Tips for Tito: State of retirement savings needs to be re-evaluated by legislators
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DURBAN – We have a new Finance Minister and hopefully new energy in government.
It is time for the Legislators to reassess the state of retirement savings in South Africa and chart their own course. The focus on cost saving needs to shift to financial inclusion and quality of outcome.
Ours is a voluntary tax incentivised savings system. Employers have a choice to enrol their employees in the system and with greater member choice, employees decide their level of savings. A measure of the success of the system would also be the extent to which the working population is covered and whether the benefits delivered are adequate.
From the 2018 National Treasury tax statistics we can observe that there are only 4.7 million in the system of some estimated 16.5 million workers. We also see that contribution levels average 11 percent of taxable remuneration dropping down to only 2 percent for the top earnings category. This clearly indicates the current system misses its mark in terms of coverage and delivery of outcomes. (It is broadly accepted a 15 percent of salary retirement savings level appropriately invested for 40 years will deliver an adequate retirement income).
Instead of further focus on incremental cost efficiencies that could be achieved by funds, it is time to take a broader view of how to solve our problems:
Source: iol.co.za