IRFocus - March 2011

Mapping the future of retirement policies

We have a plan….a national growth plan that is! The first quarter of 2011 was abuzz with Government’s plan for growth and development, with job creation being at the heart of its focus. The scenario that has been set for South Africans is largely positive despite the skeptics concerns for overburdening of the tax payer.

Government’s roll out plan will have a significant impact on the financial sector and retirement funds, and will go a long way towards meeting industry objectives. Our sector has been conjoined to work hand in hand in seeing fruition of job creation possibilities. With the focus moving away from prescribing assets for retirement funds, there is now a clear convergence of sectors for broader economic development. Exactly how Government plans to ‘mobilise resources from retirement funds’ still needs much discussion. As we anticipate the mechanics of the plan in relation to the industry there has been discussion of, firstly, a comprehensive social security system; retirement funds investment in government bonds; infrastructural and agricultural investments; ESG (social responsible investments); and a compulsory savings environment, to name a few. Interesting to the debate is the launch of Government retail bonds, which is a campaign to encourage saving.

The RSA retail bond is an investment with the SA Government which will earn fixed interest for a fixed investment term. The benefits include safety, guaranteed returns, no risk, convenience, accessibility, beneficiary nomination and no charges. How trustees balance the purpose of the bond with the return it offers in DC fund arrangements, will remain fundamental when exercising fiduciary duty to invest in developmental bonds. The jury is out on whether this is a move towards prescription. In his Budget speech this year…

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