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Pension and provident funds not under threat

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Pension and provident funds not under threat

by Gabi Khumalo
20 May 2008
BuaNews Online
BuaNews Online

Government has assured pension and provident funds contributors that their savings are not under threat due to government's proposed retirement reform.

Social Development Minister, Dr Zola Skweyiya said: "We would like to assure all those who have previously contributed will receive the full benefit of their contributions when they reach their retirement age."

The minister was informed by the Congress of South African Trade Union (Cosatu) members that some people were withdrawing their provident fund benefits as they feared that government will take their funds into the new Social Security Pension Fund.

He stressed that government had no intention of raiding any existing retirement funds or forcing members to put the savings accumulated thus far into the new National Social Security Pension Fund.

Government will be subsidising the pension contributions of low income earners and has completed it set of proposals for social security and retirement reform and will feed it into the Inter-Ministerial Committee.

The minister confirmed governments plan to reform the social security system will be comprehensive, covering savings for retirement, benefits for disability and survivors and the expansion of the social assistance system.

The department is proposing that those who earn more than R1 000 per month must contribute to the new National Social Security Pension Fund, with government providing a contribution subsidy directly into contributors account and not through a wage subsidy.

"In order to provide predictable and reasonable benefits in retirement, we will argue that contributions go towards a defined benefit scheme which will guarantee a replacement rate between 40 to 60 percent, well above the current levels of 28 percent offered by many pension funds," said Minister Skweyiya.

According to the department, the modelling work suggests that the survivors' and disability benefits will be costly in view of high mortality rates due to HIV and AIDS.

Mr Skweyiya said that unemployment also poses constraints on the department's ability to create a well-functioning social security system.

"Those who lose their jobs in the current climate have a high risk of staying unemployed for extended periods, as a result, we are looking at the feasibility of introducing social assistance for the unemployed while providing support to ensure quicker re-absorption into the labour force," said the minister

The department has also reviewed the fragmentation and gaps in the organisational arrangements and is proposing an overall of the system including governance, management, administration and oversight of both private and public participants in the system.

While the new National Social Security Pension Fund will be part of the suite of social security institutions under the minister, consideration is being given for the institutionalisation of quasi-judicial and judicial arrangements to deal with complaints. - BuaNews

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