Contributing to clarity
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.