NSSS - What is the road ahead?

With the move towards Nationalisation within the Government Savings Scheme imminent, industry players are still questioning the implementation thereof. The Department of Social Development in co-ordination with FedGroup Financial Services hosted a Breakfast discussion, Friday, 2 September, 2011 at the Grayston Southern Sun, aimed at clarifying the objectives, purpose and strategy of the Retirement Reform in South Africa.

Deputy Director General of the Department of Social Security, Selwyn Jehoma, accompanied by his team, indicated that by discussing the progress of the reform, stake-holders would be familiarized with the forthcoming changes. According to Jehoma, familiarization, through engagement and discussion, would enable stake-holders to “formulate a response to the document that Government would in time, release”.

Since its conception, the National Social Security Savings Scheme and subsequent Retirement Fund Reform has seemingly been in limbo, with no visible progress being made. The discussion held last week served as a vehicle, not only to update stake-holders on the somewhat silent progress of the National Savings Scheme, but to also answer the key questions that inevitably shape the road ahead. The questions framing the minds of approximately 280 Financial Planners, Principal Officers and other interested stake-holders that attended the discussion, was voiced by FedGroup Executive, Scott Field. “Would South Africa be able to successfully implement a National Social Saving Scheme? How would this scheme impact on the current Retirement Fund industry? More importantly, how would a National Social Savings Scheme change the role of the advisor”?

Jehoma's response to these questions confirmed that it was not a question of if the scheme would be implemented, but when. With the main thrust of the Scheme already approved by Minister's, Jehoma indicated that the proposed Reform is currently sitting in a consolidated Government Document.

As a response to the dire social-economic state that South Africa is riddled by as well as the inadequate regulation of the private financial sector, Jehoma asserted that the recommendations made by the 2000 Taylor Commission forged the focal point of the proposed reform. The three Pillars detailed in this commission, namely; Social Assistance, Social Insurance and Voluntary Insurance would look to overcome the challenges faced by the country's current financial environment. Jehoma was passionate in explaining the need for the proposed Reform, “Income Poverty, non-transparent subsidization and questionable regulation has forced us to move to what the world already has, what the world ought to have”. His passion was shared by Field, who counter-advocated the need to know what would happen to the Retirement Fund Industry once the NSSS has been implemented? More importantly, Field expressed his concern as to where the Reform would leave not only the 280 Financial Planners, Principal Officers attending the discussion, but the thousands of others who relied on the private financial sector as a source of livelihood? “How can the Reform eradicate income poverty if its intent is to consolidate and thus condense the private Financial Sector?”

Jehoma's response emphasized that implementation would unfold systematically and should be strategically dealt with by the current private financial sector. He confirmed Field's concern, stating that due to the consolidation that the Reform would hope to achieve, the private financial sector would indeed shrink. Consolidation however, would not mean that the door would close on those who currently serviced the private sector. There would be a role for the private sector; this role would need to be defined as a response to the principles implemented by the Reform. Edwin Letty, Non-Executive Chairman of FedGroup, agreed with Jehoma, suggesting that change is imminent and inevitable. “Industry players should not resist the change that the Reform will initiate, but should respond strategically and position themselves so as to successfully adapt to a dynamic environment”.

While there remains a substantial amount of legal work behind the NSSS and subsequent Reform, the discussion held Friday morning did clarify uncertainties created by the silent process. The discussion prompted industry stake-holders and players to formulate a strategic response to the changes proposed by the reform. Consensus was held by many at the discussion... it is not a question of if, but when the NSSS will be implemented. How stake-holders would respond to the proposed changes would define the role and success of the current private financial sector.

For more information on FedGroup, take a look at their website www.fedgroup.co.za