New SA pension fund 'delayed'

Johannesburg - The original target date for the establishment of the National Social Security Fund (NSSF) was 2010, but it looks doubtful if the fund will be created before 2012, with 2015 seen as a more likely timeframe, experts say.

The aim of the NSSF is to force all South Africans to save for retirement, particularly the three tot six million working people who are not contributing to pension funds.

But to get three million people to join a pension fund within a year, means that "one Liberty Life" has to be created each month, says David O'Brien, head of pension fund reform at Old Mutual.

Key players in the establishment of the NSSF are also only in complete agreement about one aspect: membership will be compulsory.

Apart from government representatives, the private sector (including financial institutions and employers with pension funds), labour and the regulatory authorities are involved in negotiations over the NSSF.

All the role players agree over compulsory membership and while it is still a matter of controversy, most also think that savings should be protected when a fund member exit the fund, says Christo Terblance, director of Allan Gray Life.

There is also some degree of consensus that the NSSF will have to provide risk cover, but there is a big debate over how the contributions will be divided between risk cover and retirement provision.

It is also assumed that the tax system won't be changed: contributions to the NSSF will be paid from pre-taxed income and income from the fund will be taxed after retirement.

It is also not yet clear whether the NSSF will be a defined benefit or a defined contribution fund.

There is also conflict about the percentage of their salary workers will have to contribute. Other matters under debate are who will administrate the fund - government or the private sector - and what investment choices fund members will have.

- Rapport