Johannesburg - South Africa should adopt the Australian approach to enforce long-term saving, says Daniel Kriel, CEO of Sanlam Private Investments.
"In Australia they have a debt-to-income ratio of nearly 130% and here we are nearer 80%, but they still have far better savings habits than we do," Kriel, who has just returned from Australia, told Fin24.com.
Australians are forced to save through their "superannuation" savings system, which is a retirement programme. Employers are required by law to pay an amount based on a proportion of an employee's salaries and wages (currently 9%) into a fund.
The product gives investors a great deal of flexibility about where they invest, but is inflexible over how they are able to withdraw this money.
This means they cannot tap into these funds whenever they face a cash flow crunch - unlike the South African scenario, where many people cashed in their retirement savings during the economic downturn.
Sanlam itself has seen employees quit their jobs to access money tied up in savings or pension plans simply to settle debt, Kriel said.
He thinks the rules should be changed to remove the temptation to access stored savings. This could include not being able to tap into your investments until you've saved for a certain number of years - or even not before retirement.
Stewart Rider, chief investment officer at asset management firm Stanlib, agrees that limits should be imposed on cash withdrawals when you move jobs and that you should keep your pension for life, subject to low cash limit constraints.
According to Kriel, trade unions would also back these initiatives as it is in the long-term interest of their members.
The asset management industry has been accused of "talking its book" when it complains that investors are taking money out of structured investment products to settle debt. But many believe that this is a serious problem which is setting the country back.
Genuine need vs consumer spend
"I do agree that a vast proportion of South Africans do not have the discipline to retain their occupational pension or provident fund savings - or they just can't afford not to take the money out because they have no job to go to," said Liberty Life executive Andrew Warren.
He adds that while the life insurance industry - and managers of retirement annuities (RAs) in particular - have been attacked because they are supposedly not consumer-friendly, the lack of liquidity of RAs is, in the long run, good for consumers.
However, he points out that Liberty is sympathetic to the current economic climate.
"Compulsory preservation will be difficult in an environment of very high unemployment and a limited social security net. Without a reasonable unemployment benefit, you cannot expect people to live on nothing while they have assets accumulated in an untouchable retirement savings vehicle," he said.
Rider told Fin24.com he knows that this is one of the issues which has been debated at length by government and the private sector.
"I think that a number of the cash-ins are genuine hardship issues which ones does need to be understanding and sympathetic to, but there are too many who do cash in for consumption spending," said Rider.
- Fin24.com
"In Australia they have a debt-to-income ratio of nearly 130% and here we are nearer 80%, but they still have far better savings habits than we do," Kriel, who has just returned from Australia, told Fin24.com.
Australians are forced to save through their "superannuation" savings system, which is a retirement programme. Employers are required by law to pay an amount based on a proportion of an employee's salaries and wages (currently 9%) into a fund.
The product gives investors a great deal of flexibility about where they invest, but is inflexible over how they are able to withdraw this money.
This means they cannot tap into these funds whenever they face a cash flow crunch - unlike the South African scenario, where many people cashed in their retirement savings during the economic downturn.
Sanlam itself has seen employees quit their jobs to access money tied up in savings or pension plans simply to settle debt, Kriel said.
He thinks the rules should be changed to remove the temptation to access stored savings. This could include not being able to tap into your investments until you've saved for a certain number of years - or even not before retirement.
Stewart Rider, chief investment officer at asset management firm Stanlib, agrees that limits should be imposed on cash withdrawals when you move jobs and that you should keep your pension for life, subject to low cash limit constraints.
According to Kriel, trade unions would also back these initiatives as it is in the long-term interest of their members.
The asset management industry has been accused of "talking its book" when it complains that investors are taking money out of structured investment products to settle debt. But many believe that this is a serious problem which is setting the country back.
Genuine need vs consumer spend
"I do agree that a vast proportion of South Africans do not have the discipline to retain their occupational pension or provident fund savings - or they just can't afford not to take the money out because they have no job to go to," said Liberty Life executive Andrew Warren.
He adds that while the life insurance industry - and managers of retirement annuities (RAs) in particular - have been attacked because they are supposedly not consumer-friendly, the lack of liquidity of RAs is, in the long run, good for consumers.
However, he points out that Liberty is sympathetic to the current economic climate.
"Compulsory preservation will be difficult in an environment of very high unemployment and a limited social security net. Without a reasonable unemployment benefit, you cannot expect people to live on nothing while they have assets accumulated in an untouchable retirement savings vehicle," he said.
Rider told Fin24.com he knows that this is one of the issues which has been debated at length by government and the private sector.
"I think that a number of the cash-ins are genuine hardship issues which ones does need to be understanding and sympathetic to, but there are too many who do cash in for consumption spending," said Rider.
- Fin24.com