SOCIAL SECURITY AND RETIREMENT REFORM – WHAT

CAN YOU EXPECTNovember 2011

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).

POSSIBLE MODEL

3 Tier Model:• Social Assistance• Social Security • Supplementary Savings

SOCIAL ASSISTANCE

• Social Old Age Grant Paid from general(SOAG) revenue -

• Disability Grant removal of means• Child Support Grant test proposed • Foster Care Grant

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

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

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

COMMITMENTS FROM GOVERNMENT

• Accrued Savings will not be affected• No Compulsory transfer of accrued savings

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

WHAT IS THE FIA DOING

• Partnered with the FPI• Did survey & identified major concerns• Proposed focus areas

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

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