Central to the government’s post-pandemic economic recovery plan is a change in financial regulations to allow the state to access retirement savings at a favourable rate, according to reports.
The Sunday Times, which said it had seen the plan, reported that among the planned proposals were the introduction of a state bank, and amendments to regulation 28 of the Pension Funds Act.
The objective was to unlock funding for long-term infrastructure projects and high-impact capital projects, and facilitate direct access to the pension funds poll by state development finance institutions.
Businesstech noted that regulation 28 limits the extent to which retirement funds may invest in particular assets or in particular asset classes. The main purpose is to protect the members’ retirement provision from the effects of poorly diversified investment portfolios.
The African National Congress has long argued for such changes in order to give the state access to South Africans’ retirement savings.
This has been included in the Reconstruction, Growth and Transformation: Building a New Inclusive Economy document, drawn up by the Cabinet’s economic cluster.
Critics have said the state does not have the financial muscle to start a fully fledged bank, while the pension fund industry raised concerns about erosion of value if retirement funds were forced to invest in projects managed by the government and state-owned entities, such as power utility Eskom.
[Picture: Steve Buissinne from Pixabay]