Correctional Services said that “matters are under control” at Johannesburg’s Sun City Prison on Wed.
Employees always ask me why they are forced to join a retirement fund with related-risk benefits by employers.
With the situation in South Africa where most people can't afford to stop working and enjoy retirement without financial worries, the answer is that the state does not have sufficient funds to pay state pensions to everyone.
The advantages of investing through a company retirement fund are:
l Employees are forced to save towards retirement;
l Employers are relieved of the moral obligation to provide benefits out of its own pocket to staff who retire, become disabled or in the event of death;
l Additional benefits offered by an employer enhances the attraction of remuneration packages;
l Employees have the advantage of also receiving the employer's contribution towards retirement;
l Group life, funeral and disability benefits form part of your package and in some cases is paid for by employers. This depends on whether your fund has the costs inclusive or exclusive.
l Group-risk benefits can be cheaper than an individual policy and cover can often be obtained without medical evidence of health. This is a big advantage for older members who may not enjoy good health.
l Low earners are forced to save when they would much rather have the additional monthly amount to increase their standard of living.
l The rules, benefits and taxes of a fund could be difficult to understand.
l Members have very little control over their investments.
A group retirement fund is an attempt to force people to save for retirement, yet members who resign have the option to take their withdrawal benefit as a cash lump sum. Sadly, they contribute towards a fund for years for retirement, but when they resign, the temptation of ready money (after tax) to spend is so much greater than the understanding of how important it is to preserve the saved benefits for retirement.
Saving for retirement is a long-term savings plan to ensure that you will be able to retire after an average career span of 42 years. It takes a lot of discipline to reinvest your withdrawal benefits in a retirement annuity or preservation fund, especially because most people seem to believe that an adequate pension will magically appear when they retire. View your group retirement fund as part of your total financial planning package.
It has been proven again and again that savings in South Africa does not happen. So being forced to join a retirement fund is one way that the majority of working South Africans are being forced to save.
l The writer is a director of Pioneer Financial Planning. Visit www.pioneer.co.za or e-mail firstname.lastname@example.org