Pensioners wait to get their monthly state pension payout on the parking lot at the Jabulani shopping mall.
The South African pension system needs reform and cannot stand against some of the world’s leading programmes, according to a global study on how nations are preparing their aging populations for retirement.
Iceland took the top spot in the Mercer CFA Institute Global Pension Index, receiving praise for being well governed and providing strong benefits for retirees, including a generous state pension. The second and third spots went to the Netherlands and Denmark, respectively.
In the survey of 43 nations, South Africa ranked 31st and Thailand was ranked last.
South Africa received a C-grade, indicating that its pension system has some good features but also risks and shortcomings that should be addressed.
The index’s insights provide South Africa with objectives that will help improve the pension system, the key area being increasing coverage of employees and self-employed people or entrepreneurs on private pensions, said Jennifer Henry, president of CFA Society South Africa.
David Knox, a senior partner at Mercer and lead author of the study, said governments the world over had responded to the Covid-19 pandemic “with significant levels of economic stimulus, which has added to government debt, reducing the future opportunity for governments to support their aged population”.
The department of social development recently published a green paper on comprehensive social security and retirement reform but this was subsequently withdrawn.
The paper had proposed that all South African earners pay up to 12% of their income into a government-managed investment fund. The proposed National Social Security Fund would have provided for retirement, disability benefits and unemployment benefits to all South Africans.
“Despite the challenges, now is not the time to put the brakes on pension reform — in fact, it’s time to accelerate it. Individuals are having to take more and more responsibility for their own retirement income, and they need strong regulation and governance to be supported and protected,” Knox said.
The index showed there were gender disparities in pensions. “The causes of the gender pension gap are mixed and varied. Every country and region has employment-related, pension design and sociocultural issues contributing to women being far more disadvantaged than men when it comes to retirement income,” Knox said.
Henry said gender differences in pensions were a strong reminder that unequal pay and limited job opportunities for women had ramifications over many years.
According to Statistics South Africa’s Quarterly Labour Force Survey (QLFS) for the second quarter, which showed the official unemployment rate at a record 34.4%, the job market is skewed in favour of men. The official unemployment rate for women was 36.8% in the second quarter, compared with 32.4% for men.
“We know that closing the gender pension gap is an enormous challenge given the close link of the pension to employment and income patterns. But, with poverty among the aged being more common for women, we can’t afford to sit idle,” said Knox.
He said measures pension companies could take included removing eligibility restrictions for individuals to join employment-related pension arrangements and introducing credits for those caring for the young and old.
“Carers provide a valuable service to the community and shouldn’t be penalized in their retirement years for taking time out of the formal workforce,” Knox added.
Anathi Madubela is an Adamela Trust business reporter at the Mail & Guardian.