The plight of the South African teacher and government pension plans

Perhaps the most hapless lot in the new RSA are the teachers employed by the department of education.

Most are just longing for the day that they can retire or just quit and start something else.

But there is a problem – teachers have a lousy track record at doing anything but teaching. ‘Matthew you fool, ‘my bratwacker Dad would say ,’that’s  why we became teachers in the first place. Those who can’t – teach. Those who can’t teach – lecture. And those who can’t lecture – consult.’

Every day South Africa’s teachers are being tempted with ‘quit, cash in their pensions and start again?’

Some may even score a million or more. And that’s a nifty sum if you have a loan-shark on your case, a stuffed up car and three kids called ‘Money, more money and even more money’

Then come rafts of financial advisors claiming they can beat the state pension fund.  Some should be shot at dawn.

I have an official policy never to give advice to teachers. So here is my call on a teachers predicament…

Rumours abound that teachers are going to be shafted by amendments contained in the income tax act that become effective next year. Some even make the press. These rumours are b%llsh%t. Actually the GEPF has a nifty pension guarantee of an annual increase of 75% of inflation that would cost a fortune to replace privately.

The teacher that serves 30 plus years on the Government Employee Pension Fund and retires post 60 is pretty well funded for retirement compared to others. And the pre-1998 service ranks for a healthy tax-break. Then add a state subsidised medical aid. All this is worth far more than a poke in the eye.

If a teacher retires before 60 a penalty of 0,33% per month is applied to the actuarial casino value of the fund. This leaves early retirement between 50 and 60, like failure, not an option. For ‘fifty something’ teachers they could lose out on both years of service and up to a further 40% of the actuarial value. And they will never catch that up in the few years before retirement.

But the result may differ if teachers win lotto jackpots or stand to inherit the earth. Few do…

Teachers over the age of 45 with 20 years service should see it through to 60 to get past the early retirement penalty. This all leaves teachers over 45 ‘married to the school bell’. And perhaps that’s what is keeping the department of education going. Which is pretty sick.

But there is an interesting conundrum on whether to retire at 60 or 65. Retirement at 60 means that the teacher still has at least a crack at finding part-time employment that may supplement the pension until 70. If retirement is postponed to 65 the prospects of starting up again are really grim.

A teacher aged below 40 has more than 20 years service to go before the pension penalty lapses. For some the thought is unbearable. The hope is that in 20 years they could replace the GEPF. But it will take some commitment.

With the changes in the tax act coming into effect on 1 March 2015 it would be a damn side fairer for young teachers if they were to be able to make their own provision for retirement using retirement annuities. That way the teacher is rewarded on a monthly basis and they at least know where they stand. Above all they would not be left in their 50’s chasing the dangling carrot that is a GEPF pension.

But before quitting to pay off the loan-shark or buy a new car, teachers should ask the question ‘quo vadis?’ (where to from here?). The answer for many is ‘Nusquam’ (going nowhere).

They don’t have another form of training and opportunities in the private schools are few.

My advice to a teacher considering resignation is to try a part-time MBA first. It’s not the sweat MBA graduates make it out to be. Teachers make good MBA students because they can write assignments and organise their lives. They are an asset in any MBA class.

An MBA opens up all sorts of horizons. Who knows, the teacher may even fall in love with teaching all over again. And an MBA can become a shortcut to headmaster. That will be pretty useful in increasing the GEPF pension benefits in the long term.

Yes, an MBA is good insurance for a teacher who feels threatened in the new RSA.

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