Low-wage earners will, in theory, retire on a combination of the old age grant and NSSF annuities, while the rich will retire on such annuities as well as whatever additional pension they have accumulated.
“Clearly, the rich have ample space to top up, whereas poor people’s only real route to a decent pension is through the mandatory system,” said Dangor.
“We will see a lot of debate on this and the timeframe is tight. In September 2017, we want agreement on the document and the process of implementing it,” said Dangor.
This is because Treasury’s retirement reform bill has been suspended until February 2018.
This will in effect turn provident funds into pension funds by enforcing the purchase of annuities instead of cashing out lump sums on retirement.
Labour federation Cosatu drove a campaign against the annuitisation rule, saying the complementary parts of the comprehensive social security system first need to get sorted out.
The annuitisation of relatively small provident savings would lead to very low monthly incomes and pose the threat of kicking some people out of the old age grant system, without improving their income.
“I would not do it either,” said Dangor of annuitising small retirement savings. “Ideally, it should be part of a package.” A policy expert involved in Nedlac discussions said that the mere fact that something had been tabled was almost more important than the content. He called the 2017 deadline “wildly unrealistic”. “It is just a discussion paper. A lot of it is vague. But at least it gets the ball rolling,” he said.
“This will easily be a five-year process, but at least we can have a discussion and get the department of social development and Treasury to talk.”
The four years of stalemating around the pension fund have been blamed squarely on the department and Treasury. “National Treasury is as relieved as we are that it is now at Nedlac,” Dangor said. “It took us four years to agree in government.” A newer version, completed in 2015, was abandoned after a ministerial committee found that the 2012 paper had been “more aligned to the Constitution”.
The 2015 paper was never released, but it was apparently more fiscally conservative.
This week, Cosatu welcomed the discussion document’s release as a “push against the neoliberal offensive from Treasury in particular”.
“Ironically, it was the minister of finance who tabled the 2012 paper,” said Dangor.
The 2015 paper questioned the most basic design for the NSSF – whether it should be a defined benefit or a defined contribution fund, said Dangor.
In a defined benefit system, the payouts are predetermined, irrespective of what happens to the fund’s investments. In the latter, the pensioner carries the risk of their pension rising or falling with the markets.
“The default position has reverted to the NSSF being a defined benefit fund, which is a more
WAITING FOR A BETTER DEAL After casting her vote in Diepsloot on August 3, pensioner Monica Ngubane (73) said she felt hopeful that doing so would improve her life. She has never missed a vote