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Pension savings ‘safe from change’

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Deputy Finance Minister David Masondo told a round-table about the role of pension funds in economic recovery.

Deputy Finance Minister David Masondo. Picture: African News Agency (ANA)

DEPUTY Finance Minister David Masondo has reassured pension fund managers that the changing regulatory environment would not give the government power over their savings.

Masondo told a round-table about the role of pension funds in economic recovery and growth and that the government would leave such decisions to the funds’ trustees.

“The National Treasury is in a process of reviewing Regulation 28 of the Pension Fund Act to make it easier for pension funds to increase investment in infrastructure, should their board of trustees opt to do so,” he said.

The National Treasury is in the process of reviewing Regulation 28 of the Pension Fund Act to make it easier for pension funds to increase investment in infrastructure.

The regulation prescribes maxima for various types of investment that may be made by a retirement fund.

There has been ongoing debate whether the amendment of the regulation would see government subjecting pension funds to prescribed asset regulations.

The draft regulation, which provides that the ministry may make regulations limiting the amount and the extent to which a pension fund may invest in particular assets or in particular kinds or categories of assets, prescribing the basis on which the limit shall be determined and defining the kinds or categories of assets to which the limit applies.

Africa’s largest pension fund manager, the Public Investment Corporation (PIC), has more than R2 trillion in its savings.

Masondo urged pension fund managers to support the government’s objectives and invest in domestic infrastructure projects.

“Economic growth depends on investments and without this, there will be no new products, new markets, new employment opportunities and no tax collection for the government,” Masondo said.

“Savings serve as a source of supply for investments. Households, businesses and the government borrow from this savings to undertake economic activities.”

Infrastructure development is at the centre of President Cyril Ramaphosa’s Economic Recovery and Reconstruction Plan to boost the economy post Covid-19.

Masondo said the Financial Sector Transformation Council was close to finalising the retirement fund BEE scorecard that will include concrete transformation targets for the retirement funds.

“South Africa needs economic growth that is transformative, inclusive, and sustainable. Growth which transforms the underlying racial and gender unequal and exclusionary structures of the economy.”

Momentum economist Johann van Tonder said the real value of both pension funds and other investments had decreased as a result of the Covid-19 pandemic.

Van Tonder said that the Momentum-Unisa Household Wealth Index estimated that households’ real net wealth declined slightly by R2.3 billion in the third quarter due to a decrease in the real value of households’ pension funds and investments.

“However, the decrease was marginal and mainly impacted by a second wave of Corvid-19 infections, specifically in Europe,” Van Tonder said.

“A new round of lockdowns contributed to financial markets declining worldwide. This had a negative impact on the real value of households’ pension fund and investment values.”

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