ROGER JARDINE — Pensions are sacred — accountability for them should be too
By Google News Personal Finance ·
South Africa has more than R51bn in unclaimed retirement benefits associated with more than 4.3-million members and beneficiaries. That is an extraordinary amount of money to be separated from the people to whom it belongs.
But the deeper problem is what it tells us about our retirement system: we have built sophisticated institutions to manage savings without ensuring that enough South Africans enjoy the financial security those savings are meant to provide, or that retirement capital fulfils its potential to support investment and economic growth.
Finance minister Enoch Godongwana’s medium-term budget speech has brought one part of that failure into focus. The Treasury reports broad support for aspects of its proposed reforms aimed at improving beneficiary tracing and reuniting people with unclaimed assets. Further technical work will inform a phased approach, with draft legislative amendments planned for 2027.
These are necessary steps, but improving the tracing of beneficiaries will not, on its own, answer the larger question: who is accountable for ensuring that our retirement system delivers both financial security for individuals and long-term economic benefits for the country?
I grew up in Riverlea, a working-class community west of Johannesburg. When I return, I see people who worked, raised families and contributed to this country yet face old age without the financial independence their labour ought to have earned them. Their experience is a reminder that retirement policy cannot be judged by the size or sophistication of the industry alone. It must be judged by what happens to people.
For me, the principle is simple: pensions are sacred. A pension is deferred income, earned month after month over a lifetime and entrusted to others so that dignity and security might endure when work ends. Accepting this principle creates binding obligations.
Employers must pay over contributions deducted from wages. Trustees and regulators must demand good governance. Asset managers must pursue appropriate risk-adjusted returns rather than allow somebody else’s lifetime of savings to earn unnecessarily low returns through complacency. Policymakers must create the conditions in which those savings can be protected and grow.
Yet, stewardship cannot begin only after money reaches a retirement fund. It must also confront who gets the opportunity to save in the first place. Research presented at Old Mutual’s Thought Leaders Forum estimates that 9.4-million formally employed South Africans remain outside the retirement system.
Two workers with similar earnings can reach old age with vastly different prospects because one employer provides retirement benefits and another does not; a seemingly higher wage today may conceal the absence of security tomorrow.
The people most exposed are often those with the least bargaining power: low-wage, piece-work and so-called low-status employees. It is easy to urge people to save, but far harder to do so when putting food on the table is an immediate struggle. Precisely because individual circumstances are so unequal, leaving retirement provision entirely to chance entrenches and perpetuates inequality.
But coverage is only the first test. Contributions must be made consistently, savings preserved where possible and investments managed with care. We must also revisit assumptions about working lives. For those willing and able to work longer, five additional years can mean more contributions, more time…
Originally published by Google News Personal Finance
