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Lindiwe Zulu, Minister of Social Development, has published the Green Paper on Comprehensive Social Security and Retirement Reform (2021) for public comment.
The Green Paper on comprehensive social security and retirement reform addresses several key gaps and proposals. Published on Wednesday, 18 August 2021, according to the Department of Social Development, one of the most notable proposals is mandatory contributions to a government-managed fund that will provide retirement, disability, and unemployment benefits.
The Department explains in the Green Paper, “The most notable gap in our social security system is the absence of a mandatory contributory public social security fund that provides retirement, disability and survivor benefits to the workforce.”
It admits that although private occupational and voluntary schemes partially fill this gap, some 6.2 million formal sector workers – primarily low-income earners, informal workers and informal sector workers are excluded from such arrangements.
Therefore, the Green Paper notes that several countries have mandatory schemes providing retirement savings for their citizens. “Although some occupational schemes are mandatory as conditions of employment, South Africa does not have a mandatory public social security fund that is based on social security principles of risk pooling and social solidarity.”
Therefore, if approved, the key reform proposal will offer a National Social Security Fund (NSSF), a centrally managed public fund to provide retirement, survivor, disability benefits, and unemployment benefits.
Thus, to keep the fund alive, all employers and employees in the country will be obliged to initially contribute between 8% and 12% of their earnings. This scale is based on the Unemployment Insurance Fund (UIF) ceiling, currently at R276 0004 per annum. E.g. If you make R276 000 a year, you will pay 12% of that R276 000 a year – around R33 120 to the fund.
It is further noted that Government should subsidise the contributions of low-income workers to minimise disruptions to the demand or supply of labour associated with the introduction of mandatory contributions.
It is proposed that employees earning below an income threshold (R22 320 per year) should not be obliged to contribute to the NSSF for retirement or risk benefits but will continue to contribute to the UIF.
A simplified contribution arrangement for self-employed individuals and informal workers will also be established. In light thereof, the Department notes, “The NSSF will provide income protection benefits for all workers and their families. However, those earning above the tax threshold will need to contribute to supplementary retirement savings and insurance arrangements to ensure an adequate replacement income.”
Another proposal in the Green Paper includes that the Means Test for Social Grants will be phased out. According to the Department, it is proposed that the means tests for social grants be phased out through the alignment of social assistance with the structure of personal income tax rebates. Further stating, the safety net should be expanded to include working-age individuals.
“The objective is that all dependent children, the disabled and the elderly and those of working age, should be eligible for income support, regardless of their income or assets. This basic income will form part of a comprehensive social protection floor and is the basis of the Pillar 1 reforms. The additional expense to the fiscus could be phased in over time through changes to the structure and value of tax rebates, subsidies and the possible introduction of additional tax.”
Be sure to read the full Green Paper here: CLICK HERE
With numerous proposals being brought forward, interested persons and organisations are invited to submit any substantive comments or representation by no later than 10 December 2021. Written submissions can be forwarded to the following address:
The Director-General: Department of Social Development, 134 Pretorius Street, HSRC Building, Pretoria; Private Bag X901, Pretoria 0001.
For attention: Mr John Tebeila, Acting Director: Retirement Reform
Tel: 012 741 6820
What are your thoughts on the proposals? Do you feel South Africa can do this? Or do you feel this is the final straw in pushing people out of SA?
Share your views in the comment section below.