MTBPS commentary snippets from Momentum

Annuitisation from March 2021

Speech:

“In the area of social protection, we are happy to announce a historic agreement with all NEDLAC constituencies for the annuitisation of provident funds beginning in March 2021, which will enable all workers to continue to enjoy tax deductions on their contributions. We thank the labour constituency for identifying appropriate annuity products for low income workers.”

Commentary from Rowan Burger:

The P Day and T Day proposals to try to streamline pension and provident funds finally have effect. Given the generous concession given, the purchase of annuities only applies to future contributions and persons younger than 55 now, meaning the benefit of this proposal will take a long time to be seen in our annuity sales. We had asked for a communication plan to alert pension fund members to this change but there is no mention of this.

Social Protection for Informal Workers

Speech:

The NEDLAC constituencies also agree to accelerate the introduction of auto enrolment for all employed workers, and the establishment of a fund to cater for workers currently excluded from pension coverage, as an urgent intervention towards a comprehensive social security system.

Commentary from Rowan Burger:

Treasury have for a number of years believed auto enrolment would improve coverage. We have highlighted that the coverage gap is primarily informal and atypical workers. This fund is seen by those in Department of Social Development as a pre cursor to the National Social Security Fund. From a Business perspective we recognise we simply cannot provide a low cost solution in this space but need the boundaries to protect the existing system.

Introducing Partial Compulsory Preservation

Speech:

Government will present legislation next year to allow for limited pre-retirement withdrawals under certain circumstances linked to mandatory preservation requirements.

Commentary from Rowan Burger:

The request by Labour for immediate access to retirement savings over the initial COVID period highlighted a rigid system that could not easily allow for this. It did however present an opportunity for a future system that allows access but then also compels preservation. From the positivity in the statement it seems to have received broad support from labour.

What was missing?

Commentary from Rowan Burger:

I could not find a reference to prescribed assets. We would have appreciated the Finance Minister being more deliberate on prescribed assets as it has created reluctance amongst investors to invest in retirement vehicles.

ENDS