This week, National Treasury released the first two of five discussion papers that formulate its aims to ensure you save as much as possible for your retirement and that your pension lasts the distance.
An initial raft of proposed reforms that, if accepted, will fundamentally change the landscape of South Africa’s R2-trillion retirement saving and pension-provision industry has been unveiled by National Treasury.
Government considers the proposals to be urgent interim retirement reform measures that complement the more fundamental and comprehensive social security reforms. The proposals aim to:
* Ensure you get the best deal possible in saving for retirement and provide structures that will maximise your pension, ensuring you have a sustainable income for life; and
* Limit the ongoing plunder of your retirement savings as a result of fraud, high costs and trustees and service providers that do not do their jobs properly.
The most significant proposals include having your retirement fund play a greater role in encouraging you to preserve your savings for retirement; and when you reach retirement, offering you a low-cost, low-risk default pension provided by a reined-in financial services industry.
Government wants to ensure that at least a defined minimum value of your savings is used to buy a pension that is guaranteed for life. It also wants business and organised labour to consider nudging or obliging all formal-sector employers to ensure that their employees join a retirement fund.
Treasury says although the discussion papers do not cover this international trend, it is an option that stakeholders, including business, organised labour, and the civil society body, the National Economic Development and Labour Council, should consider.
Yesterday, Treasury released the first two of five private-sector retirement reform discussion documents on which there has already been extensive consultation with the financial services industry and labour.
All the discussion documents, which present ranges of options to improve the retirement savings environment, are being released on publication for public comment before final decisions are made and translated into legislation.
The five papers follow a document published in May giving an overview of urgent retirement reform, entitled “Strengthening retirement savings: overview of the 2012 Budget proposals”.
The two papers released yesterday are entitled “Enabling a better income in retirement” and “Preservation, portability and governance for retirement funds”.
They are to be followed, shortly, by two papers entitled “Incentivising non-retirement household savings” and “Simplifying the tax treatment of retirement funds”.
The fifth paper, dealing specifically with the costs of retirement savings, is scheduled to be released in November.
South Africa has one of the largest retirement fund industries in the world relative to its gross domestic product. Government hopes with the proposals to substantially grow the current 10.3 million retirement fund members with their R1 trillion plus saved in private sector pension funds and a further R1 trillion in the Government Employees Pension Fund.
COMMENT
Comments on the first two retirement reform discussion papers can be submitted by November 16 to the Chief Director of Financial Investments and Savings, Olano Makhubela, Private Bag X115, Pretoria, 0001; or by fax to 012 315 5206; or by email to [email protected].
The papers are available on the National Treasury website, www.treasury.gov.za