1. Retirement Fund Reform
Finance Portfolio Committee
Comments on National Treasury discussion paper
Retirement Fund Reform
Rob Rusconi
16 February 2005

2. Credentials Private sector employment
SEI Investments, global asset manager
Speaking in my personal capacity
Author of analysis into industry costs
Presented at 2004 Actuarial Convention
Costs of Saving for Retirement
Options for South Africa

3. A picture of old age prosperity

4. Three issues Issue #1 Insufficient analysis
Issue #2 Security of retirement fund members overstated
Issue #3 Lack of fiscal support for the National Savings Fund

5. #1 Insufficient analysis
Old Age System not Retirement Fund
Insufficient financial and demographic modelling
What is the financial state of the aged?
How is this picture expected to change in future?
How to evaluate the alternatives (coverage & cost)?
Insufficient evidence of coordinated policy development
Social Security benefit increases appear to be ad hoc
Is the pattern of retirement fund fiscal cost modeled?
The ‘missing middle’ appears to be cost free: should it be?

6. #2 Member security Retirement fund costs understated
Research shows that costs are significant
Particularly for smaller funds
Career interruptions have not been modeled
Key shortcoming of my research
Not dealt with in the Treasury paper
We do not know how much S Africa is saving for retirement
Very disappointing lack of information even from funds
Let alone the so-called leakage
False sense of security is the big concern

7. #3 NSF in the cold Designed for the untaxed Design options
Elegantly disincentives the middle-class and wealthy
But doesn’t really encourage participation
Design options
Government-funded bonus at retirement
Very simple design to keep costs low
Compulsory contributions from employers
Is access alone sufficient to stave off dependence on the State in old age?

8. Summary of response Strong, thorough & practical document
But we need to:
describe the old-age landscape
understand the sensitivities
ensure coordinated policy response