The government wants to introduce a mandatory pension and insurance system that will see employers and employees paying up to 12% of their earnings into a state-run national social security fund (NSSF).
Social development minister Lindiwe Zulu on Wednesday published a green paper on a comprehensive social security and retirement reform that aims to improve access, coverage, administrative efficiency, delivery and transparency of a social security system.
“Several countries have mandatory schemes that provide retirement savings for their citizens. Although some occupational schemes are mandatory as conditions of employment, SA does not have a mandatory public social security fund that is based on social security principles of risk pooling and social solidarity,” according to the green paper.
The NSSF will provide income protection benefits for all workers and their families. “However, those earning above the tax threshold will need to contribute to supplementary retirement savings and insurance arrangements to ensure an adequate replacement income.”
It proposes that South Africans contribute up to 12% of their earnings to the state-managed fund that will provide retirement, disability and unemployment benefits.
The paper highlights that though private occupational and voluntary schemes partially fill the gap of a social-security fund, about 6.2-million formal sector workers — primarily low-income earners, informal workers and informal sector workers — are excluded from such arrangements.
The proposal emanated from a 2002 inquiry into a comprehensive social security system. It found that the most notable gap in SA’s social security system is the absence of a mandatory contributory public social security fund that provides retirement, disability and survivor benefits to the workforce.
“All employers and employees will be obliged to initially contribute between 8% and 12% of qualifying earnings up to a ceiling, based on the Unemployment Insurance fund (UIF) ceiling, which is currently at R276,000 per annum.”
The green papers says the government should subsidise the contributions of low-income workers to minimise disruptions to the demand or supply of labour associated with the introduction of mandatory contributions.
“It is proposed that employees earning below an income threshold (R22,320 per year) should not be obliged to contribute to the NSSF for retirement or risk benefits but will continue to contribute to the UIF.”
A simplified contribution arrangement for self-employed individuals and informal workers will also be established, it said.
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