The department of social development has released a green paper on comprehensive social security and retirement reform for 2021. We note that it is largely similar to previous proposals dating back to 2012.government. This fund intends to provide basic benefits for all qualifying citizens up to a threshold, including all employees from within the private sector. In addition, citizens can choose to top up their retirement benefits using an occupational or individual arrangement.
In practice, this means most existing members will become dependent on government through the National Social Security Fund for their retirement and insurance benefits, rather than through an occupational or individual as is currently the case. We argue that such a route may result in reduced benefit security due to a number of deficiencies in the proposed system:The proposal removes agency and the power of self-determination from employers, bargaining councils and unions.
The challenge with unfunded benefits is that these are future benefit promises being made by government with no accumulated asset values backing them. Hence the benefit security for existing individuals would be reduced. In contrast, the benefits are fully funded for members of defined contribution funds. These funded arrangements have specific ring-fenced accumulated assets to provide the required benefits per individual member.
Separate interventions should be thoroughly explored for the informal sector, taking the specific dynamics of this sector into account to ensure a sustainable and pragmatic solution. To improve outcomes for retirement fund members, Alexander Forbes will continue to engage through industry bodies and directly with policymakers.
This is a matter of public interest. Substantive comments can be submitted to: GreenPaperCSS@dsd.gov.za.Would you like to comment on this article or view other readers' comments?
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