Business Maverick reports that SA’s pension system recently scored a high 78 on integrity in the 14th Mercer CFA Institute Global Pension Index (MCGPI).
A high level of regulation and the government’s attempts to encourage saving through tax incentives played a role in the higher integrity rating. However, SA fell short when it came to the two other focus areas of sustainability and adequacy. The MCGPI is a comprehensive study of 44 global pension systems, accounting for 65% of the world’s population. SA scored 44.2 for adequacy, 49.7 for sustainability and 78.4 for integrity. To put this in context, Iceland scored above 83 in all three categories. Belinda Sullivan of Alexander Forbes, Mercer’s strategic partner in Africa, noted that the index this year focused on the shift from defined benefit to defined contribution funds. “South Africa has a relatively mature defined contribution environment, with this shift having started more than 30 years ago. However, despite the opportunity to save in the private sector, there have been insufficient measures in place to ensure that more people have some kind of retirement savings and that they preserve these savings for retirement,” Sullivan pointed out. The net effect was that although many might start out saving for retirement, continual changes from one company retirement savings scheme to another, combined with the opportunity to withdraw funds meant that these members ended up with insufficient savings and were forced into reliance on family support, government grants or both. Sullivan advocated that the government should remove the means test of the state old age pension to ensure a minimum safety net. Employers who do not have retirement savings plans in place can also make a change by putting something in place for their employees. The two-pot system proposed by National Treasury will also make a significant difference in terms of improving the amounts preserved by individuals.
- Read the full original of the report in the above regard by Neesa Moodley at Daily Maverick
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