WEALTH WATCH
STEPHEN CRANSTON: Defining the pros and cons of ways to save for your old age
In the electrical world it might be all about AC/DC but in pensions it’s more like DB/DC (defined benefit/defined contribution). Anybody under 40 probably hasn’t experienced a defined-benefit fund, with the big exception of the Government Employees Pension Fund (GEPF). In the GEPF pensions are still paid out on the classic formula of final salary multiplied by length of service. And there is a rock-solid guarantee from the government, though that seems a lot less solid than it did 10 years ago. Defined benefit is valued in much of Europe but it became deeply unpopular in SA: people who entered the workforce in the 1980s and ’90s will remember being given, on their resignations, their contributions plus something derisory such as a 5% return (inflation peaked at 20% in those days). Millennials would not have tolerated defined benefit: it is a way for the young and mobile to subsidise the corporate lifers. In most countries defined benefit was abandoned because companies were sick of ...
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Subscribe now to unlock this article.
Support BusinessLIVE’s award-winning journalism for R129 per month (digital access only).
There’s never been a more important time to support independent journalism in SA. Our subscription packages now offer an ad-free experience for readers.
Cancel anytime.
Questions? Email helpdesk@businesslive.co.za or call 0860 52 52 00. Got a subscription voucher? Redeem it now.