The Department of Social Development has released a new Green Paper on Comprehensive Social Security and Retirement Reform.All South African earners will have to pay up to 12% of their earnings into the fund.
The first 10% of this contribution will go to the mandatory fund, rather than to a retirement fund. The next 2% will go towards unemployment insurance. The paper proposed that government should subsidise the contributions of low-income workers. Those who earn less than R22 320 per year won’t have to contribute, but a government-backed annuity product will be designed for them.
"However, those earning above the tax threshold will need to contribute to supplementary retirement savings and insurance arrangements to ensure an adequate replacement income." "It will also be much easier to implement a reform that will require a significant adjustment to taxes as it willbe easier for government to sell an increase in taxes on the working age population with an increased transfer to that same population."Higher-income workers will be encouraged through tax incentives to contribute to pension and insurance plans, in addition to the NSSF.
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