State Managed Pension Fund could demand 12% of your earnings.
Your thoughts? RED FLAGS PERHAPS?
A new proposal by the Department of Social Development on a new Comprehensive Social Security and Retirement Reform, which proposes the creation of a New National Social Security Fund (NSSF) –a fund managed by the Government which will provide disability benefits, retirement and unemployment benefits.
Essentially all employers and employees will be required to contribute up to 12% of their earnings – up to a certain ceiling of which the proposed amount at the moment is R276 000 per annum. If you earn more than R276 000, you will be required to pay 12% of R276 000 which is roughly around R33 120 or R2760 per month towards the fund. In the proposal, it states that government should subsidise the contributions of low-income workers. Those that earn less than R22 320 per annum will not be required to contribute, however an annuity product backed by government will be designed for them. ‘A simplified contribution arrangement for self-employed individuals and informal workers will also be established,’ the paper states. The paper expects workers who earn higher salaries to divide their earnings between the NSSF as well as the private sector.
State Managed Pension Fund could demand 12% of your earnings.
State Managed Pension Fund could demand 12% of your earnings.
State Managed Pension Fund could demand 12% of your earnings.
State Managed Pension Fund could demand 12% of your earnings.
State Managed Pension Fund could demand 12% of your earnings.
State Managed Pension Fund could demand 12% of your earnings.
Where exactly will the money go?
The opening 10% will go to the mandatory fund and then the leftover 2% will go to the Unemployment Insurance Fund. This may eliminate having a private sector pension fund. The NSSF pensions will be based on career earnings and the duration of the contributions. The fund will also provide income protection benefits for workers and their families. "However, those earning above the tax threshold will need to contribute to supplementary retirement savings and insurance arrangements to ensure an adequate replacement income," states the Green Paper. The Green Paper suggests that a basic income grant should be launched at a level "that will at least lift the individual out of poverty".
Red Flags perhaps?
There are obvious concerns around the proposal, as there is generally a lack of trust when it comes to government managing any funds, i.e UIF. This may come from an upright position that we have a very low savings rate in South Africa and unfortunately the burden later lies on government’s lap when people reach retirement or become disabled, etc. It does however take away competition and efficiency and it monopolises certain elements of pension benefits. To what extent will the government then convince the public that they are going to manage these funds in the best interest of public and the people who will fund it? There is definitely still a long way to go as this is a green paper and still needs public consultation and input. The department said that the green paper's recommendations will take several years to implement, and that a phased-in implementation approach is proposed. Transparency has to be at the top of the list and due processes are critical. People and organisations are invited to submit comments on the paper by 10 December.
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