In the years to come, South Africans may get the opportunity to allocate their retirement fund contributions into two different accounts. One account would be entitled for retirement purposes, while the other would serve as a savings account to which the members would have access even while being still employed.
BDO recently called this as three pots, especially highlighting the third pot as the vested funds, which means that members of the fund will go on to have the option to withdraw one-third of their retirement savings much before reaching the retirement age, rather than having to wait till retirement in order to access the funds. However, the National Treasury has gone on to request a postponement of the development, which was originally scheduled for March 2024. The reason for this delay is to let the investment industry have sufficient time so as to establish the necessary systems when it comes to processing transactions swiftly and at the same time securely. The new target date for implementation is all set for 2025. Throughout the preparation period, it is crucial for pension funds to prioritize safeguarding consumers from fraudulent as well as high-value withdrawals of their pension funds that are hard-earned.
Murray Collyer, who happens to be the Chief Operating Officer at iiDENTIFii, goes on to express his support for thoughtful execution when it comes to the two-pot pension system. Once introduced, it has the opportunity for simpler access to investments that are valuable. Fraudsters happen to find it as the perfect target, as they can make use of the advanced technology so as to exploit unsuspecting individuals that are involved in transactions. Traditional methods of authorization are insufficient. Pension funds must make sure to fulfill their duty of care so as to safeguard consumers from fraud as they deal with the new system. This has in it implementing appropriate processes in order to safeguard retirement savings from the threat of cybercriminals.
Which funds are at risk?
It is important to note that when this legislation takes shape, fund members’ savings will go on to receive a 10% boost in the current balance in the fund, up to a specific limit of R25 000, which may shift to R30 000 as this is what has been proposed by the National Treasury. Additionally, savings will keep growing with one-third of contributions on a regular basis. There are indeed going to be certain rules regarding accessing the savings pot, which would include a minimum amount of R2,000 and also the allowance to access the pot only once in a tax year. While fraudsters may not have the ability or the capacity to completely deplete pensions, the savings that get deposited in a pension fund still go on to represent a substantial sum of money when it comes to many South Africans. The risk is further multiplied by the challenging economic landscape, where 89% of South Africans plan to work even after retirement because of insufficient pension funds.
Collyer stresses the importance of consumer as well as pension fund awareness, as fraudsters are constantly seeking out new ways so as to exploit trends and at the same time gain access to large sums of capital. Cybercriminals have in the past targeted cars, property, as well as legal companies that take care of significant amounts of funds. These fraudsters, apparently, take undue advantage of seasonal activities or trends like the SARS rebate season. It is well to be noted that a loss incurred from a fund savings pot not just hampers consumers when it comes to their savings and the probable compound interest they could have been earned in the future, but it also very much affects the pension funds’ reputation, which is responsible for making sure that the money is well secured.
How secure are withdrawals from a savings fund?
It is worth noting that South African pension funds have not yet offered to provide any details on how individuals can have an access to their pension savings. They have clarified that the official process will be disseminated closer to the launch of the two-pot system. A postponed date of commencement does offer financial institutions with additional time for preparation. Funds happen to be taking a prudent approach by educating members on how having a savings pot will go on to have an impact on their retirement savings. Just like in the case of any financial service, it is important for members to have an idea about safeguarding their personal identifying data so as to protect themselves from fraud.
Collyer goes on to suggest that pension funds should prioritize identity verification as they go on to prepare for the implementation of the two-pot pension system. While dealing with any financial services provider, a very important and notable challenge arises in terms of verifying a person’s identity. Apparently, it is possible to forge signatures. One-time passwords- OTPs can be easily intercepted by fraudsters, who can then use them so as to get an unauthorized access to a person’s account. Legacy biometrics like fingerprints or retina scanning are also susceptible to spoofing, as criminals can exploit the affordability as well as widespread availability of AI tools so as to imitate someone’s voice, thereby helping them to carry out fraudulent transactions in that person’s name.
Simply relying on static face verification is insufficient, and Collyer points out that while biometrics are a more secure method of verification compared to passwords and even OTPs, fraudsters are becoming more skilled when it comes to orchestrating attacks that could potentially grant them all-out access to pension savings. In reality, individuals who engage in fraudulent activities can go on to pretend to be someone else by imitating biometric features that happen to be easily replicable. This deceptive practice could go on to grant them unauthorized access to an individual’s pension savings.
How pension funds can make sure to safeguard consumers
iiDENTIFii has gone on to collaborate with various prominent banks across South Africa so as to introduce a groundbreaking authentication process known as 4D Liveness. In simple terms, this process goes on to verify that the person conducting a transaction is indeed a human being, authenticating their identity as well as confirming that the transaction is taking place in real-time. The individual who happens to be withdrawing the funds captures a selfie, and by way of a distinctive sequence of flashing-coloured lights, one can go on to ascertain their authenticity. iiDENTIFii’s technology can precisely authenticate someone’s identity in just a matter of seconds by comparing their selfie with all relevant government databases. According to Collyer, these advanced algorithms are consistently being refined so as to effectively prevent fraudsters from being successful.
The two-pot pension scheme, like any new development when it comes to access to savings, has the potential to come up with a new risk frontier to the financial services landscape. If proper security measures are not found, fraudsters have the capacity to impersonate consumers and, at the same time, gain access to significant amounts of money, which could have life-altering consequences for the affected individuals. Notably, pension funds must prioritize the protection of their members as they go ahead with full implementation of the two-pot pension scheme. Similarly, insurers should take essential steps to provide coverage that goes on to protect against significant losses in savings. One aspect of this is making sure that their biometrics provide sufficient protection against criminals. The fact is that implementing this measure will guarantee financial security for consumers.
