The pension fund industry is currently subjected to massive changes to financial regulation in the form of the Twin Peaks model planned for implementation, as well as changes to the Pension Funds and Income Tax Acts.
"This is a really scary statistic, made even more serious by the fact that this figure refers only to people who are fortunate enough to belong to an employer sponsored retirement arrangement," Hiller van Rensburg says. "What about unemployed people? What protection exists for them in terms of unemployment insurance, medical cover or disability cover? It's very clear that South Africa's citizens are in desperate need of comprehensive social security."
Ad hoc reforms that focus on pensions only are seen to be of little use to citizens who are unemployed or disabled. At last year's IRF Conference Alex van der Heever, chairman of Social Security Systems Administration and Management Studies at Wits University, implored the government to review its position and unite all social security departments, among them health, maternity, retirement, death and disability.
"Silos don't communicate effectively. Until we have one Social Security Department in place for policy reform, South Africa will be slow to progress. Government has yet to publish its paper on social security reform, keeping this as a narrow, bilateral discussion that excludes society," Van der Heever said.
Last month's Budget announcement included a discussion document around retirement fund reform that has been mostly welcomed for aiming to boost the protection of retirement savings. National Treasury has since released further announcements outlining broad policy goals for this reform including the implementation of a mandatory contribution system, improving preservation, improving fund disclosure to provide a simple measure of charges in retirement funds and simplifying retirement savings products. The papers also give more detail on non-retirement savings reform, allowing tax-free savings accounts that discourage unnecessary withdrawals.
More adequately skilled trustees who will be required to act independently and comply with prescribed requirements will be enforced by the new Pensions Act. Trustees, valuators and fund administrators will also be obliged to blow the whistle on any findings that could prejudice the fund or members, by informing the Registrar.
The numerous changes to both the Pension Funds and Income Tax Acts were debated at the IRF's recent bi-monthly Trustee Fiduciary Duties Seminar.
Zamani Letjane, IRF chairman, says the proposed changes to the Pension Funds and Income Tax Acts present a valuable opportunity to funds to improve benefit designs with the singular objective of improving retirement outcomes for members. All stakeholders need to ensure compliance and importantly, take advantage of new savings opportunities.
"We are in desperate need of a proper debate about comprehensive social security reform that will allow pension funds to fulfil the role for which they are capable - assisting people with an income when they are no longer able to earn one due to old age," Hiller van Rensburg concludes.
