Pretoria - It’s back to the drawing board after the at best mediocre communication on government’s retirement savings reforms reportedly triggered a rash of resignations to get funds out amid rumours of the nationalisation of pension and provident funds.
Cosatu last week raised its concerns workers were resigning to cash in their retirement savings, adding the government had caused confusion through its mixed messages. The topic also hotly featured on social media and talk radio.
Minister in the Presidency Jeff Radebe on Thursday acknowledged communication could have been better. “From government’s side, I don’t think we communicated this thing appropriately,” he said, adding the cabinet now had asked Finance Minister Nhlanhla Nene to undertake an “aggressive” awareness campaign to explain and allay concerns.
“There’s no intention on the side of government to nationalise these things (retirement savings). I want to put it emphatically: ‘no, no, no!” What we want to do is to encourage a culture of savings,” said Radebe during a briefing on this week’s cabinet discussions.
Radebe said there was only anecdotal evidence some workers were resigning to cash in retirement savings, but National Treasury deputy director-general Ismail Momoniat confirmed a recent rise in cash-outs from the Government Employees Pension Fund.
Cautioning that it usually took two to three months after resignation for the fund to receive such instructions, he acknowledged citizens’ concerns: “We are getting lots of phone calls. We are getting lots of queries. There is clearly a great discomfort”.
Momoniat said household indebtedness was “clearly one of the pressures”, alongside the extensive, some would argue excessive, use of court-issued garnishee orders to recoup debts directly from a worker’s salary. “There’s a lot of pressure. A lot of pressure is linked to levels of over-indebtedness,” said Momoniat.
Only 6 percent of South Africans are able to maintain their pre-retirement lifestyle after retirement, according to figures cited variously by the Treasury, government departments and financial services bodies. Six million workers do not have employer-sponsored retirement benefits at all, according to National Treasury.
Other figures show 16 percent of South Africans were dependent on the R1 350 government pension available following a means test, while over 70 percent of South Africans either needed support from relatives or had to continue working beyond retirement.
Household debt stood at 74 percent in the fourth quarter of 2013, according to official statistics. While household indebtedness has decreased from 81.9 percent in late 2008, it remains staggeringly high. Overall household debt is estimated at just short of R1.5 billion countrywide, according to various financial services institutions.
South Africa’s economy historically is driven by consumer spending, but financial pressures on households have hiked amid rising food, petrol and electricity costs alongside a clampdown on unsecured, effectively personal, loans.
Momoniat described resignation to cash out retirement monies as “very very risky”.