The defined benefit portion of government's proposed National Social Security System should be scrapped because running parallel systems adds to the costs, which are crucial.

The defined benefit portion of government's proposed National Social Security System should be scrapped because running parallel systems adds to the costs, which are crucial.

This is the view of South African-born international pension economics expert, Dr David McCarthy, who said last week that: "It only adds bad things."

A new mandatory, earnings-related social security scheme was proposed by Finance Minister Trevor Manuel in February last year, but is still in a critical discussion phase with stakeholders as a number of grey areas exist. The implementation was set for 2010.

The system considers a large portion for defined contribution funding via individual accounts and then defined benefit funding from the productively employed.

McCarthy felt that before pensions and social security could be understood, savings needed to be understood. He said that diversity was the primary characteristic of South Africa, and this was what made building a social security system valued by all citizens so difficult. "Give people what they want: a cheap, portable, secure and accessible way to invest," he said. - I-Net Bridge