Dangers of early pension cash-in
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Dangers of early pension cash-in

Unscrupulous service providers and resignations from the Government Employee Pension Fund

Written by Tammy Peyper: Manager Consumer Education Department, Financial Services Board


There has been much in the media recently about the resignation of government employees in order to access their pensions. According to the Government Pensions Administration Agency (GPAA) this is especially high among teachers and employees of the South African Police Service. Much of these resignations are a result of members of the Government Employee Pension Fund (GEPF) being incorrectly informed regarding the proposed changes in legislation wrongly believing that they won’t be allowed to withdraw a cash lump sum. Jay Morar of the GPAA has urged members of the GEPF to stop resigning because members fear they will lose their money, especially members’ lump-sum benefits. Morar continues, ‘"Nothing is further from the truth. All members of the GEPF will still be entitled to a lump sum when they retire - no matter the date."


Yet, these rumours continue unabated and it has come to the FSB’s attention that some of the blame for these misconceptions rest with unscrupulous financial advisors. According to Kagisho Mahura, a Certified Financial Planner (CFP)® professional and a member of the Financial Planning Institute (FPI), ‘these (unscrupulous) advisors uses scare tactics to entice scores of investors to resign and exit from their current pension or provident funds because “government is going to take their money”. This could not be further from the truth. The advisers’ motive is often to encourage the investors to exit so that they (advisers) can invest the withdrawn amounts and earn fees thereon.’

So how can consumers guard against getting incorrect financial advice, feeling pressured into taking out financial products and where can they go to if they feel that a financial advisor has acted inappropriately?

Firstly, anyone who gives financial advice (for example advising you to withdraw your pension and invest it with them) must own or work for a financial service provider that is authorised by the Financial Services Board. Being authorised provides the public with assurance that the advice they receive is proper. This includes the consumer being provided with sufficient information to make informed investment decisions. Advisors are required to adhere to a Code of Conduct with one of the requirements being that the advisor will always act in the best interests of the client. Anyone telling a consumer to quit their job to access their pension is NOT acting in a consumer’s best interest and, therefore, in breach of the Code of Conduct and has contravened the FAIS Act . Any government employee who has been a victim to this type of behaviour is strongly encouraged to report the matter to the Financial Services Board and the FAIS Ombud (contact details are at the end of the article).

A possible option for seeking financial advice is utilising the services of a CFP® professional. These professionals are in a position to offer you sound financial advice as they or the company they represent are authorised by the FSB and must adhere to the FSB’s Code of Conduct.

Lyndwill Clarke, Head of Department: Consumer Education Department, offers this to government employees considering resigning to access their pension, ‘resignation to access your pension is short-sighted as in these economic times getting reemployed is not easy. Rather, first take time to assess your current retirement benefits, research what are the facts surrounding the tabled changes in legislation, thereafter make an informed decisions regarding your retirement.  This assessment could include consultation with reputable advisors.  Clarke concludes by encouraging members of the GEPF not to be pressurised by anyone into cashing out your pension.’


For this and more information consult the FSB Consumer Education Website at www.mylifemymoney.co.za or visit the GEPF website at www.gepf.gov.za.

Contact information

Government Employee Pension Fund
0800 117 669


Financial Services Board
0800 110 443


Office of the FAIS Ombud
0860 324 766


Financial Planning Institute
0861 000 374