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SOCIAL SECURITY AND RETIREMENT REFORM – WHAT
CAN YOU EXPECTNovember 2011
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LATEST MODEL
• According to Selwyn Jehoma Deputy- Director of Department of Social Development agreement has been reached on a number of issues around retirement reform (IRF Conference in September 2011).
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POSSIBLE MODEL
3 Tier Model:• Social Assistance• Social Security • Supplementary Savings
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SOCIAL ASSISTANCE
• Social Old Age Grant Paid from general(SOAG) revenue -
• Disability Grant removal of means• Child Support Grant test proposed • Foster Care Grant
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SOCIAL SECURITY
• Unemployment Insurance (UIF) Contribution• Compensation for Occupational % unsure
Injuries and Diseases
• Partial funded Defined Contribution 12% of Benefit Fund R200 000 earnings• Disability and Survivor of which 4% is for Benefits risk
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SOCIAL SECURITY – Partial Funded Retirement Benefit
• Mandatory contributions to partially fund a basic universal retirement benefit, designed to ensure a minimum level of income protection in old age over and above SOAG
• Suggest target replacement ratio is 40% of R75 000 with a later 70% target
• Suggest contribution rate of 12% • 4% of the 12% will be for risk cover – benefit not agreed• Will consider opt out if properly motivated• National State Fund
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SUPPLEMENTARY SAVINGS
• Contributions between earnings floor and ceiling• Earnings floor – R200 000• Earnings Ceiling – R888 000 • Defined Contribution Schemes• Accredited Retirement Funds• Tax incentives still unclear
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COMMITMENTS FROM GOVERNMENT
• Accrued Savings will not be affected• No Compulsory transfer of accrued savings
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UNDECIDED MATTERS
• The investment strategy • Management of the NSSF assets• The implementation sequence • Whether there should be a single Government
department dealing with all aspects of pensions
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WHAT IS THE FIA DOING
• Partnered with the FPI• Did survey & identified major concerns• Proposed focus areas
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SURVEY RESULTS
• General mistrust of Government and their ability to manage and run a National Fund
• Call to clearly establish the Role of the Intermediary in the proposed environment
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PROPOSED FOCUS AREAS
• Discuss Role of Government– Tri parte agreement – between Business,
Labour and Government regarding management
– Clarify the Benefit of the Intermediary– Engage and partner with other organisations
to influence on multiple levels