Treasury: Saving must become law

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Gushesh

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Johannesburg - The Treasury will next month release a discussion document to pave the way for government to lay down legislation making it harder for people to cash in their pension benefits when they change jobs.

This forms part of its plan to introduce a compulsory pension system which will force millions to save for retirement and reduce their dependence on the state when they become pensioners.

Olano Makhubela, Treasury's chief director for financial investments and savings, said this week that the legislation - which will focus on enhancing preservation of pension benefits - could arrive before the end of next June, after the government has engaged in extensive public consultation.

"The legislation will introduce some form of mandatory preservation until people retire or are disabled. Under certain exceptions, we are proposing a restricted withdrawal arrangement, but you can’t withdraw everything," he said.

The second phase of rolling out the compulsory pension system will involve the establishment of a National Social Security Fund, which will force every working South African to make a contribution to it.

Treasury is formulating a discussion paper dealing with the nitty-gritty of setting up the fund. The time frame for the fund has yet to be worked out.

"A lot of work has taken place and we want to get it right the first time round. I am confident we will see it in our lifetime, but it is a big project," Makhubela said.

Frank Richards, head of asset consulting for employee benefit investments at Momentum, believes compulsory preservation is essential to solve the problem of people retiring without sufficient savings.

"We also need to introduce a tax legislation that supports savings. For instance, the interest that you earn on your savings must be tax-free," he said.

But South African Savings Institute deputy chairperson Dr Sheshi Kaniki has warned that rising unemployment and high levels of indebtedness could frustrate plans to force people to save for retirement.

He advised government to build flexibility into the legislation to allow pension contributers to access their benefits should they encounter hard times.

"It is not easy to preserve if you are without a job and income. I think the preservation rule should be waived in special circumstances to allow people with no income to access their savings," he said.

Kaniki encouraged government to go ahead with the pension reforms but advised that in order for the reforms to be effective, they needed to be supplemented by improved financial literacy and a culture of saving.

The mooted system has also been touted as South Africa's best hope of boosting national savings.

Makhubela said: "If we want to grow at 6%, we need to push the gross savings rate to at least 31% of the gross domestic product (GDP).

"We need to focus on households, because they are contributing less to gross savings. In the first quarter of this year, households contributed 1.5% to the country's gross saving rate of 16%, while corporates cover the bulk."

During the past 31 years, the gross savings rate has declined to 16% from 33%, making South Africa one of the poorest savers in the world.

A World Bank study noted that countries that grew at rates of above 6% over the last 18 years had average saving rates of 31% to GDP, like China at 40%, India at 23% and Botswana with 38%.

Makhubela also said higher gross savings would help South Africa to be less reliant on capital inflows to finance its savings deficit, which is financed by short-term capital inflows or pools of savings from foreign countries.

These capital inflows tend to leave the economies of developing countries during periods of financial crisis, disrupting their economies by weakening their currencies and triggering inflation. The rand lost a chunk of its value when the credit crisis hit in 2008.

Makhubela added that a country with a large pool of savings stood a better chance of staving off financial crises like the ongoing debt crisis in the US and Europe, because it can rely on its own savings.

He singled out Japan, which relied on its national savings to rebuild its infrastructure and economy in the wake of an earthquake and tsunami which struck the country earlier this year.

"You don’t need to rely too much on short-term capital inflows if you have high gross savings because short-term capital inflows can *easily and quickly be withdrawn.”
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http://www.fin24.com/Money/Treasury-Saving-must-become-law-20110821
 
And in next month's headlines:

Treasury announces a wealth retirement tax where previously disadvantaged individuals will be taxed a monthly % to cater for those who cannot afford retirement annuities themselves.

Here's a novel idea, dear law makers...

How about you inept and degenerate bunch of idiots peruse our tax money for services that require rendering in a first world manner - instead of quoting first world figures to further your own agenda.

Listen up and listen good ... YOU CANNOT LEGISLATE BEHAVIOUR! It simply does not work.
 
The second phase of rolling out the compulsory pension system will involve the establishment of a National Social Security Fund, which will force every working South African to make a contribution to it.
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Along with the NHI of course, new road tolls, the rising cost of living, etc. Are these muppets out of their freaking minds? Where the hell are we supposed to get the money for all this socialist bull****?
 
This forms part of its plan to introduce a compulsory pension system which will force millions to save for retirement and reduce their dependence on the state when they become pensioners.
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Having the government manage your savings is like having an alcoholic manage your liquor stash.
 
Dear Govt,

Until 2 years ago I was quite easily saving exactly what I needed to to retire comfortably, due to all the latest increases in everything (Food, W&L, Rates, Tolls, Levies) I am no longer doing that. To ensure a culture of saving you cannot tax the populace to within an inch of their lives....
 
Jladan said:
To ensure a culture of saving you cannot tax the populace to within an inch of their lives....
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It's not merely tax, the Reserve Bank keeps interest rates arbitrarily low and expansion of the money and credit supply leads to price inflation. I'm pretty sure that most people are getting negative yields when you calculate inflation in a more realistic way than the government does. U.S. Treasuries and German bonds are already at negative yields when adjusted for the government stats, so it must be far worse in real terms...
 
Reposting a response from the SA Libertarian Google Group, not my own words.

"The legislation will introduce some form of mandatory preservation
until people retire or are disabled. ... The second phase of rolling
out the compulsory pension system will involve the establishment of
a National Social Security Fund, which will force every working
South African to make a contribution to it."

..

"Makhubela also said higher gross savings would help South Africa to
be less reliant on capital inflows to finance its savings deficit"

If you want people to save more, here's an idea, you could always
stop stealing money by taxing savings through artificially created
inflation, in order to encourage private savings. But then, that
isn't really the goal is it.

..

"Makhubela added that a country with a large pool of savings stood a
better chance of staving off financial crises like the ongoing debt
crisis in the US and Europe, because it can rely on its own
savings."

Translation: "States that use force to capture retirement savings,
can plunder and burn through grandma's savings to temporarily
continue funding a bloated dysfunctional chronically-overspending
interventionist kleptocracy for a little longer". Makhubela speaks
about burning through grandma's savings to fund wars, oversized
bureaucries and the "bailouts" of politically-connected billionaire
bankers who lose their customers' money while paying themselves huge
bonuses courtesy of the taxpayer, as if it's somehow a good thing.
Grandma's going to be eating cat food when she retires, but hey, at
least the corrupt bankers will have private islands to live on.

The last people in the world you should trust with your retirement
savings, are the state.

I can already guess who's going to be running and managing these
schemes, and, I'm guessing, who is writing this legislation -
probably the same morons from private industry who lost huge
portions of my retirement savings while paying themselves fat
bonuses (because I was stupid enough not to manage my own savings
when I was younger, naively thinking, then, that the people running
the system knew what they were doing). They're probably writing this
legislation and trying to have it made mandatory ("for our own
good", of course) precisely because people are (rightfully) losing
trust in these institutions under non-compulsory schemes (and of
course because the recessionary fruits of modern policy create
additional pressure for people to focus even less on savings and
more on day-to-day needs). Once it's mandatory, they won't even have
to worry about managing things well enough to maintain the customer
base, it will be automatic, a literally captive customer base ... I
can see them drooling already.

NHI, now compulsory social security on the way .. honestly, it's
like we're trying hard to remove the last things South Africa
actually has going for it over places like Australia (where not only
is government-run social security compulsory, but you can't even
cash out your own money that you paid in, if you emigrate from
there).
 
Ah yes, the world bank strategy starts to roll out, soon they will decide what we can spend our salary's on too. They are already limiting our free travel with the toll roads, hmmm imagine if you openly disagree with the new government in the future, no pension for you I guess, oh and no trip to the airport to leave either as we own the roads. Guess Gorge Orwell was right after all. Now we just need cameras in our homes to make sure we are not planing a uprising against them and military troops in the street 'policing' us civilians and we are set ;)
 
The government wants people to save but they themselves run a budget deficit of about 5% and their central bank keeps rates at record lows. Hypocrites.
 
All I can say is I feel really sorry for those of you that remain behind in South Africa and, for whatever reasons, cannot or choose not to emigrate.
 
Koosi said:
All I can say is I feel really sorry for those of you that remain behind in South Africa and, for whatever reasons, cannot or choose not to emigrate.
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I was thinking about this recently too,
Not everyone can up and leave if they want to. Very worrying the way things are going in SA.
 
The model they're planning is for everyone to have their pension fund savings up to R50000 in the National Social Security Fund. Any further savings will be invested with a normal pension/retirement fund as is currently the case. I work with people directly involved in the process. It's going to take a few years before anything happens and will be a nightmare to administrate due to the splitting of the savings.
 
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Se voet are the guavamint getting MY retirement money to play with.... I don't trust them.
 
SaiyanZ said:
The model they're planning is for everyone to have their pension fund savings up to R50000 in the National Social Security Fund. Any further savings will be invested with a normal pension/retirement fund as is currently the case..
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So basically a once-off tax of 50k... I can't see myself getting any benefit from a National [-]Security[/-]Slush Fund. :(
 
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