Programme director
Chief Executive Officer of the Principal Officers Association, Ms Anne-Marie D'Alton
Honourable Members of the Board of the Principal Officers' Association
Distinguished conference delegates
Ladies and gentlemen
Good afternoon.
Thank you for inviting me to speak to you about what is not only one of the most important public policy facing South Africa today, and one that will be critical to for decades to come, the future of retirement reform.
I also want to thank you for your warm reception. I am very pleased to join this group of distinguished Principal Officers' Association, fund functionaries, pension bodies, industry regulators and union representatives at this very timely conference.
The Principal Officers' Association is an important voice on pensions and your input to the policy and legislative process in this vital area is much appreciated.
Ladies and gentlemen, I am sure you are aware that issues of retirement reform have become a global concern, particularly in the aftermath of the recent economic recession. Around the world, many countries have made or are making changes to their social security and pension systems.
More recently, we have seen mass demonstrations and public dissatisfaction with regard to proposed retirement reforms in countries such as Belgium, Germany and France to name a few. Closer to home, countries such as Uganda and Ghana have also introduced pension systems.
I hope this conference will generate lively and interesting discussions. The discussions of a conference like this one will help contribute to the national dialogue on the future of our proposed social security and retirement reforms.
I therefore welcome the opportunity to share notes on our government's position on this important subject. The topic of my address this afternoon is "Let's talk: Are we making progress with the industry reforms?"
From the outset, let me state that our government believes strongly in involving organisations such as the Principal Officers' Association as it comprises of professionals and captains in the retirement industry.
Our government also believes strongly in involving as many people as feasible so that we can hear all of their ideas and all of their perspectives.
By doing that, we will have the benefit of many high quality minds and ideas, and I believe we will come up with better solutions to the challenges confronting us.
As government, we remain committed to working with you, as we aim to help all South Africans, irrespective of their social status to realise their goals for a better life.
As I indicated earlier, this conference comes at a critically important juncture in the history of the retirement industry in South Africa. As you know, last year the Interdepartmental Task Team on Comprehensive Social Security completed a protracted process of drafting the consolidated government document on comprehensive social security to Cabinet.
Programme director; allow me to give a little bit of information as a way of introduction. In 2006 the Department of Social Development commissioned a number of technical review reports with the view to find alternative policy options.
This resulted in the first discussion document entitled Reform of Retirement Provisions. I must say that the extent to which the retirement industry engaged in the process has been particularly encouraging and I would like to thank all those who took the time to make submissions and those who attended our public seminars.
It is my view and that of our government, the consultation process in which we have been engaged in over the past years has been well worthwhile and has added greatly to our understanding of the issues and the implications of various policy options.
We are well aware that since the discussions on the reform of the retirement provisions were mooted, a few years ago it has caused anxiety and raised many questions in the retirement industry.
Contrary to popular belief, our approach to retirement reform is underpinned by the objective to develop a retirement system which will deliver an adequate retirement income to all our people, which is at the same time affordable in the long term.
As I said, the consultation process was a great success, and while there is a general acceptance that we need to reform the current retirement system in our country, no consensus on the way forward has emerged. I will not go into any great detail at this stage on the views expressed as this can take the whole day.
However, suffice to say that our government has gone for what it considers to be workable suitable proposals. We will, during the course of this year release the consolidated framework which will shape the direction of the retirement system in South Africa for years to come.
As members of the retirement industry, I know that you have a particular interest on government's views on the retirement industry reforms. And so I will talk about that in some detail now.
Our envisaged comprehensive social security system has three pillars: Social Assistance, Social Insurance and Voluntary Savings. We have made commendable progress in the expansion of pillar one of the comprehensive social security system.
Under the first pillar, our Social Assistance programme now covers just over 14 million South Africans, the majority of which is children who receive the child support grant. Other provisions include the old age pension, disability grant, foster care grant, care dependency grant as well as war veterans' grant and social relief of distress. It is the largest government cash transfer programme and the most effective poverty alleviation strategy.
Various evaluative research findings confirmed that the provision of social grants to vulnerable individuals and households not only reduce the occurrence of hunger and extreme poverty, but also facilitates household access to basic services and economic opportunities.
The report: "Review of the child Support grant uses, implementation and obstacles (2008)", found that the child support grant plays an important role in enabling caregivers to access food of sufficient nutritional quality and variety to meet the child's needs. Access to adequate nutrition for young children is very critical as malnutrition may have long term negative consequences on physical and cognitive development for children.
The second pillar of our proposed social security system is Social Insurance. While social assistance aims to alleviate poverty, the goal of social insurance is to prevent poverty. Currently, our country does not have a fully developed second pillar or system of social insurance.
As a result, too many previously employed people fall into poverty as many workers do not insure against unforeseen circumstances. Many employed people are also not covered for unemployment insurance and the system for compensation for work related injuries is fragmented.
Consequently, millions of former employees become dependent on the social assistance system. History and experience have proved that the role of the state is critical in providing the platform for a social insurance system to ensure the pooling of risks and to achieve social solidarity objectives. As government we cannot simply be bystanders. We do not want the repeat of the Fidentia saga.
Imagine devoting your life to a company, paying into a pension plan for more than 30 years only to discover more than a decade after your retirement that the money for your benefits has disappeared. Without significant policy changes, we face the prospect that the majority of the working people who have helped build this country will face the prospect of retiring into poverty and despair.
The problems identified above can only be corrected by getting as many people as possible to save for retirement during their active working years. The key social security reforms relate to setting up a mandatory system of social insurance, especially a retirement system, with disability provisions and benefits for surviving dependents in the event of the death of the breadwinner.
With respect to the second pillar, our aim is to introduce a statutory contributory social security framework which will include a basic retirement benefit element to ensure that, after a lifetime of work, our people can retire and live out their last years in dignity.
Let me now move on to the third pillar of Voluntary Savings. This pillar as the name implies, represents the continuation of additional voluntary, private retirement savings and insurance arrangements for those who can afford it.
The current voluntary savings scheme is mostly limited to public sector workers and private sector. One of the main challenges towards the future is to extend coverage of the voluntary savings to the informal sector.
Ladies and gentlemen, we cannot underestimate the challenges that our government faces and will face as we work through the retirement reform. From the outset, what is obvious is that no single policy option is likely to be sufficient, but a combination of a number of sources is likely to be effective.
Honestly speaking, the existing retirement system and the legislative environment are poorly equipped to address some of the challenges I outlined in my address.
Our government will continue to encourage research and analysis of the South African retirement industry and provisions to increase our understanding and to support informed debate. This is an issue that touches every South African.
While there are many diverging opinions on how to improve the system, the challenge is for us to find areas of common ground and to have open and transparent discussions on this important yet thorny subject.
Through public consultations and forums like this one, I am convinced that together, we can find broadly acceptable solutions that will ensure a better future for all our people.
As I mentioned at the beginning of my address, retirement reforms are happening all over the world and our government cannot refuse to latch onto the wheel of change.
In conclusion I would like to thank the Principal Officers' Association once again for organising this important conference, and for gathering such an excellent field of participants to discuss an issue that is critical to the future prosperity of not only South Africa, but every country in the world.
I thank you.
Issued by: Department of Social Development
31 May 2010
Source: Department of Social Development (http://www.dsd.gov.za/)
