The state of South Africans’ Retirement Savings
Allan Greenblo, Editorial Director
Year in and year out, Sanlam and Old Mutual report their respective research into different aspects of SA retirement savings. Effort and expense go into the Sanlam Benchmark survey and the Old Mutual Retirement Monitor. Year in and year out, they refresh the levels of desperation at the accepted absence of a “savings culture”. What’s the point?
Ok, so the reports can provide a tool for sales consultants. Ok, so more people can be shocked into thinking about their retirement plans but not necessarily acting on them. Were it otherwise, there’d be bright spots to highlight. Without them, there’s a train smash taking place in slow motion.
It hardly bears repetition that South Africans are spending more than they’re saving. The habit is ingrained. And it won’t moderate, let alone reverse, at least until government leaders set the example by switching their behaviour to displays of austerity. It’s a big ask. But that’s with whom the research reports should land with the biggest thump. It’s unlikely.
More likely is that the spendthrift consumption will continue, with the flashy vehicles and the snazzy attire and the perk indulgences, as will the crunch in household savings. The one is concomitant with the other, just like over-expenditures trigger the hardship of debt downgrades. Few in the public eye are setting models of constraint for lesser mortals to emulate. Surely an opportunity for political mileage is being missed.
"It hardly bears repetition that South Africans are spending more than they’re saving. The habit is ingrained. And it won’t moderate, let alone reverse, at least until government leaders set the example by switching their behaviour to displays of austerity.
The latest Sanlam survey focuses on the middle class, mainly respondents earning between R400 000 and R1m a year. Most of them have post-matric qualifications. Neither their earnings nor their education offer relief from financial stress (defined as “emotions associated with the difficulties that an individual or household may have in meeting financial commitments due to a shortage or misuse of money”).
In fact, the survey finds that 73% of them experience financial stress. The survey being too polite to attack the propensity for debt-fuelled consumerism, it attributes the stress to such factors as obligations that range from support for members of an extended family to paying school and university fees, and not having sufficient for unexpected emergencies. As many as 42% admit that they’re simply unable to save for the future.
Their expectation, possibly forlorn, is that they’ll be able to work beyond retirement age. Where and at what remuneration in a low-growth economy? Or, probably inevitable, that they will reduce their living standards. By how much do they anticipate, given the compounding inflation of healthcare costs alone?
So we dream on. For a reality check, it could be useful if a future survey were to compare the pre-retirement expectations of respondents from say 10 years ago with the actual circumstances they ultimately confront in retirement.
Old Mutual surveyed 1 008 individuals, with matric and above, living in metropolitan areas and having full-time employment. It found:
- Between the years 2012 and 2016, the number of working South Africans intending wholly or partly to cash in their retirement savings had increased from 19% to 35%;
- 30% have no formal retirement provision;
- 25% are in the “sandwich generation”, supporting both child and adult dependents;
- 73% believe that they have no alternative other than debt.
There you have it in a nutshell. The unanswered questions are who’s going to do what about it.
Viresh Maharaj, of Sanlam Employee Benefits, looks to employers: “Workplace-based financial wellness programmes provide the opportunity for them to address the drivers of their employees’ financial stress at scale. Amongst our respondents, six out of 10 indicated that they would be interested in such programmes. Another two out of 10 were open to such initiatives. Respondents expressed an appetite for programmes that include access to financial advisors, financial-literacy training and budgeting tools.”
Many employers do try. The trick is not so much in getting horses to the water as in getting them to drink.
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