Economists worry about pension fund investments

Imagine investing in a pension fund for decades, just to find yourself poor when you retire.

JOHANNESBURG - Any employee's financial nightmare would be to discover after years of investing in a pension fund, their investment is worthless.

One economist fears this nightmare may be a reality if the government forces investors to place up to 45-percent of funds in risky state-owned enterprises.

At its manifesto rally, the ANC said it would investigate the possibility of prescribing assets to shore up ailing parastatals.

The country's debt currently stands at around 55 percent of GDP.

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Economist Mike Schussler says if you add the debt burden of state-owned entities, this figure skyrockets to around 90-percent of GDP. 

The solution being touted to the country's liquidity problems is pension funds. 

South Africa's pension assets are the 8th biggest in the world in dollar terms with R4.3-trillion invested in various markets by 2017. 

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Schussler explained, "prescribed assets is something that can make us go poor in South Africa we have a very good asset in our pension fund assets and the bigger that asset is the more crooks look at it, the more people with bad intentions look at that asset and they find ways to get their hands on it"

Schussler says he is not being alarmist and points out the apartheid government used prescribed assets and the ANC in its election manifesto said it was considering this very issue. 

Market analyst, Viv Govender said there are some ways to safeguard your pension though.  

Govender said, "get yourself out of the jurisdiction of whatever the prescribed asset would be, if its restricted for instance to retirement funding you could decide not to have an RA or invest in a personal share portfolio if its restricted to South African fund managers you can always take your money our of the country and invest your money offshore."

Schussler says fund managers should be alert and ready to act if the ANC presses ahead with the idea.

Source
eNCA