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Third Quarter review – Where has this year gone?

October 27, 2021

At the time of writing this, it is hard to believe we have 68 days left of 2021. On the other side of the third wave of Covid 19, I reflect on the scholars of our country who, for the last two years, have adapted to a combination of online and classroom education, limited social interaction opportunities and for the sport-loving children virtually no opportunity to display their talents.

The social unrest and looting, which occurred predominantly in Kwa Zulu and Gauteng, resulted in substantial damage to many businesses, the economy and the personal loss of possessions for many individuals and families.

In October, the country moved to adjusted alert level one, and we have approximately twenty million South Africans who have been vaccinated either partially or fully. Permission has been granted for 12 – 17-year-olds to be vaccinated. South Africa was removed from United Kingdom’s red list, making travel to and from the United Kingdom much easier for vaccinated travellers. These developments have lifted the country’s mood as residents can plan end of year travel and holidays, and families can re-connect over the festive season after many months of separation and isolation.

The year thus far has jolted the psyche of many South Africans. Yet, despite all these challenges and heartache, the proud people of this nation remain resilient, positive, and committed to the success of South Africa.

Over the last quarter, we have seen the following proposed legislation released for comment, which was undoubtedly influenced by the financial impact of Covid on many households.

Green paper on comprehensive social security reform

On 18 August 2021, the Minister of social development released a green paper on comprehensive social security and retirement fund reform, which was very similar to the National Social Security Fund paper of 2012.

In brief, the objective was to create a centralised “National Social Security Fund” (NSSF) intended to provide basic benefits, such as pensions, disability and survivor benefits for all qualifying citizens, up to a certain threshold. The government would manage the Fund, and employers/employees were initially expected to contribute between 8 and 12% of qualifying earnings. In addition, employees could choose to top up their existing retirement savings using their current occupational or individual arrangements.

This meant most employees would only be able to contribute to the “NSSF”, thereby putting their existing private funds at risk. After a huge public outcry, the paper was withdrawn on 1 September for further consultation and consideration.

Two bucket system/Dual access system

National Treasury is considering proposing a “two bucket system” for retirement; the proposal, aimed to be effective by 2022, will allow for pre-retirement withdrawals from a retirement fund while ensuring preservation of savings.

This has come about after growing calls from members to access part of their retirement savings due to exceptional circumstances, like the financial impact of Covid 19 on many employees.

The proposal is considering allowing employees to access a maximum of 30% or R30 000 of retirement savings while employed. Treasury is considering allowing fund withdrawals under very specific circumstances. The proposed two bucket system will enable “bucket one” to be preserved until retirement. The second bucket will allow pre-retirement access to retirement funds during emergencies or extraordinary circumstances.
The proposed trade-off for allowing early access is compulsory preservation, with “Bucket one” not being accessible before retirement.

Business, labour and government are currently locked in discussions to finalise this legislation, thereby replacing the current legislation, which prohibits pre-retirement access to retirement savings unless the employee resigns or is retrenched.

The industry awaits further announcements in this regard.

Changes to unapproved Policies

The definition of beneficiary was recently amended in the Long Term Insurance Act, which has impacted the payment of Death and Funeral benefits. As a result, an employer may no longer determine the beneficiary, and benefits cannot be paid directly to the employer, despite the policies being employer-owned policies.

This means that an insurer may not accept an employer/committee resolution instructing them who to pay, nor may an employer advance a payment and ask the insurer to reimburse them.

Where no beneficiary has been specified on the beneficiary nomination form or where no beneficiary nomination form has been completed, the insurer will pay the Death Benefit and/or the Funeral Benefit to the insured person’s estate.

It is, therefore, critical that each member completes a beneficiary nomination form and that this is kept up to date and on record with the employer. The change will come into effect from 1 December.

Stay Safe

As the year draws rapidly to a close, may I urge you all to remain vigilant and careful so a possible fourth wave does not spoil the current buoyant mood.

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