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By unknown | Feb 12, 2008 | COMMENTS [ 0 ]

Isaac Moledi

Isaac Moledi

The government's aim to introduce a mandatory comprehensive social security system by 2010 will go a long way to assisting employees whose companies are not contributing to a pension or provident fund , experts say.

South Africa does not have laws that compel local companies to contribute to pension or provident funds on behalf of their workers.

The government's mandatory savings and compulsory preservation of savings is seen as a bold move to assist those employees who retire from their jobs without a pension.

The earning-related social security scheme, to provide unemployment insurance, disability, death benefits and retirement savings, was highlighted by President Thabo Mbeki in last year's state of the nation address.

Finance Minister Trevor Manuel supported this view in his Budget speech, although details of the exact social security measures are still sketchy.

The government believes not enough is being saved towards pensions and other forms of retirement and disability savings and it wants the social security tax to fund these needs.

The state regards as a costly exercise the more than R62billion a year it incurs on funding the country's social security.

The state believes this money can be better spent elsewhere, particularly since there are so many areas in need of urgent economic intervention, such as poverty relief, the creation of basic infrastructure, job creation and housing.

The government is also concerned that though the country has a well-established retirement industry, it does not adequately meet everyone's needs.

By combining savings for retirement with unemployment insurance and protection of dependants, the government believes that a social security system can provide affordable basic benefits for everyone.

Manuel told Parliament last year that the system would be financed by a social security tax administered by the South African Revenue Service and collected in the name of every contributor.

To offset the cost of social security tax for low-income earners and to lower the cost creating employment, a wage subsidy for those whose earnings fall below the income tax threshold would be introduced.

He said the principles underpinning these reforms included equity, pooling of risk, mandatory participation, administrative efficiency and solidarity.

Manuel said the proposed social security funding model had broad objectives:

l To lower the costs of job creation and raise net labour earnings of the working poor.

l To extend basic social security benefits to a larger number of workers and their families on an affordable and partially self-funding basis.

l To give practical expression to social solidarity.

"The government should be commended for this," said Sanlam's spokesman for employee benefits, Deon Booysen.


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