Moonstone: National savings planned delayed

An article entitled “State pension plans delayed” Adri van Zyl discusses the progress made in terms the proposed National Savings Plan. A couple of interesting aspects emerge from the article.

Originally scheduled for implementation in 2010, it now appears more likely to happen much later, particularly in the light of the fact that it is linked to National Health Insurance Scheme, in addition to ensuring funding for the provision for death and disability cover. The article raises some other factors which should be considered as part of the bigger picture:

David Gluckman, chief executive of Sanlam Umbrella Solutions, says provision for a reasonably comfortable retirement for all citizens is desirable, but there are other matters requiring attention first. These include education, healthcare, poverty relief, housing and job creation.

The estimated R40bn to R60bn that it will cost to introduce a national savings fund in the more or less 10-year transitional phase could be better applied to solving other macroeconomic problems.

Two important demographic statistics that have to be taken into account when calculating benefits from the savings fund, reckons Gluckman, are South Africa's death statistics and high unemployment rate.

The most recent figures indicate that only 30% to 40% of all 20-year-old men will reach retirement age. These people therefore do not need a retirement fund, but rather comprehensive death cover so as not to expose their next of kin to years of financial hardship.

South Africa also has a very high unemployment rate and no pension fund industry reform will help the jobless, he points out.

Gluckman argues that the money that could be spent on a national savings fund could more productively be applied to stimulating economic growth and thus increasing employment.

He reckons that amendments to the existing retirement-provision setup could possibly accommodate people currently excluded from the pension system. In this way risk could be eliminated and the cost of a system, whose benefits are indeterminable at this stage, saved.

We will watch with great interest (and a fair amount of trepidation) to see how this marriage between capitalism and socialism develops.