A defined-contribution pension scheme places all the risk on employees, so they should have more of a say
22 August 2024 - 16:39
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The retirement age is a remnant of the old fixed-benefit pension fund, which was, in effect, eliminated 30 years ago. With defined-contribution schemes the employee takes on the full risk of investment returns and longevity. However, being forced to “retire” at a given age puts the employee in an impossible situation.
Employers know that by forcing a person to retire before there is a big enough retirement pool is to effectively cast the employee into the wilderness with little chance of re-employment at that age. In the end, it is left to the state to pick up the slack.
Unfortunately, retirement age is built into the employment contract. This needs to change. Setting a retirement age of, say, 65 in a contract is arbitrary and unfair. Given that defined contribution places all the risk on the employee, surely it should be left to employees to decide when they want to retire?
If they become too old to work, physically or mentally, there are different mechanisms to “retire” an employee. But nowadays for most people age 65 presents no such impediment, and being forced to leave employment before there is a sufficient pension fund pool is callous and irresponsible. It should also be unlawful.
Richard Bryant Via BusinessLIVE
JOIN THE DISCUSSION: Send us an email with your comments to letters@businesslive.co.za. Letters of more than 300 words will be edited for length. Anonymous correspondence will not be published. Writers should include a daytime telephone number.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
LETTER: Retirement age arbitrary and callous
A defined-contribution pension scheme places all the risk on employees, so they should have more of a say
Khaya Sithole’s most recent column refers (“Age is the next frontier in retirement fund reform”, August 22).
The retirement age is a remnant of the old fixed-benefit pension fund, which was, in effect, eliminated 30 years ago. With defined-contribution schemes the employee takes on the full risk of investment returns and longevity. However, being forced to “retire” at a given age puts the employee in an impossible situation.
Employers know that by forcing a person to retire before there is a big enough retirement pool is to effectively cast the employee into the wilderness with little chance of re-employment at that age. In the end, it is left to the state to pick up the slack.
Unfortunately, retirement age is built into the employment contract. This needs to change. Setting a retirement age of, say, 65 in a contract is arbitrary and unfair. Given that defined contribution places all the risk on the employee, surely it should be left to employees to decide when they want to retire?
If they become too old to work, physically or mentally, there are different mechanisms to “retire” an employee. But nowadays for most people age 65 presents no such impediment, and being forced to leave employment before there is a sufficient pension fund pool is callous and irresponsible. It should also be unlawful.
Richard Bryant
Via BusinessLIVE
JOIN THE DISCUSSION: Send us an email with your comments to letters@businesslive.co.za. Letters of more than 300 words will be edited for length. Anonymous correspondence will not be published. Writers should include a daytime telephone number.
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