EDITOR – The credit ombudsman Mr Nicky Lala Mohan made an observation that more than nine million consumers are struggling to service debt and concluded that emergency savings play a crucial role in helping the affected consumers to avoid turning to micro-lenders when in need.
He added that at this time more and more consumers are being forced to repay their debt and fewer households were able to save due to the economic downturn.
In essence consumers were struggling to cope with the rising interest rates and basic food, electricity and petrol prices which have skyrocketed over the recent past few months. This matter of concern has been on the agenda as the country continues to mark July as the National Savings month. Mohan has fervently urged consumers to save for retirement.
This is so important and it’s time for the Government to “put it’s money where its mouth is”. To extend this argument one has to dissect the Government Pension Fund which applies to all state employed people and we all are aware that the Government is the largest employer. Fortunately many consumers are forced to save towards a pension fund through compulsory deductions for a pension or provident fund and this has to be considered a good thing.
However, in as much as the Government Pension Scheme has been hailed the best there is given that the state contributes R2 for every R1 contributed by the employer. But when one goes to the end of the line and that is when the employee reaches his retirement day the scheme allows the retiree to withdraw 33.33 per cent as a gratuity and the balance of 66.66 per cent goes towards providing the retiree a percentage of his salary for the rest of his life.
Once again this has to a good thing but when the retiree takes his 33.33 per cent gratuity (once-off lump sum) this amount is taxed as follows – the first amount between R0 to R315,000 is not taxed, between R315,001 to R945,000, R56,700 + 27 per cent of the amount over R630,000 and R945,001 and above, R141,750 36 per cent of the amount above R945,000.
The purpose of providing these facts is to unpack the “scheme” in that the Government actually gets back most if not all of its contributions of R2 for every R1 that the employee has contributed. Its also important to note that whatever interest derived from the gratuity banked is also taxed at the normal taxation rates.
This is why the word “scheme” is used to define the Government Pension Fund.
My question is then – is the Government really concerned with the plight of its people when its takes away more than it gives?
Sicario
Durban
