Cape Town - The DA has asked the National Treasury to reject an
ANC policy proposal that a portion of pension funds be prescribed for
investment in developmental projects.
"Finance institutions should invest pension funds based
on the prospective return for pensioners and should not be forced by
government to invest in speculative projects," Democratic Alliance
spokesperson David Ross said on Wednesday.
This proposal could be seen as a tax on pension funds, he said.
"I have written to both the Minister of Finance Pravin
Gordhan, and Mr Arthur Moloto of the Government Employees Pension Fund,
to raise our concerns with regards to the proposals of prescribed
investments for pension funds."
According to the ANC discussion paper on state-owned
entities and development finance institutions, the state should
"regulate a substantial part of retirement and life assurance funds to
be invested in state-owned enterprise and/or development financial
instruments".
The idea was that retirement fund resources be
channelled into an institution such as the Industrial Development
Corporation, which could provide "concessionary finance", or cheap
money, to state-owned and private entities.
Should this proposal be implemented, it could reduce
benefits for pension fund members. Investments at market-competitive
rates did not require prescription, Ross said.
The purpose of retirement funds was only to help savers achieve comfortable retirements.
By doing this they channelled funds into projects that
tended to have the most sustainable long-term growth prospects, thereby
benefiting the entire economy.
"No prescription by government can possibly achieve a better outcome for pensioners or the economy," Ross said.
The savings industry had strong reasons for opposing
the prescribed asset approach. These included that prescribed assets
could undermine the value of members' and policy holders' savings.
The policy interfered with the market by creating
artificial distortions and negative perceptions. It also had a "crowding
out" effect, where healthy competition was undermined through
preferential regulatory treatment for state funds.
"In other words, the opportunity costs of such a move simply outweigh any potential benefits," Ross said.
"Instead, government needs to create the conditions to
allow real market opportunities for equity investment, which are free
from the interventionist hand of the state."