“The first thing to be aware of on retirement reform is that it has been around for a long time, so we started discussions round about 2003,” Investment Solutions head of institutional business Alan Wood told CNBC Africa.
“Ten years down the line one could take a view and look back and say, ‘has anything actually happened,’ and in a macro view, you could probably say nothing has changed. We are still where we are.”
Wood explained that despite all the plans and reform, the country’s retirement policy has changed only slightly, with only 10 per cent of South Africans retiring comfortably and the rest retiring poor.
“You can’t argue that the state pension scheme is not anything that people can rely on to live. The first thing we need to be aware of is that after 10 years, while you might look back and say ‘nothing has happened’, a lot has actually taken place in the background.”
The country is now in the implementation stage of the retirement reforms, but Wood added that one of the largest impediments to the savings system is the fact that South Africans are allowed to spend their retirement savings when moving from one job to another.
“That’s one of the changes that will come about from about 2015, so people will be forced to preserve some of it. The challenges we have in the country is the fact that the only formal savings that we have in the country is your retirement savings. If you lose your job, it’s often the only amount of money that you have access to,” said Wood.
He added that the small percentage that did not spend their retirement savings often placed the funds in a living annuity, which is not easy for the layman to manage because of its particularly specific structure.
The country’s private sector, in partnership with government, could however assist in making a more efficient retirement savings structure for South Africans.
“At a high level, government and private sector are doing the right things. There’s a fair amount of criticism coming from the private sector towards government, and from government towards the private sector. We’re finding our feet in trying to figure out the way going forward. Internationally, the structures and the sentiment that have been put in place is that the private sector should be used to boost and aid government in solving the retirement crisis.”