- The Ministry of Social Development has published a new Green Paper on comprehensive reform of social security and retirement.
- This paper proposes a new government-administered fund.
- All South African earners have to pay part of their income to the foundation.
According to a new proposal from the Department of Social Development, South Africans may have to donate up to 12% of their income to a new state support fund.
On Wednesday the ministry published a green paper on comprehensive social security and pension reform. He proposes the creation of a new National Council for the Social Insurance Fund (NSSF). This is a government fund that provides retirement, disability and unemployment benefits.
All employers and employees are initially obliged to donate up to 12% of their income. This is up to a certain limit that is currently proposed for the annual income of R276000. This means that if you earn more than R 276,000 per year, you will pay the fund up to 12% of R 276,000 per year (around R 33,100 or R 2,760 per month).
The first 10% of this contribution goes to the compulsory pension fund, not to private old-age provision. The next 2% go to unemployment insurance.
High-income workers are also expected to contribute to private pension funds.
The newspaper suggested that the government should subsidize the contributions of low-income workers. People with an annual income of less than R22320 do not need to donate, but government-sponsored pension products are intended for them.
“In addition, a simplified contribution contract for self-employed and non-permanent employees will be set up,” says the newspaper.
The Green Paper expects higher paid workers to split the contributions between the NSSF and private sector funding.
NSSF pensions are based on professional income and contribution time. The Fund also pays disability and survivors’ allowances, a fixed amount of funeral allowances, and income protection allowances to all workers and their families.
“But those who earn above the tax line must contribute to additional retirement plans and insurance to ensure an adequate alternative income.”
This paper suggests automatic enrollment to encourage workers to contribute to additional pension and insurance schemes.
Other suggestions for the Green Paper are:
Basic income subsidy for the working-age population
The Green Paper suggests that basic income should start at a level that “at least saves the individual from poverty”.
We also support universal grants that are not means tested.
“Administratively, SARS is much easier [SA Revenue Service] The tax rates technically adjust more than Sassa to recoup the subsidies paid to wealthy individuals [SA Social Security Agency] Interview millions of applicants to see if they are eligible by their income. As a result, universal grants are potentially more efficient, less expensive, and the more targeted targeting means there are fewer exclusions, ”the newspaper said.
“The main use of universal interests is to promote social solidarity and support for the system. It’s also a lot easier to manage and has fewer lockout challenges. The stigma of the poor and yourself. You can reduce the dissatisfaction of wealthy people who feel that they are. Those who fund the system. “
The country’s tax system is “significantly more advanced” than Sassa, who says, “Therefore, relying on the tax authorities’ ability to audit incomes could be much more effective than the social security administration. Very sexual. “
“It will also be much easier for governments to increase resettlements and market tax increases for the working age population, so it will be much easier to implement reforms that require significant tax adjustments. . “
Regulatory reforms in the pension and life insurance industries
High-income workers are encouraged to contribute to pensions and insurance plans through the NSSF as well as tax incentives.
However, the new paper proposes a new framework for approving funds eligible for these tax incentives. One of the proposed eligibility criteria is to meet certain cost-effectiveness criteria, including price caps.
“Such funds must meet strict standard of treatment, prudence, governance, fiduciary duty, transparency and cost control.”
“Proposals for an individual retirement fund framework include portability with no prepayment penalties, increased product standardization and disclosure, higher tariffs and increased investment controls, including restrictions on individual investment decisions.”
This paper criticized the costs associated with certain retirement products, careless investments, poor corporate governance and management. All of this diminishes the value of a worker’s lifelong savings.
Expanding the benefits of UIF
Currently, the Unemployment Insurance Fund offers unemployment benefits for up to eight months at exchange rates of 38 to 60%, depending on the employee’s salary. On a daily basis, credits are issued for every 6 workers.
This treatise suggests that credits be accrued every four working days and that the long-term unemployed receive continuous benefits.
This means that employees who have exhausted all of their UIF benefits will be paid at a lower rate so that they do not have to deduct their retirement savings.
Traffic accident benefit system
The proposed system replaces the current road accident fund and provides income replacement benefits on a similar basis as the compensation fund, which depends on the income ability of the injured worker. It has not yet been decided which assessment tool should be used.
Means test has expired
It has been proposed to phase out the means test for social allowances by aligning social allowance with the structure of income tax deductions.
The aim is to provide grants to all dependent children, people with disabilities and the elderly, regardless of income or wealth. For families whose income exceeds the tax limit, a tax refund replaces the right to state support.
The ministry said it would take several years to implement the recommendations of the Green Paper and a gradual implementation approach would be proposed.
Interested parties and organizations are invited to comment on the paper by December 10th.
New government plans want South Africans to pay 12% of their income to state-controlled funds
Source link New government plans want South Africans to pay 12% of their income to state-controlled funds