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Business Times reports that there can be little doubt that the Covid-19 pandemic has had an impact on the retirement funds industry. A key trend is that financial distress is on the rise among South African employers, and contributions declined at the height of the lockdown.
A Financial Sector Conduct Authority (FSCA) survey in June showed that in nearly 40% of active retirement funds (and in 47% if non-employer-related funds are excluded), the employer was in some form of financial distress because either the employer or employee, or both, had approached the fund to ask for a temporary suspension or reduction of retirement contributions. However, this financial distress should not necessarily be interpreted as financial unsoundness at fund level, given the nature of retirement funds and that most are defined contribution funds. The sectors hardest hit were manufacturing and services, particularly smaller businesses participating in bargaining council funds or umbrella fund arrangements. Larger employers mostly managed to pay full salaries and honour their commitments to provide retirement fund benefits. This was helped by temporary short-term compromises made on the regulatory side, allowing delayed submissions and considering urgent rule changes to allow suspension or reduced deductions and contributions. So far, accessing retirement savings immediately has not been enabled, thereby protecting assets people have already saved – if the employee remains in employment. Meantime, sustainable investing has become an issue in SA and globally. A project to benchmark costs and fees in the retirement industry is also under way.
- Read the full original of the report in the above regard by Olano Makhubela at BusinessLive (paywall access only)
Get other news reports at the SA Labour News home page