Deputy Finance Minister David Masondo has raised concerns over the country’s retirement landscape with millions of South Africans outside the retirement system due to the high unemployment.
Masondo was delivering a keynote address at the Old Mutual Thought Leaders Forum in Johannesburg on Tuesday.
The forum gathered role players in the retirement industry looking at collective efforts towards retirement security and improving retirement savings.
The Deputy Minister calls for transformation, focusing much of his address mainly on the upcoming two-pot retirement system.
In its inaugural sitting, the Old Mutual Thought Leaders Forum has been described as the beginning of an ongoing dialogue that will help drive positive change and improve retirement outcomes for all.
“We found as Old Mutual that there is 6% statistics that you’ve mentioned quoted over and over again, that’s definitely not good enough but we live in a complex situation with many South Africans unemployed, many people are not even part of the retirement system so we have a dual challenge on how to improve outcomes for those who are saving but how to also increase coverage for people who are currently not participating in the retirement system,” says MD of Old Mutual Corporate, Prabashini Moodley.
Video: Thought Leaders Forum – Increasing and improving retirement coverage in SA: Prabashini Moodley
Labour market
This has been attributed to the lack of economic growth that has seen many people unable to enter the labour market and actively contribute to their retirement savings.
Masondo says it has even been more concerning to see some members of pension or provident funds terminate their employment to access those retirement savings due to financial distress.
“Our country has made significant progress in our 30-year journey of freedom and democracy. Many people who were historically excluded are now active participants in the economy. However, our journey is far from over. There are still too many unemployed South Africans and too many who live in poverty. Income and wealth inequality persists, and millions of South Africans cannot retire with dignity, while millions more cannot save for retirement at all.”
The country will see the introduction of a new two-pot retirement system on the 1st of September which has been described as the latest in a series of comprehensive reforms. The system will see workers able to withdraw 10% of their savings capped at R30 000.
Role-players in the sector say they’ve been hard at work to prepare for the day. FSCA Olano Makhubela says, “They are pretty much ready, we’ve also been engaging with them to encourage them to enter into this service level agreement with clients just to manage the expectations because one of the points is around managing expectations from members who might think on 1 September the money will be available, you go to the ATM and the money will be instantly available. It’s likely not to be that way for every member for every fund because there are administration issues to go through and so it’s important to advise the public out there to be patient with the system.”
There’ve been concerns about the lack of information with funders urged to be transparent and help prepare workers for what lies ahead.
Chairperson of Old Mutual Super Fund Nhlanhla Nene says, “We have a legal requirement to report funds or employers that do not transmit the requirement contributions to the Financial Sector Conduct Authority there is that legal requirement. There are employers that are delinquent but because there is the name and shame process also, we don’t wait until there is a death or a claim when they are found to be non-compliant. We are required to report them to the regulator.”
Masondo says the Government of National Unity will prioritize inclusive economic growth and job creation to increase the number of people who can contribute to their retirement savings.
The Thought Leaders Forum drawing to a close with commitments to addressing the economy, retirement inequalities, eradicating disparities, and ensuring comprehensive support for individuals transitioning out of the workforce.
As the 1st of September looms for the two-pot retirement system, calls remain for financial literacy transparency and patience in learning the system.
