admin“People must take full responsibility for their own financial planning, if they aim to be able to retire comfortably,” said Craig Featherby, African head of the deVere group.
As part of its austerity package, Greece will cut state pension payouts to retirees by up to 10 percent, while the retirement age will increase from 65 to 67 in 2013.
With a rapidly ageing population, Greece’s pension payments represented up to 14 percent of its gross domestic product before the crisis hit.
This is not sustainable if the Greeks are to meet the spending cuts being demanded of them, and reductions in pensions and wages will make up the lion’s share of the 11.5bn euro to be saved.
The UK, France and Spain have resisted pressure to cut pensions so far, due to lobbying from voters.
However, in the face of cries from international investors and the rest of the eurozone to improve their debt position, this resistance may not last.
In the UK, the value of pension pots is in freefall as annuity rates drop by record amounts due to the Bank of England’s quantitative easing (QE) programme.
QE works by electronically creating new money, which is used to buy UK government bonds, known as gilts, pushing down the interest rate, or yield paid on them.
As pension companies use the value of gilt yields to determine retirement or annuity incomes, there is increasing downward pressure on those payouts. The value of annuities has plunged by seven percent in just three months, research has found.
“The deepening of the eurozone crisis means yet more pain for Britons nearing retirement because it could speed up the death spiral of annuity rates, which determine a person’s retirement income for life and are already at historic lows,” said deVere Group CEO Nigel Green.
Amid record high deficits in pension liabilities, even corporate pension schemes in the UK are under pressure.
According to a new report by consultants and actuaries Hymans Robertson, UK companies should do their utmost to mitigate the risk rather than use corporate cash contributions to make new investments.
The review shows that five percent of companies have unhedged pension liabilities that are greater than 100 percent of their current market capitalisation.
“Investors, whether they be expatriates or South African, should seek to manage their pension investments directly with an adviser who specialises in providing tax efficient bespoke products to suit their needs, rather than be at the mercy of a third party,” said Featherby.
“There’s no use waking up one day when you’re 60 and finding out the state, or your employer, has provided too little, too late to make you secure in your retirement.”
Meanwhile, amendments are needed to Broad-Based Black Economic Empowerment (BBBEE) legislation to ensure that South Africa’s economy is more inclusive, Trade and Industry Minister Rob Davies said yesterday.
“We cannot run an effective economy that draws its leadership and entrepreneurial capacity only from a small minority of the population,” he said in Johannesburg at a breakfast briefing hosted by the New Age newspaper.
The proposed amendments to the BBBEE Act would define the practice of fronting, including “complex fronting”, and introduce a commissioner with the power to impose penalties.
Complex fronting involved companies drawing up complicated contracts which deprived black managers of the appropriate authority for their positions.
Davies said the codes by which compliance was assessed also needed to be revised to encourage symbiosis between large and small companies.
“(President Jacob Zuma) has said: ‘Where are the black industrialists?’ and of course we have one or two, but what we are looking at is to create many more real players in the productive economy.”
The categories of the scorecard used to measure BBBEE compliance would be reduced from seven to five, under the proposed amendments.
The categories of employment equity and management control would be merged into a single category, as would preferential procurement and enterprise development.
Davies said the amendments also sought to introduce sub-minimum requirements for the priority elements of ownership, skills development and the enterprise and supply development categories,
“If you don’t score sub-minimum and you are a large business, we will reduce your overall score by two places,” he said.
Qualifying small enterprises would be downgraded by one place for failure to meet the 40 percent requirements.
“We cannot any longer regard people as significant contributors to BEE if you are not involved in the broad categories of BEE . . .”
The proposed bill, which was in the public consultation phase, would also do away with the necessity for small, black-owned companies to have their status verified by agencies.
At present, small companies had to pay a verification agency for a certificate as proof of their BEE rating, but Davies said this placed an “inordinate and unnecessary burden” on these enterprises.
As such, a 100 percent black-owned, small enterprise would automatically be regarded as level one.
“Essentially, I think the slogan might be that we want to turn BEE essentially from supporting passive shareholding to something that supports a much more active and productive empowerment of black people across the economy,” Davies said. — AP
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