Con­tribut­ing to clar­ity

Finweek English Edition - - Letters - BARON F

I’M RE­SPOND­ING to the let­ter by Rory G and head­lined “Do the Maths” (22 March). Clearly, the writer doesn’t un­der­stand how the new pro­posed so­cial se­cu­rity con­tri­bu­tion will work. It seems he fears a pro­posed ad­di­tional 15% de­duc­tion from his salary.

It’s not quite as sim­ple as that. The pro­posed so­cial se­cu­rity con­tri­bu­tion (15% – a num­ber that isn’t cast in stone) will be ap­pli­ca­ble up to a cer­tain ceil­ing, the cost of which for many low-in­come work­ers will be fully or par­tially off­set by the pro­posed wage sub­sidy.

The writer stated that he al­ready makes a 6% con­tri­bu­tion to a re­tire­ment fund, which by the way is too low to se­cure a de­cent re­place­ment rate on re­tire­ment. He seem­ingly recog­nises that fact by mak­ing an ad­di­tional con­tri­bu­tion to an RA of 7%. He’s there­fore ef­fec­tively mak­ing 13% pro­vi­sion for re­tire­ment. That’s quite close to the mooted 15% so­cial se­cu­rity con­tri­bu­tion.

Many tran­si­tional ar­range­ments will need to be made, but the pro­posed end state is this: for lower in­come work­ers the na­tional fund would pro­vide re­tire­ment ben­e­fits. Higher in­come work­ers would also con­trib­ute to the na­tional fund, up to a ceil­ing.

Above that, re­tire­ment pro­vi­sion could be made via an oc­cu­pa­tional fund or re­tire­ment an­nu­ity. At re­tire­ment such an in­di­vid­ual would re­ceive two ben­e­fits: one from the na­tional fund and the other from his oc­cu­pa­tional fund/re­tire­ment an­nu­ity.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.