Is Your Pension Under Threat?

By Jeremy Gordin, The Sunday Tribune

August 17, 2008

South Africa

Finance Minister Trevor Manuel kiboshed the fears and the unions backed him - yet worries persist that the government's planned pension fund could be disastrous for people's pensions.

The plan is that 20 percent of an individual's contribution to his or her pension fund would go into a government-controlled and administered "national contributory savings fund", where it would be largely untouchable until retirement age.

The concern has been that the plan could result in people's pensions being "stolen" or mismanaged.

In a joint statement, the government, Cosatu, the Federation of Unions of South Africa (Fedusa) and the National Council of Trade Unions (Nactu), pointed out that it would be unconstitutional for the government to "attempt to commandeer individual savings".
"The worries that existed don't persist any more on the factory floor," said Andre Kriel, the deputy secretary-general of the South African Clothing and Textiles Workers Union in the Western Cape, where nearly a quarter of its members resigned prematurely from their jobs over the past year.

"The first part of the problem was that there was wholesale fear-mongering on the part of some service providers - they said that the government was going to nationalise pensions or steal the money from pensions and provident funds." 

The second element of "the problem" was that many of the resignations were related to present "financial stress", Kriel said.

"People are under such financial stress that they resigned so as to get their pension money - and then went and got, or tried to get, a job somewhere else."

"Oddly enough, it is more in the boardrooms - more among so-called 'educated' people - that worries remain," said Denise Theunissen, administrator of the Independent Newspaper Group's pension and provident funds.

"Overall, the mooted plan is actually a good idea.

But, she said, people had no need to be fearful, provided it became clear that the whole matter was going to be handled competently.

"To begin with, there are still too many unknowns. Who will be the asset managers? Who will collect and monitor the government fund? Will it be the revenue service? That would in itself be a problem because Sars is the taxman. Will it be a defined contribution fund or will it be a pooled fund - and, if so, who will be responsible for investing it? And where will it be invested? Will it go into the Public Investment Corporation?"

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