South Africa has embarked on pension reforms to support investment and economic growth, Finance Deputy Minister Mcebisi Jonas said on Monday.
“South Africa has embarked on pension reforms to boost the national savings rate to support investment and economic growth. We have a worrying low savings rate when compared to other developing and emerging market economies,” said the Deputy Minister.
Speaking at the 5th Annual Audit Committee Conference on Monday, the Deputy Minister said the country had experienced a decline in the national savings rate over the past decades.
Gross savings declined from a peak of 33.6% of Gross Domestic Product
(GDP) in 1980 to 18. 9% in 1990 declining further to a level 14.9% in 2014.
With pension fund reforms being a topical issue in most countries including South Africa, the Deputy Minister said a review of the country’s financial sector regulatory system included the reform of the pension funds industry.
The key drivers behind the reforms include fiscal pressure, an ageing population, market imperfections, a lack of consumer protection and low levels of financial literacy and low savings, among others.
The Deputy Minister said that when smartly invested, pension funds provide a mechanism for unlocking savings, stimulating economic growth and ensuring that pensioners are provided for in retirement.
Another key reason for pension reform is to ensure that individuals have adequate retirement provision and do not default to the state after having had an opportunity to work.
When coming to the governance of pension funds, the country relies on the system of trustees to manage and govern retirement funds.
“South Africa relies on the system of trustees to manage and govern retirement funds, with assets worth over R3 trillion as at 2013, according to the Financial Services Board.
“It is imperative that retirement funds be governed and run by sufficiently trained and skilled trustees who are able to properly manage conflicts of interests and take decisions which benefit the members of the funds,” explained Deputy Minister Jonas.
The Deputy Minister said that government recognised that trustee education was a key aspect in the governance of pension funds.
He added that not only do the trustees have an almost unlimited fiduciary responsibility placed on them by law, but they also have a moral obligation to act in the best interest of fund members. - SAnews.gov.za