By Richard Mantu, tel: (012) 314-2419 

Government and the pension and retirement funds industry have released a discussion paper for public comment in a bid to reform the funds for wider access in the country.
 
Releasing the paper in Pretoria today, Treasury Chief Director for Macro-economic Policy Elias Masilela said the paper sought to include issues of coverage, where about 10 million people are covered by such funds, to ensure that a "long-term" system is "put in place providing certainty for all industry players."
 
He added that reforms were necessitated by the need to encourage South Africans to adequately provide for their retirement.
 
The current legislation, the Pension Funds Act of 1956, which had numerous amendments throughout the course of 48 years, provides for only two types of retirement, which are the Pension Fund and Provident Fund.
 
The setback has been that with the Pension Fund, an individual can only access one third of their funds while with the Provident Fund, a person is given their money without proper education on how to invest it to last them throughout their retirement.
 
If a person decides to invest, sometimes individuals fall victim to unscrupulous brokers who take a certain percentage for their services while charging also for moving from one investment product to another.
 
Deputy Registrar of Pensions at the Financial Services Board Dube Tshidi said this scenario left beneficiaries without adequate funds to last them throughout, thus they become dependent on the state.
 
He added that the current legislation was based on the goodwill of employers to provide retirement funds for their employees.
 
Mr Tshidi said the reforms were meant to challenge employers to provide for their employees and both might be given leeway to negotiate the percentage of their contribution to the pension fund.
 
He said the reforms would also look at pension funds of resigning employees to move with them to their next employer as people have a tendency to spend their withdrawal benefits after resigning.
 
"With current legislation, you only save as long as you are employed. If you resign, the current legislation says you must be paid your withdrawal benefits and people take that money and pay accounts and whatever. When you get to another employer you start afresh," he said.
 
On the issue of the current 18 percent tax on pension benefits, reduced from 25 percent in 2001, Mr Tshidi said most people had questioned government for taxing people trying to save.
 
He said when the regulatory framework had been developed into a Bill, the issue of tax would also be dealt with to streamline it with issues of pension funds governance, access and coverage.
 
There is currently a committee that is dealing with the issue of tax in relation to pension benefits. - BuaNews