded and that the aim of the new rules was to make retirees financially more secure. "We've designed the system so it will suit the interests of those who save," the Treasury's head of tax and the financial sector, Ismail Momoniat, said in an interview on Talk Radio 702.
Cosatu described Zuma's support of the new laws as an "act of provocation".
"This is an outrageous and blatant act of provocation by the ANC-led government which will have dire and lasting consequences on the relationship between the government and the workers.
"This is not just a slight against the federation, and the emasculation and undermining of Nedlac, it is an offence against all working people, who have their deferred wages to look forward to after retirement," the federation said.
Cosatu said the government's decision would be met with an "appropriate response" by workers. "Workers will fight any attempts to impose the compulsory preservation of our hard-earned deferred wages.
"We will spare no effort to stop this tyranny because no government has the right to unilaterally decide for workers how and when to spend their retirement savings," said the federation.
The Treasury warned that those cashing their pension or provident fund savings would not only pay significant amounts of unnecessary taxation but would also forfeit the growth of their savings.
Old Mutual principal consultant Michelle Acton said: "While the reforms have the potential to deliver benefits for fund members, unlocking these benefits in full will require action by employers and their advisers, in consultation with employees and members."
Gauteng ANC chairman Paul Mashatile said on Friday that the ruling party was considering using the Public Investment Corporation, the state-owned pension fund, to invest in the economy.
"We complain that black people don't own this economy ... but 30% of companies on the stock exchange - their equity is from our pension funds."
Additional reporting by Bloomberg and Reuters