Old Mutual has expressed its concern over the confusion felt by many South Africans regarding the government's proposed overhaul of the retirement fund industry in 2010.
David O'Brien, who heads Old Mutual's retirement fund reform team, says this confusion is being driven by e-mails circulating around the country which contain a number of incorrect facts and statement about government's intentions around the reforms.
"These emails are causing unnecessary panic amongst consumers. Some of the specific objectives of the proposed overhaul of the pension system is to encourage more people to make provision for their retirement so that they are not dependent on the state; to reduce the costs of retirement savings so that more money is channelled into actual retirement savings and to improve the governance of retirement savings in order to minimise risks for the members."
O'Brien says the reforms also seek to address a number of other shortfalls in the old age system such as:
- Raise national savings
- Aid economic growth
- Reduce Poverty in old age
- Extend retirement benefits to all South Africans
O'Brien says for people to resign from their jobs to access their accumulated retirement savings for fear of the proposed reforms would be an unnecessary and rash decision.
"One of the chief reasons that South Africans have inadequate savings at retirement is that they do not preserve their retirement savings when changing jobs. It is estimated that approximately only six percent of South Africans can maintain their standard of living when they retire. Compound interest on savings is especially evident in the last few years before retirement, so the longer that South Africans remain invested in a retirement savings vehicle, the more money they will have when they retire."
O'Brien says it is crucial that South Africans continue saving for retirement while the reform unfolds. "There is no sense in delaying savings in anticipation of the new legislation. This is particularly true for people who currently do not have a retirement savings plan."
He says it is also important for South Africans to consult with an accredited financial advisor on a regular basis to ensure that they are making sufficient provision for their future retirement and other financial needs.