New insights
As retirement fund reform proceeds, many issues in this area are shifting. The means test for the OPG, which we criticised in Benefits Barometer 2013: The employee benefits system, should be phased out by 2016. Reform is moving inexorably towards mandatory enrolment and preservation. The government is considering the following factors for low-income and vulnerable workers:
- The cost structure
- Their need to access retirement savings during unemployment or extreme financial need.
Although the incentives structure for both retirement and non-retirement savings is taxed, the National Treasury recognises that low-income earners may need alternative incentives.
Work by the World Bank on governments matching pension contributions suggests that it can increase participation. However, it has a negligible effect on increasing contributions. Applying behavioural finance aspects in public policy seems to show more promise among low-income earners. One potential downside of matching is that households see the match threshold as advice from the government on how much to save.