Coen Welsh | Nov 14, 2017 | 0
Where is the National Pension Fund?
Twenty years later and we still do not have a national pension fund. This topic is a popular hobby horse for us. We follow up at least once a year, and for the past two years, we always got the same answer: It has been submitted to the line ministry and must now follow the approval process.
It is a shattering awakening to realise that a core element of poverty alleviation has been neglected for two decades. Many years back when the idea was first mooted, it was first attacked by the established pension fund industry, and then later, when sense returned, various models were offered. At that point, I believe, the industry was under the impression that the National Pension Fund is a fait accompli and it had to prepare for its arrival. Nothing much has happened since.
If we are serious about our war on poverty, the starting point must be those most vulnerable and immediately exposed. On this road we have travelled far and made much progress particularly with the Old Age Grant, and the wide-ranging support from the private sector for vulnerable and disadvantaged children.
But common sense dictates that we also look after those people who now earn an income but who will stop working at some point in their lives. Then they should not be dependant on a monthly grant but should receive the savings of their working life.
The vigor for the National Pension Fund, in my mind, was killed when some clever analyst showed us figures and calculations of the Zimbabwe National Pension Fund, which at that point, was utterly insolvent, bankrupt and only survived on government treasury support. I do not know if that pension fund still exists, or if it pays only in Zimdollars, but its grim reality helped to scuttle local attempts to put the pension fund debate on a sound footing.
The sad part of this tale is that the work done by the private sector then, actually offered us several workable, sustainable frameworks for a national pension fund, where only a few practical glitches still needed to be ironed out.
One of these impediments was membership. The private sector argued that membership of two pension funds will over the long-term dilute the earning capacity of the pensioner and not improve it. A promise was made that this will be considered in the drafting of the bill. As far as I know, the bill was never drafted, or if it were, it has collected a lost of dust on somebody’s shelf.
Then it was argued that most workers will not be able to carry contributions to two funds. This has turned out to be a sort of practical joke since the problem is that most ordinary workers, do not have access to any pension fund, let alone a government-run national one. That has certainly changed over the years but only because the government has become the biggest employer and not because the private sector has caught on.
Conventional pension funds are typically expensive savings vehicles, not only in terms of contributions, but also where compliance, reporting, auditing and administration fees are concerned. The associated costs simply put them out of reach of small businesses. I know dozens of small business owners who all welcomed a national pension fund pinning their hopes on a lean, well-managed fund with minimal overheads that will accept even the most modest pension fund contribution.
The principle that was lost during the ensuing years is that of affordability. If I consider the importance the Social Security Commission has acquired over the years based on pooled contributions sometimes of the smallest amounts imaginable, then a national pension fund where monthly contributions can indeed also be very small, would have been a major contributor to the war on poverty. And if said fund has been running for twenty years, just think where it could have been now.
It is ironic that while we hasten to rush extremely damaging legislation through Parliament, we forgot how we argued twenty years ago over the ins and outs of a national pension fund. The generation that worked without pension from then until know is basically lost but I think we owe it to the current generation of income earners, to channel our energy where it matters. That is certainly not promoting poverty by constricting the private sector. Instead it should be where savings are accumulated and provision is made for when one can no longer work. The basic principle rest on the premise that retired workers should not join the ranks of those who live on a grant.