What if SA is where Zimbabwe was ±20-25 years ago? With the benefit of hindsight, what would the average Zimbabwean do differently? Would they have stopped investing into their pension funds and bought more foreign currency? Would they have emigrated? Would they have bonded their houses to the hilt and taken the funds offshore?
I have always promised my clients that I would not invest their funds where I am not investing myself…if it is good enough for me it is good enough for them. In the same way, I have been a massive proponent of retirement annuities (and pension funds) in SA – they have made so much tax sense (as well as estate duty sense). But what if this is all about to change? If SA goes the way of Zim then I am afraid that your pension fund in SA will be worthless. If the state re-introduces prescribed assets for pension funds, then possibly it will be better to have funds offshore. If Zuma has been paid his commission for the nuclear deal, as some are suggesting, then we are facing a bleak future and a very weak currency – then it will be better to have funds offshore.
They say you should never ask a barber if he thinks you need a haircut and unfortunately this seems to apply to fund managers and pension funds too? If you ask them if it still makes sense to invest into your pension fund in SA they are likely to answer yes – their income depends on it. But what are they doing with their own money? I’ve asked a few of them but no one is prepared to stick their necks out – I suspect that they are all moving as much money offshore as quickly as they can but no one seems to be brave enough to say this in public.
So perhaps it’s time that we had a frank discussion about the future of pension funds in SA – we might not be Zimbabwe yet but perhaps we are the proverbial frog in the pot of water and perhaps we are reaching the point where we will no longer be able to jump out? So how about it, anyone brave enough to express an opinion on this one?