Retirement Funds and Social Reform

1. Retirement Funds and Social Reform

2. The South African Problem Scourge of Poverty • Unemployment. • No retirement provision. Legacy of South Africa – no national retirement savings provision, except for State Old Age Pension.

3. Retirement Funds as a solution Retirement Funds are crucial. Traditionally address the second problem (retirement provision). • Create retirement savings. • address other major financial needs: • death of breadwinner • disability of breadwinner

4. The changing face of retirement funds Retirement Funds evolve over time. • Previously: defined benefit funds - employer took risks and surplus. • Then: defined contribution funds – members share risk and investment profits. • Now: emergence of industry, sector and umbrella funds who has control of the funds. transformation of benefits and structures over time. to offer optimal balance of valuable benefits. at a reasonable cost. Outcome of discussion, negotiation and. listening to needs of members and the employer.

5. The changing face of retirement funds • Society changes, financial needs change. • Retirement Funds change to remain relevant. • Treasury issued a discussion paper on retirement fund reform: • proposes a National Savings Fund • conditional compulsory preservation • improved Governance • occupational retirement fund membership optional • Discussion important, to ensure views are known. optional legislative structure to give Trustees. Freedom to structure the needs of membership. • Guidance to ensure appropriate Governance.

6. Retirement Funds as a solution Retirement Funds should develop a further crucial role addressing problem of unemployment. How? • Job creation. • Skills development by means of Targeted Development Investment.

7. Targeted Development Investment by Private Investors Result of extensive social discourse • Labour. • Government. • Business. at • Growth and Development Summit. • Financial Sector Summit. • Nedlac Retirement Fund’s Trustees conference. • President Mbeki in his State of the Nation address. • Treasury Retirement Fund reform document.

8. Targeted Development Investment by Private Investors Institutional Funds – retirement fund monies – invested in • Transformational infrastructure. • low cost housing. • Agriculture. • SMME’s. results in • job creation. • delivery of public services to previously unserviced. • good investment returns to retirement funds. • instrumental in taking South Africa from “doing fine” to “doing great”.

9. Targeted Development Investments and Retirement Funds Fiduciary duty of Trustees • Act in interests of members. • Avoid conflicts of interests – e.g. disclose gifts and alliances. • Greater “unqualified responsibility” (from FSC) to social good.

10. Targeted Development Investment by private investors • Initial reluctance by Trustees to risk retirement fund monies. • engage with Treasury – facilitate structures to make these investments safer. • education of Trustees • in general • on Targeted Development Investment in particular Specialised area – need advice – know what you are buying.

11. In Conclusion Retirement Funds can play a pivotal role in socio-economic change in South Africa. Need discourse to share ideas and needs, to change thinking, and to embrace the new. If the heart is transformed, the mind will implement in an orderly fashion.

12. Questions?? Thank you