New government plans want South Africans to pay 12% of their income to state-controlled funds

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  • The Ministry of Social Development has published a new green paper on comprehensive reform of social security and pensions.
  • This treaty proposes a new fund managed by the government.
  • All South African employees must contribute part of their income to the endowment.

South Africans could be required to donate up to 12% of their income to a new government support fund, according to a new proposal from the Department of Social Development.

On Wednesday, the ministry published a green paper on comprehensive reform of social security and pensions. He proposes the creation of a new National Council of Social Security Funds (NSSF). It is a public fund that provides retirement, disability and unemployment benefits.

All employers and employees are initially required to donate up to 12% of their income. This is up to a certain limit currently proposed for annual income R276000. This means that if you make more than R276,000 per year, you will pay the fund up to 12% of R276,000 per year (around R33,100, or R2 760 per month).

The first 10% of this contribution goes to the compulsory pension fund and not to the private pension fund. The next 2% goes to unemployment insurance.

High-income workers should also contribute to private pension funds.

The newspaper suggested that the government should subsidize the contributions of low-income workers. People with annual income less than R22320 do not need to donate, but government sponsored retirement products are designed for them.

“A simplified contribution agreement for self-employed and non-regular workers will also be established,” said the newspaper.

The Green Paper expects higher-paid workers to “leave the contributions” between the NSSF and private sector funding.

NSSF pensions are based on career income and contribution period. The fund also pays disability and survivor allowances, as well as a fixed amount of funeral allowances, and provides income protection allowances to all workers and their families.

“But those who earn above the tax cut-off must contribute to additional retirement savings and insurance plans to ensure adequate alternative income.”

This treaty proposes self-registration to encourage workers to contribute to supplementary pension and insurance schemes.

Other suggestions for the green paper are:

Basic income subsidy for the working-age population

The Green Paper suggests that basic income allowances should start at a level that “at least saves people out of poverty”.

We also support universal, non-means-tested grants.

“Administratively, SARS is much easier [SA Revenue Service] Technically adjust tax rates more than Sassa to recover subsidies paid to high net worth individuals [SA Social Security Agency] Interview millions of applicants to determine if they are eligible based on their income. Therefore, universal grants are potentially more efficient and cost effective, and by being more targeted, there are fewer exclusions, ”the newspaper said.

“The main advantage of universal interests is to promote social solidarity and support for the system. It is also much easier to manage and has fewer exclusion issues. The stigmatization of the poor and themselves. You can reduce the dissatisfaction of rich people who think they are rich. Those who fund the system. “

The country’s tax system is “considerably more advanced” than that of Sassa, saying: “Therefore, relying on the ability of tax authorities to test income could be much more efficient than the Social Security Administration. Very sexual. “

“It will also be much easier for governments to increase offshoring to the same population and market tax increases for the working age population, so it will be much easier to implement reforms that require significant tax adjustments. . “

Regulatory reforms in the pension and life insurance sector

High-income workers are encouraged by the NSSF as well as tax incentives to contribute to pension and insurance schemes.

However, the new treaty proposes a new framework for the approval of funds eligible for these tax incentives. One of the proposed eligibility criteria is to meet certain profitability criteria, in particular the ceiling prices.

“These funds must meet strict standards of treatment, prudence, governance, fiduciary duty, transparency and cost control. “

“Proposals for an individual annuity fund framework include portability without early termination penalties, increased standardization and product disclosure, higher pricing and increased investment controls, including restrictions on choice of individual investment. “

This paper criticized the costs associated with certain pension products, negligent investments, poor governance and mismanagement. All of this reduces the value of a worker’s lifetime savings.

Extend the benefits of UIF

Currently, the Unemployment Insurance Fund offers unemployment benefits for up to eight months with exchange rates of 38% to 60%, depending on the worker’s salary. Credits are accrued for every 6 workers on a daily basis.

This treaty proposes that credits be accumulated every four working days on a daily basis and that the long-term unemployed receive continuous benefits.

This means that workers who have exhausted all of their UIF benefits will be paid a lower rate so they don’t have to withdraw their retirement savings.

Traffic accident compensation system

The proposed scheme replaces the current Traffic Accident Fund and provides income replacement benefits on a basis similar to the Compensation Fund, which depends on the income capacity of the injured worker. It has not yet been decided which assessment tool to use.

Resource testing has been phased out

It has been proposed to phase out the means test for social allowances by aligning social assistance with the structure of personal tax deductions.

The aim is to provide benefits to all dependent children, people with disabilities and the elderly, regardless of their income or wealth. For families whose income exceeds the tax threshold, a tax refund will replace their eligibility for public assistance.

The ministry said it would take several years to implement the Green Paper’s recommendations and a phased implementation approach has been proposed.

Interested parties and organizations are invited to submit their comments on the treaty by December 10.

New government plans want South Africans to pay 12% of their income to state-controlled funds

New government plans want South Africans to pay 12% of their income to state-controlled funds


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