Speaking at the 2024 Old Mutual Thought Leaders Forum, Deputy Minister of Finance Dr David Masondo emphasised the importance of the retirement industry to South Africa’s broader economy. He said that the event, hosted by Old Mutual just weeks before the implementation of the Two-Pot Retirement System, came at ‘a critical moment for the South African retirement industry’.

‘The Two-Pot system aims to support long-term retirement savings while providing flexibility to assist fund members in a financial crisis,’ he said. ‘It is the latest in a series of comprehensive reforms implemented by the South African government to simplify and harmonise the pension system, incentivise pension savings and increase the fairness of the retirement system.’

Unlocking economic growth

Deputy Minister Masondo said that increased employment – supported by economic stability – was key to expanding access to retirement savings and improving retirement fund members’ outcomes in retirement.

‘Our country has made significant progress in our 30-year journey of freedom and democracy,’ he said. ‘Many people who were historically excluded are now active participants in the economy. However, our journey is far from over. There are still too many people who are unemployed and too many who live in poverty. Income and wealth inequalities persist, and millions of South Africans cannot retire with dignity, while millions cannot save for retirement at all. We have to grow the economy to address these problems.’

He pointed to the government’s Operation Vulindlela as an example of efforts to make the economy competitive by reducing the cost of doing business in South Africa. ‘The logic of this reform is straightforward,’ he said. ‘Greater efficiency in energy and logistics decreases the cost of doing business, which in turn enables local production to expand and jobs to be created. This increased production and job creation leads to higher consumer spending and boosted tax revenues, which enable us to do a lot of things as government. As confidence in the economy grows, so does investment, creating jobs and supporting demand – a virtuous cycle that leads to higher growth on a sustainable basis.’

This economic growth, he explained, will increase retirement savings, as more people will be employed and will contribute towards their retirement funds.

Interventions along the value chain

‘Fund members convert their working years – their human capital – into financial capital during their working lives,’ he said. ‘Inevitably, our working capacity diminishes as we approach the end of our working life. It is our collective responsibility to defend and protect the hard-earned financial savings of these workers. In many cases, retirement funds are the only savings that fund members have.’

Here the Deputy Minister pointed to the ongoing retirement industry reforms, of which the Two-Pot Retirement System is the most recent policy. These reforms, he said, aim to change the lives of South Africans as well as improve the retirement outcomes of those whom the retirement system serves.

‘But the government cannot achieve this alone,’ he said. ‘All stakeholders have a critical role to play. Interventions are needed at every point along the industry value chain. Trustees are required to perform their fiduciary duties and act in the best interests of the asset owners in line with the Pension Fund Act. Asset managers are required to make prudent investment decisions that enhance portfolios. Employers who select the funds must prioritise the safeness of the retirement savings. Regulators must ensure that everybody plays by the rules.

‘As a responsible government,’ he continued, ‘we will always set and promote a policy environment that enhances portfolio returns, promotes market stability and avoids compromising both the pre- and post-retirement lives of citizens.’

He added that retirement fund members themselves, whose retirement outcomes are ultimately at stake, also have a responsibility to make the right choices regarding their retirement savings.

Deputy Minister Masondo closed by calling on all those stakeholders to co-create solutions that will improve access to the retirement system as well as fund members’ retirement outcomes.

‘Together we must drive this sector forward through responsible governance and a continued focus on inclusive growth, employment creation and poverty alleviation,’ he said. ‘Whether you are a regulator, asset manager, asset owner or policymaker, we all want to see a better, stable and secure retirement industry for all. By working together as industry stakeholders, we can do more to transform South Africa’s retirement system. Initiatives like the Old Mutual Thought Leaders Forum are an important step in bringing about the improvements in access and outcomes that all in this industry wish to see.’

Read the Old Mutual Mindspace Thought Leaders Forum special issue here.