Mandatory social security plan proposes another tax on the middle class

The government is determined to introduce a comprehensive social security system with a mandatory payroll deduction of 8-12% to help fund the scheme.
From state capture to private wealth capture? SA is already dealing with National Health Insurance proposals, the exit tax for emigrants, and the discussion around prescribed assets. Image: Shutterstock

SA’s battered middle class got another dose of bad news this week – a green paper on Comprehensive Social Security and Retirement Reform that proposes setting up a new fund that will provide pensions to formal, informal and self-employed workers who reach retirement.

It also proposes providing disability benefits to those physically unable to work, and survivor benefits to their dependants should they not live until retirement.

Contributions to the pension and risk benefit components of the proposed National Social Security Fund (NSSF) will be pooled, with risks being shared between all contributors.

According to the green paper, the scheme will be funded by way of a mandatory pension payroll contribution of 8-12% of earnings “to be met by employees and employers, at the establishment of the NSSF”.

‘Floor and ceiling to contributions’

“There will be both a floor and a ceiling to contributions: it is proposed that workers earning less than R20 000 per year should not be obliged to contribute to the NSSF, though they will continue to contribute to the UIF [Unemployment Insurance Fund]. Those earning more than the ceiling R276 000 per annum or R23 000 per month, at present will not be obligated to contribute on income above that level.”

At retirement, a worker who contributed to the NSSF will receive a pension calculated according to a formula based on lifetime wages, length of service, and an accrual rate which will determine what percentage of yearly income is paid out.

This would be a defined benefit scheme, meaning pensioners would be paid out at a rate linked to wage inflation rather than at a rate linked to market performance of the amount saved.

National Treasury has tried to play down the publication of the Green Paper saying “it is not policy”. However, clearly there is some level of intent by government on this proposal with the Department of Social Development’s publication of the Green Paper.

Cas Coovadia, CEO of Business Unity South Africa (Busa), says the core proposals in the paper are not new and discussions around this have been going on for several years.

“We would urge government to consider a balanced approach between the public and private sector’s role in a social security system. Any proposed system must build on what we have and must be considered within the context of the serious fiscal crisis SA is in. We also note that the NSSF is proposed as a defined benefit scheme. In this instance, we must protect the interests of younger people and balance these against those already retired.

“We will engage on the green paper but are concerned about suggestions in the document of centralised funds to which taxpayers are asked to contribute.

“SA taxpayers, particularly corporates, are already taxed at some of the highest rates globally and levying additional taxes will be counter-productive to economic growth.”

Adds Johan Gouws, head of advice at Sasfin Wealth: “This green paper comes as a bit of surprise to many of us, coming as it does on top of the National Health Insurance proposals, and the exit tax for emigrants, and the discussion around prescribed assets.”


“I think we have to be careful we don’t move from state capture to private wealth capture,” says Gouws.

“The middle class is under a tremendous amount of stress at the moment and this proposed mandatory deduction of up to 12% of earnings, paid for by both employees and employers, would place them under even more stress.”

Areas that are lacking

Association for Savings and Investment South Africa (Asisa) senior policy advisor Dr Stephen Smith says the green paper identifies three areas within the public social protection system that are lacking: a basic contributory state pension, statutory health insurance, and adequate income security for those aged 18 to 59.

Smith says it is important that future social security reform programmes build on, rather than disrupt, the existing contractual savings and life insurance arrangements of both public and private sector employees. “It is these savings pools that finance much of the country’s investment requirements and fund South Africa’s capital market.

“A state pension that is used to pool and subsidise risks between workers has to be balanced against what proportion of income remains for the funding of an adequate pension related to an individual’s accustomed standard of living.”

Existing contributors to retirement savings funds are already struggling to preserve what they have accumulated, asking for access to their long-term retirement savings.

Listen to the SAfm Market Update interview with Fifi Peters and Sasfin’s Johan Gouws on the topic:

The interests of the young

As a defined benefit scheme, a percentage of contributions made today will be used to fund those who have retired.

“The interests of the future young need to be protected against what is viewed by our actuaries as a strong likelihood of ever-increasing contributions to fund benefit promises,” says Smith, adding that it is important to have clarity on how the promises embedded in the design of the NSSF system will impact on the fiscus.

According to Smith, it needs to be ensured that future social security reform programmes do not inhibit employment creation.

“A job is still the best form of security. Social security is a safety net when all else fails.”

Smith says the Covid-19 pandemic and the consequences of the economic lockdowns have highlighted the urgent need for the appropriate social protection, particularly of informal and vulnerable workers.

“We need solutions to provide protection for these workers, to provide support through unemployment and saving through to retirement as existing legislation and structures are not designed to cater for their needs.

“Asisa sees this as the most urgent issue to solve.”



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This is of great concern. They are cutting open the goose that lays the golden eggs.

This should be of great concern for other reasons too. This will probably walk down the same route that every other similar scheme has gone the last 50 years, the youth that are supposed to fund the scheme are not contributing enough to fund the aged at the other end. This will be even worse in our country where the youth unemployment is so high. Please review the case studies of Japan, USA and Canada where this very scenario is playing out in various stages.

We need to have the discussion about being a pseudo welfare state with such a small tax base compared to the population.

Yes, it’d be funny if weren’t so desperately sad. By accident of birth, we have a situation where a tiny minority of people is harangued and harassed by what amounts to a mob of car guards.

Why don’t we ask the Swedes, the French, the Germans, the Japanese, the S. Koreans to contribute a little % of their own salaries to provide “adequate income security” for all adult South Africans. They’d laugh, of course.

In other countries, social security is for the tiny minority who struggle… not literally everyone who isn’t driving a Range Rover!

I am not unhappy about this idiocy though. It may just convince sufficient numbers of people to participate in a tax revolt, which will be far, far more effective in bringing the cadres to other insights than any election could ever be. The key to this would be to convince the heretofore spineless corporate sector to play its part and pay over taxes to a trust fund, administered by, oh, I dunno, Solidariteit…

The death of the insurance industry, brought to you by a an ignorant uninformed ANC

Only the wealthy will in future be able to afford what will be known as private RA’s

This is stealing and the only people who will be able to manipulate the system are the self employed

As for the rest, your employer is an Agent for SARS, and you have no say in the matter

How can the middle class afford this when they’re left with a pitons as it stands currently

What about employers contributions? Will that fall away?

What about those already on retirement? Must they also contribute?

I hope these idiots get punished at the polls

‘I hope these idiots get punished at the polls’

From your comment you are aware of the dire lack of intellect in the ANC, I doubt that there is anyone there who would be able to produce even a meagre two paragraph white paper. So the question is which think tanks are writing these papers and who funds those authors, once you know that you can connect the dots. For instance just take a look at the funders of The Institute for Economic Justice.

Instead of thinking of creative ways to stimulate the economy, the ANC think of creative ways to bash the middle class even more

Don’t they realise that a10% to 12% contribution removes consumer spending, resulting in billions going into one fund and away from the economy

This will result in many businesses retrenching staff or even closing up shop

A vicious circle, whilst the masses produce more offspring so the middle class may pay for their grants

Little wonder SA has been reduced to a failed state

Unfortunately, no, they do not think or realise this. They think that like so many of their other ideas, it will work because they thought it up. They come up with every.. Let’s call it what it is, slander for those who critisize the ANC and their hare brained schemes. BUT history (and the present) speak volumes as to the effect of these ideas and policies.

Eish, she’s blokken Boss, wait, hang on, you not Boss anymore, I am, eish, the country she is fine for today!

Never been happier about my imminent emigration as I am after seeing this article.

Just another scheme to create an economic tit from which the ANC cadres ultimately can suck. So obvious it is laughable.

This is just dumb. No wonder rich people leave South Africa.
I strongly believe increase in tax related issues, are against the constitution. This should be voted on by the people, not corrupt politicians/government alone

You don’t have to be rich to leave, I left SA with just R50 about 5 years ago. Thankfully since then my hard work has paid off.

South Africans are in high demand overseas, we are seems as cheap but high quality workers.

SA democracy is fake…
Nothing democratic about being a slave, the media often refer to the anc as the Ruling Party.

Ah, the effect of self-selection! South Africans who emigrate are indeed low-cost high-quality workers. The ones who don’t though… are expensive low-productivity workers… if they deign to work at all.

Where did you go?

Bravo PurgeCoin – for various reasons I need to hang around a bit but I’ll give my non-SA passport a hug when I get home … SA is a failed state. No better description. I’m gonzo’s too then

Well they can just (short copulating movements) off!!!!

My partner & I have received our go ahead to settle in the Netherlands. Primarily for our twin toddler boys…

Sad to see the departure day arrive but the fabric of this country has frayed beyond memory. Excited & relieved for our boys future

I suppose the change people want, cannot be materialised by government

To answer everyone questions.
I left my wife and new born in SA after receiving a job offer in Dubai, which I was actively pursuing for over 8 months and eventually got the job. It was not straight forward as my qualifications were just a matric however up to that point I chased every learning opportunity at work and built up a decent set of credentials and reputation.

The job offer has a 6 month probation period of which I nearly lost my job due to high risk idea which I believed in, my new bosses had my termination letter printed and on a Thursday afternoon at 1pm were going to serve it to me but by some miracle it all came right by 11am. The solution was so good that after my 6 months were completed I was given a company car, salary increase and a R50,000 bonus.

Two more years of continuous hard work and the company awarded my with a higher salary and benefits which allowed me to bring my family up.

In the first 6 months that I lived in Dubai I stay in a room that was 2m long, 1.5m wide which had a bed and a dresses. My rent was R12,000 a month.

That R200 was money my mom gave me, by our son needed food so I gave my wife R150 and I kept the other R50 which I used to get a taxi in Dubai from the airport to my hotel. My first day I walked to work, not knowing anything about Dubai let alone another country…

In the end it all paid off and I continue to progress and all my family to enjoy a good life one that we could not otherwise and very sadly have in SA.

To this day I try my best to help any SA get out, especially those who have kids. I owe it my son that he must have a decent life one in which he will be happy, learn and grow.

Contrary to belief, every time I see an article or post that is negative about SA, part of me cries because the people of SA deserve so much better that the nonsense which they are giving by the political classes who only seem to ever seek enslavement of their countrymen.

No wonder Tito Mboweni left.

At least we can trust that good ‘ol Cyril will resist this new capture by remaining in government with his majestic meekness and long term vision.

I am surprised that some of Cyril’s biggest fans are critical of this structural reform. Don’t they know how big a mandate the man will get by distributing more crumbs amongst voters? The main slice will of course be allocated to the glorious governing party.

The ship has been turned around and we are now truly in the New Dawn.

Looks like government needs more money to loot

This is state capture 2.0

The ANC has run out of tax to loot and needs to create other streams

EWC, NHI and now this. SA is truly doomed, proper communist state.


Look at the cabinet-Patel, Gordhan and Godongwana are communists

FLEE -if you can!

I heard the waiting list of South Africans for Australia is currently 40,000.

Aagh Sam- we gifted it to the terrorists in 94 full knowing they were communists — Nothing new here !!

At least there is a maximum amount of tax i.e. 100%. If one one adds up all the proposals it will probably exceed taxpayers pre-tax income.I predict will get many taxpayers jailed for underpaying tax as politicians cannot understand that the countries taxes are finite.

And the next tidal wave of emigration is coming !!
Next step = exchange control!!!

Hilarious. The South African middle class was already the most taxed in the world, now this.

I’m tempted to imagine the authors are in fact trolling.

Normally, a percentage point one way or another is considered a big deal.

But what 8-12 % does is it makes very stark indeed just what a ridiculous situation we have on our hands.

Typically anc government style; first dish out money and then asks where will it come from while our fiscal is empty and eroded by the government on bee and 1000s of cadre employees and projects, small wonder the previous minister of finance resigned, from now on I can easily mow the lawn myself and you know what that means for the now ex gardener

Is there an election coming ?

I’m not sure this is a crowd-pleaser. What voter of working age is going to support a 12% hit in exchange for the promise – by the ANC – of a pension of intedeterminate amount in the distant future ? It’s more likely there’ll be riots when the payroll deductions begin.

It’s now time for companies to stop cooperating with SARS and government and pay their employees off the the books or in kind. Until such time that the government can prove it simply does not steal tax money to personally enrich ANC cadres.

Or pay their employees without deducting PAYE. Then let the onus rest on employees to pay the tax to SARS themselves.

It is evident South Africa can no longer afford this government. It is an accepted adage that the private sector uses capital better than government does. Yet this government thinks it can continue heaping more taxation on an over-stretched economy. Forget about this insane scheme and fashion a strategy to enhance job skills, create more employment, and so alleviate poverty. Taxes will then flow naturally to the fiscus (given that corruption is also attenuated) for social distribution. Our mantra should be: reduce taxes NOW!

The logical approach, but of course far too complex for the ANC brain.

Conceptually this is not the worst idea in the world. Looks like they have been looking at the British system. Implementing it, nope, not in SA I am afraid. Managing it, nope, not in SA I am afraid. Protecting it, nope, not in SA I am afraid.

I wouldn’t be too concerned about this proposal, lets be realistic we actually cant implement anything in SA.

WHAT COULD GO WRONG???????????????????????????????Giving the government MORE of your money to hold on to. I mean the Gupta’s left. What could go wrong. Did any read how they raided the Lottery’s offices????

Common thieves, what more do you expect?

Faaark me!! Godongwana wastes no time. It is clear the ANC is out of cash, they can’t even pay SARS

Or their own staff’s salaries. We all knew that at some point the trough will run dry considering the rate at which the Cadre’s manage to STEAL.

I am just seriously confused about what exactly the role of the PIC is and if this new so called Peoples Pension Theft Fund will be investing in el Doctore Surve’s whatever new venture he is going to cook up!!!!!

That is exactly the problem with people who have no clue how to govern a country, they take the easiest way out. Creating jobs is one task they have failed at because they are unable or unwilling to change their macroeconomic policies that will unlock the economy and create jobs. Solution? Tax them.
The taxes we already pay:
1. Income Tax (insane brackets)
2. VAT: 15% of what you remain with still goes to the govt, whether you see it or not. Effectively , your net salary is not what you see.
3. Security: we pay for extra security because the State can’t protect us even with the taxes they get from us
4. Education: we pay for good education because our taxes are used to pay for mediocrity we don’t want our kids exposed to
5. Health care: we have to pay for good healthcare otherwise you die waiting for your tax to provide you with good health care.
What else?
6. Oh we are also expected to pay for that TV License
7. Pay for your annual car license
8. And pay for the scam called renewing your driving license now and then.
9. Massive entitlements: free education; paying people to have babies while the rest of us toil, etc etc etc.
Can someone tell me what I’m left with after all these govt scams?
More than 18 Million people on welfare may suit politicians in getting votes but with a thinning and increasingly overburdened tax base soon you will have no milk left but blood. Text book case of how not to govern a country.
Lemme Rest. JM.

Do not forget:
Tax on petrol
Carbon Tax on tyres (That we see no benefit from)
Toll Roads
Estate duty tax
Capital gains tax
Duties and import tax
Regional levies

And you might as well include:
PIC propping up tax (thanks Dr Surve)
SABC propping up tax (thanks Cloudy)
SAA propping up tax (thanks Dodo)
Denel propping up tax (thanks Gabba’s)
Eskom propping up taxes and tariffs (thanks Gabba’s)

eish my ink is running out of all these enterprises!!!

Oh ja then:
Rates and taxes from the municipalities
Tax on water
Tax on electricity
Tax and excise on alcohol and tobacco
Import taxes
Taxes on security, education, health and similar services. Remember we pay 15% tax on the service and the company pays company tax ne!!!

And the list is in fact endless

My God, I couldn’t list further because I was getting angry as I wrote. Thanks for adding. So what remains for us to save or invest? And the guys are happy to thieve whatever they get from us. But someday something must give and it will.

I can add dividend tax and tax on interest. Only tax to be removed was stamp duty.

Awe shucks I want a Ferrari but cannot afford it this year.

I wonder if current pensioners will also need to pay 12pct of their taxable pension income ??

One positive out of all these racist, criminal ANC schemes is that the economy will collapse faster so that once it hits rock bottom then the rebuilding can take place in time for those born today being able to enjoy a better life in their old age. That’s if they are able to survive that long in what is left after the economy has collapsed.

It is fascinating to see south africa come apart at the seams, exactly according to that old african-country-liberated script.

Populism is simply the next logical step in the process. Welcome to it. Look, there won’t be many high-income earners left a couple of years after the enforcement of these new taxation schemes, but that matters not, for it kicks the can down the road another 5 or 6 years. And the end of the road scenario will be “someone else’s problem”.


Starting off by stating the obvious; the average South African cannot be treated like a donkey and be burdened with more load than what they already have to carry. The current fallout is entirely government made before 2020; this was exponentially accelerated with Cyril’s imprisonment of the general public and business SA with hard lockdown for months on end. Couple this lockdown with some extremely short sighted and draconian restrictions and you have now the after effects, which again, we are saddled with. Approx. 2 million jobs lost, more emigration of skilled and hard working South Africans (who contributed with their taxes by the way) and more “creative” tax laws and amendments on the brew or already enacted. We the common people of this country had to bear the brunt of lockdown with job losses, more broken promises by government, less income and more finger wagging by those who are supposed to serve RSA and her populace. I find it hard to believe that our elected elites had to endure the same. I am also troubled with thoughts of how we just meekly accept this from those whom have lost touch with us (generally speaking now) that put them into power in the first place. We who contribute to the economy are being “penalised” with more and ever creative taxes being drawn up on a whim by self serving politicians; they who tell us to give more whilst they shove their snouts deeper into the trough. We work harder to pick up the slack in income from SARS’s now extortionate taxation and then are told that there is even more taxation on the way? The mafia state is just digging their talons deeper & deeper into you wallet and applying more pressure with their boot on your neck. This is how revolutions/insurrections are cooked up because the common man/woman is fed up with those who should be serving (instead of stealing) while we that foot the bill slide ever more backwards.

And another 8-12% motivation to resign, move to a quiet village and live from a grant.

Nee man Japie, this is designed the other way. Only the first 276k is subject to the levy, therefore if you pick yourself up by the socks and earn an extra R1m, that R1m is effectively “tax free”. Bargain!

Unless you earn so little that you don’t pay the levy but collect the R14k per year grant as a sweetener. I haven’t seen the loop math on that. If you earn more than 20 you pay the levy but does that 20 include the 14k levy we all receive….

Only 90 pages, please read and send comments to GreenPaperCSS at dsd . gov . za

45% Marginal tax Rate + 12% NSSF + 15% VAT = death of middle class

This tax is on formal working middle class people only.
Informal workers (eg taxi drivers), Directors (paid by share options/dividends) are exempt

Can’t let a good crisis go to waste – let’s use covid-19 as an excuse. There are 22 references to Covid-19 in the Green Paper (90 pages)

Page 29/Section 3.3.3 Unemployment
Paper acknowledges unemployment does nothing to fix unemployment.

DEFINED BENEFIT – 40% return – middle class will need to ‘top up’ to maintain levels of income on retirement – See Section 4.4.1 Retirement

Pension + Insurance – Combining Savings + Risk is a common insurance tactic to provide low returns on savings by inflating risk cover. Most insurance companies stopped this practice a long time ago.

So with all the references to COVID-19, their assumption is that COVIED-19 will not go away. Then why keep the economy closed?

Run for the hills!! Invest overseas now or you will be poor!!

Fascinating. I suppose workers in the informal sector will be providing details of their lifetime earnings and length of service.

I know, they could make this a tax levy that gets deducted off the primary, secondary, plus medical aid credits. Those are anyway just bonus money for taxpayers because we tax people and then give them back the rebates. Aslo, it should be calculated before retirement / pension tax deductions. Saving for retirement is anyway a capitalist luxury.

The grant should be tax-free because the head hurts too much imagining how to tax something that must help you

I can imagine the state worker cadres relish giving their R22billion to their Comrades. That R1500 cash bonus? Now have 2700pm new tax. Viva, viva comrades

This is fine as long as tax rates go down by 8-12%

Do these morons take lessons in the ABC of how to destroy a country.

This will happen.. same old ANC tactic – come in swinging with a high number and then following backlash and eventual ebbing of discontent will agree to make it 5%.

Every time I hear Cas Coovadia…. he is always striking a balance… always taking a middle line…

Cas gave the Same story for the New finance minister….

Please call a spade a spade Cas. I think you have a ANC agenda at the back of your head! You need to revisit your logic!

This extra tax is no good for the country (except the ANC and its looters).

The final stretch to Zimbabwe 2.0. Wipe out the taxpayers, well done afro nationalists!

The principle is one thing.
Is this tax on top off your pension contributions?


‘nough said!

So instead of taxing the rich, like the ANC parliamentarians and their ilk, they want to tax the most economically pressurised and productive sector of the economy.

Expect a flight of professional and blue collar workers equal to the 1994 emigration.

The Scam Artists are at it again . . . devising new “policies” from which to acquire more wealth, i.e. from which to feed at the trough. Trough feeding is the ANC’s number one priority!!

It has been a long-term goal of our master’s masters to destroy the middle class. They are merely implementing as instructed. UN Agenda 2030 and global socialism.

Its not doable and national treasury is not supporting this – Just an election ploy…

With 23000 plus child pregnancies in Gauteng alone a year, no amount of money will be enough to provide for future generations. This is the result of the money-for-free grants that has been dished out this past year. SA is beyond saving.

934 cases of the girls between 10 – 14, but a FEW cases of statuatory rape being reported. Wow, the S. A. justice system can’t even see obvious crime. And no profiles of the fathers. Shock

This NSSF will go the same way as the Accident Road Fund namely bankrupt after the cadres get their snouts into this new delicious trough…

They are taxing the wrong people – 58% of all tax income goes to 2.5% of the population, the government employees.

Cut their income, not that of the productive citizens that produce the taxes.

Maybe this is an indirect way for the ANC Gov to cut the exorbitant gov salaries.

Just one step closer to becoming a socialist state. This additional proposed social contribution is taking South African closer to everyone being a bunch of subsidized, bone-idle, ‘sit on your ass and do nothing all day’, citizens. Only recently I sold my last property in South Africa after having left the country to work in the Middle East in 1996. And with my shiny new British passport – thank you mom’s dad for your lucky birth – I strongly suspect that it will be a long time before I decide to be in South Africa again, having last been in South Africa in 2013, and am strongly encouraging my aging parents to move with me to Thailand eventually when I retire. How much more blood can the government squeeze from the ever-diminishing stone that is the South African tax based? Not much I would care to guess. I strongly oppose a welfare state, except in very few select circumstances such as disability resulting in the inability to work, and for me anyone who does not work and contribute to the economy should not be supported by those for whom an honest day’s work is the norm. Bye from the Middle East, where I am very happy to stay indefinitely.

With all these commissions running investigating graft and state capture, I have my doubts that this scheme will be used for what it appears to be used for and not just another fleecing tool.

If something is going to trigger a general tax revolt, this could be it 🙁

The revolutionary Zuma-looters had their chance to show the country how unhappy they are. And all the service delivery protesters had their time. But it’s always the silent middle class that takes everything in their stride. Beware the day no-one deducts PAYE tax, or pays VAT (in cahoots with comp management & accounting industry)….we will all queue for years to go to jail.

(Jail won’t be manned either. As Govt salaries would cease to a full stop….I don’t know a govt worker that will work diligently for free)

Why no middle ground? Like R450 to ALL SA citizens. This will reduce crime, reduce babies (for child grants) & eliminate poverty. And it will increase economic activity. (It must be to ALL, because otherwise the administration will cost more than the grant itself!)

Small business owners, will get rid of a third of the employees in order to pay this tax. All that is means, is that the other two thirds will have to work harder and smarter, but the main thing is that the ANC “clever” Govt will once again cause more chaos and more people losing jobs.

the question : when will the ANC and Ramaphosa be able to think about anything in life and its consequences- Eish!!! to the clever people of RSA: get out of this country quickly as it is crumbling fast under Ramaphosa.

If ai understand this, people will pay toward this on their first 276k per year income.

That effectively means the tax disproportionally hits lower income groups. If you earn R2m then the tax is 12% of 276. If you earn R400k the tax is 12% of R276.

How do these geniuses think this will fix income inequality??? The tax should be progressive. Nothing on first R300k, 5% on next R300k, 7% on third 300k, etc

Just creating another trough from which the politically connected can feed! And the suggestion that employers still continue to pay into UIF is laughable! – a bankrupted Fund that has been so abused and stolen from….these people couldn’t organise a piss up in a brewery – all they know is” give me money, give it now and give it for free!” Sis man!

End of comments.




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