Johannesburg - Every year, companies are contributing less to their employees' pension funds.
Results from Sanlam's annual survey of principal officers and trustees showed that employers' contributions to their workers' pension funds fell from 10.6% to 9.5% over the past six years.
The 2008 survey interviewed administrators from 200 retirement funds.
Dawie de Villiers, chief executive of the structured solutions division at Sanlam, said the decline in pension contributions was mainly due to a lack of industry legislation that compelled companies to pay a minimum amount towards their employees' pension funds.
"The other reason is that companies want to generate more profits for themselves by reducing the pension fund contributions," De Villiers said.
If the trend continued, many people faced the risk of retiring broke.
"This would also put more burden on the state to provide pensioners with retirement money.
"Hopefully when the National Social Security System (NSSS) comes into effect it will introduce a clause that sets a minimum amount of money employers and employees should pay towards their pension funds," said De Villiers.
Strong savings culture needed
The NSSS is government's proposed social security reform project to create a pension fund body that would cover workers in all income brackets of the private and public sectors.
Mxolisi Mbekwa, the managing director of Selekane Asset Consulting, disagreed with Sanlam's findings that employers' had reduced their contributions to retirement funds.
"I don't think that is accurate. Most of the pension funds have converted to defined contribution funds. This means employers and employees are making fixed contributions, which makes it impossible for the funds to decrease," he said.
But Sanlam's findings might explain why most of the pensioners who took part in a survey conducted by another long-term insurance company grumbled about their retirement funds.
Old Mutual's survey noted that 69% of pensioners said the money they had saved for retirement was not enough.
Elias Masilela, Sanlam's chief strategist for financial sector developments, said a strong culture of saving needed to be developed and sustained.
He said the NSSS might lessen the negative trend by compelling earners to save for their retirement.
Masilela added that there were mixed reactions about the government's proposed savings initiative.
About 61% of the 200 participants in the Sanlam survey said they felt the NSSS would never be implemented. However, 9% of participants said they believed the government pension fund would be rolled out in 2010.
Rubbed up the wrong way
Masilela said if the system was implemented in 2010 it would be rolled out gradually.
"If the NSSS proposals are passed, 42% of participants indicated that they expect more communication and information from employer funds before the scheme is implemented," he said.
Old Mutual's Gobalsamy Seelan said the uncertainty would be reduced if government and industry players supplied ongoing clarity on how the planned retirement fund was going to work.
Masilela said the system would rub employees up the wrong way if it favoured the poor over the rich or vice-versa.
Some of the fund administrators said the NSSS might give employees a wider range of retirement funds and better benefits.
However, the administrators raised concerns over the government's ability to manage such a fund. Others said it could potentially become a burden to taxpayers and could also lead to the demise of employer funds.
About 49% of the administrators interviewed in the survey said the NSSS should give members the option of choosing when they would want to stop using the government pension fund.
Roughly 35% of administrators said NSSS should be compulsory for everyone earning an income below a certain threshold.
- City Press