Pension funds battle to recover

Pension funds battle to recover

2010-09-20 17:37

Johannesburg – Pension fund assets are struggling to return to pre-crisis levels, head of policy analysis at Sanlam and national planning commission member Elias Masilela said Monday.
Masilela addressed the Institute of Retirement Funds' annual conference in Johannesburg.

Pension funds were among assets that took a knock during the financial and economic crisis of 2008/9. Retirement indices also show that most people do not believe that they are going to retire comfortably.

"Pension fund assets struggle to recover. We've only made up 1.5 trillion of the 3.5 trillion lost in 2008," he said.

Prospects were looking positive in Organisation for Economic Cooperation and Development (OECD) countries such as China and the US, Masilela said, due to the flexibility of their financial and labour markets among other factors.

"Labour market flexibility is taboo in South Africa. We need to reverse our perception towards that concept. There's no way you can hope to have a sustainable economy if your labour market is not flexible," Masilela said.

The government is looking to implement changes to the regulatory framework in the retirement fund industry.

These include stricter governance requirements, proactive supervision, mandatory retirement savings and improved unemployment insurance. Currently, there are voluntary contributions to a pension fund or employer-mandated retirement schemes.

A consolidated government document has been completed and will be tabled before cabinet soon.

Masilela told the conference that inflation, which has the ability to erode pension fund benefits, should also be taken into consideration.

"In South Africa we generally have high levels of inflation - yet we still have people saying don't worry about inflation targeting, worry about something else," he said.

On a more positive note, Masilela said that the possibility of another crisis in the near future was low.

"For us to see a sustained turnaround into the future, the generation of incomes and employment creation needs to happen. Long-term planning and decisiveness are important," he said.

  • Rick - 2010-09-20 20:00

    The fund and asset managers were asleep when the crash was predicted and finally arrived as most asset managers were and did not act fast enough. If they read the reports from some world economist the crash was predicted as far back as 2003 as a result of the global banking scams.

  • Jualette - 2010-09-21 09:27

    @Rick.The tragic part is that they are still sleeping. Have a look and tell me one that has come up with an inovative or basically a different product.They just follow one another. If the market collapsed at the 32,000 level dropping to the 18,000 level. Now at the 28,000 level and they have only recovered 43% of the fall, they cannot be very sharp. If I could take my pension and invest myself, without all the red tape I would have recovered the loss by now! No now the government wants to introduce further red tape so that we can lose more with these idiots.

  • Sheppy - 2010-09-21 10:19

    @Rick - and if they had listened to some world economist in 2003 and pulled all of your money out of the market they would have lost you the 33% p.a. return you probably enjoyed for five years!

  • BB - 2010-09-21 12:55

    @Rick & Jualette. Strange how, when everthing is going well, the client is the clever investor but when things turn a bit pearshaped it's always the broker's and/or the fund and asset managers fault. Just a thought - Use it/don't use it!!

  • investor - 2010-09-21 18:33

    @ BB when investors pay fund managers to look after their money they have every right to expect the fund managers to be proactive in preventing losses. They failed to do so and by reasonable definition they are not equal to their job and the fees they are paid. I am a very run of the mill private investor but I dumped equities in Dec 2007 and avoided big losses as a result. If I could do it then surely the fund managers could do so as well. Most of them are simply desk warmers

  • Jualette - 2010-09-22 10:42

    @BB.You miss thecritical point and that is that the investing public has no choice but to use these "specialists" in view of the law and red tape relative to pension funds. As a result you expect better from them! As mentioned I could have without much effort recovered the losses within the last eighteen months and that is not with speculative investments.My personal portfolio verifies this however i am still well down on my pension investment and that is even with it spread between Investec/alan gray and Old Mutual. You must be one of them!.

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