Social grant system reviewed to force people to save

THE ANC is considering farreaching changes to the social security system that could see the establishment of a new universal child grant and a mandatory retirement savings scheme.

The latter plan is to deal with the almost complete absence of retirement savings for South Africa’s working poor, millions of whom rely on state pensions after retirement.

The proposals are contained in the ruling party’s discussion documents for the upcoming national general council to be convened in October.

The council meeting is the ANC’s mid-term review between national conferences.

“Limited progress has been made in preventing large numbers of South Africans from retiring into poverty after years of working.

“Nearly 3 million do not have retirement benefits, resulting in large numbers of older persons who had jobs having to rely on the state oldage pension for income support. As a result, the establishment of a national retirement scheme will be one of the more pressing tasks facing the ANC government,” the ruling party’s discussion document on social transformation says.

The ANC-led government has previously bemoaned the low retirement savings rate in the country, even among higher income individuals.

The Treasury is piloting new regulations to force employees to preserve the majority of the funds in the pension schemes when they resign from their jobs or leave their funds.

Under new rules that are being resisted by labour unions, resigning employees will not have their retirement savings released to them, but will be given a portion of their money if they specifically request it. The system is called default preservation, and is aimed at reversing the present situation, where an estimated 90 percent of South African workers retire with too little money. The Treasury’s new rules come into effect in March next year.

The ruling party is also mulling the introduction of a single universal child grant to cut down on the number of poor children who fall through the cracks of the grant system.

“South Africa has about 1.5 million double orphans and about 4 million poor children who have mothers, but due to poverty and other social problems, reside with their extended families. These are all children in need of foster care. “The foster care system is c umbersome, with significant administrative delays that impact negatively on orphaned children’s rights to adequate and timeous social assistance as is constitutionally required.

“Over the next five years, work will be done to review the child support and foster care grants to align the benefits and create a universal child benefit,” the document points out.

The ANC document lauds the far-reaching impact of the government’s grant system over the past 20 years, a fact the party says South Africa still does not appreciate.

“While South Africa’s ability to improve access to unconditional transfers to millions of its citizens has been impressive and is being studied as a model by other developing countries, its impressive impacts have largely been unappreciated domestically.

“Social grants have created household income security, thereby helping families cope with vulnerability.

“The net effect is that human development indicators have improved and risks have been mitigated,” the report adds.

The child support grant, in particular, has been recognised by the World Bank as among the top five “unconditional transfer” programmes in the world, with a wide-ranging social impact.

The party also moved to deny allegations that the extension of a broad social security network was having negative social consequences, such as fostering dependency, a common gripe among the right wing that is often voiced by ANC ministers.

“The evidence not only refutes the dependency hypothesis, but also provides important evidence that the (child support grant) can contribute to labour market engagement, particularly for groups within the country that often face significant risks and vulnerabilities.

“In particular, the youth, women and especially single women – including single mothers – were most likely to respond positively to child support grants by successfully finding employment,” it said.

Workers fail to provide for old age pensions