Pension funds battle to recover

Johannesburg – Pension fund assets are struggling to return to pre-crisis levels, head of policy analysis at Sanlam and national planning commission member Elias Masilela said Monday.
Masilela addressed the Institute of Retirement Funds' annual conference in Johannesburg.

Pension funds were among assets that took a knock during the financial and economic crisis of 2008/9. Retirement indices also show that most people do not believe that they are going to retire comfortably.

"Pension fund assets struggle to recover. We've only made up 1.5 trillion of the 3.5 trillion lost in 2008," he said.

Prospects were looking positive in Organisation for Economic Cooperation and Development (OECD) countries such as China and the US, Masilela said, due to the flexibility of their financial and labour markets among other factors.

"Labour market flexibility is taboo in South Africa. We need to reverse our perception towards that concept. There's no way you can hope to have a sustainable economy if your labour market is not flexible," Masilela said.

The government is looking to implement changes to the regulatory framework in the retirement fund industry.

These include stricter governance requirements, proactive supervision, mandatory retirement savings and improved unemployment insurance. Currently, there are voluntary contributions to a pension fund or employer-mandated retirement schemes.

A consolidated government document has been completed and will be tabled before cabinet soon.

Masilela told the conference that inflation, which has the ability to erode pension fund benefits, should also be taken into consideration.

"In South Africa we generally have high levels of inflation - yet we still have people saying don't worry about inflation targeting, worry about something else," he said.

On a more positive note, Masilela said that the possibility of another crisis in the near future was low.

"For us to see a sustained turnaround into the future, the generation of incomes and employment creation needs to happen. Long-term planning and decisiveness are important," he said.

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