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Comprehensive Social Security in South Africa

A year ago, unions called for T-Day legislation to be scrapped or postponed. As a result the  measures  requiring  compulsory  annuitisation  for  provident  fund  members  was  postponed  to 1 March 2018 to give parties more time to consult. The consultation process has been slow and we understand that little progress has been made to date. One of the demands made by unions is that T-Day measures can only be considered in the context of holistic social security reform.

On 18 November 2016 the long-awaited discussion paper was released for comment. On closer scrutiny it appears that the report circulated dated back to March 2012. Commentators report that a subsequent paper produced in 2015, which contained more of a National Treasury influence, did not find favour. The fact that Government has taken so long to agree on the paper is indicative of the tensions and disagreement on the appropriate way forward.

What is the National Social Security Fund (NSSF)?

The central reform proposal is the introduction of a National Social Security Fund (NSSF), a centrally managed public fund to provide pensions, death and disability benefits and unemployment benefits. All employers and employees will be obliged to contribute at a combined rate of 12%, inclusive of a 2% UIF contribution, of qualifying earnings up to a ceiling that will be aligned with the UIF earnings threshold. This threshold was increased to R178 464 in 2015.

Impact on retirement funds

This will require that the first 12% of all workers’ retirement contributions on earnings up to the NSSF ceiling [R178 464] will go to the NSSF rather than to their present retirement funds. As a result, all these retirement funds will suffer a significant loss of business. In addition, they will henceforth be competing for supplementary savings over and above workers’ contributions to the NSSF. Bargaining council funds, with an average contribution rate of 12.9%, will be more affected than private-sector funds, whose average contribution rate is 15.8%t and who typically cater for higher-income earners.

This paper is now published for public comment. Government undertakes to engage stakeholders in an intensive consultation process to ensure that the proposals are right for the country as a whole. Consultation between social partners will be facilitated through a task team of the National Economic Development and Labour Council (Nedlac). The Inter-Departmental Task Team on Social Security and Retirement Reform (IDTT) will co-ordinate a series of consultative forums to ensure that the views of retirement fund members, organised labour, business and community groups are all heard.

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