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Too little, too late

South Africans are failing themselves when it comes to retirement planning.
Research shows that many South Africans are prioritising their current lifestyle – at great expense to their future selves. Image: Shutterstock

Only 6% of economically active South Africans have a thought-through plan for their retirement. A further 27% have a ‘pretty good idea’ of what they are doing. The vast majority, however, have no plan at all, or a vague plan at best.

Source: 10X South African Retirement Reality Report

This statistic from the 2019 10X South African Retirement Reality Report, which is put together by sampling the universe of 15.1 million economically active South Africans, illustrates the scale of the retirement problem the country is facing. And it is made even more concerning when one considers that 72% of those who said they have some sort of retirement plan still feel unsure whether they will have enough when they retire.

Source: 10X South African Retirement Reality Report

The current economic climate and weak market returns would contribute to this feeling of unease, but no matter how you explain it, it is clear that a significant majority of South Africans are ill-prepared for retirement. The report suggests a number of reasons for this.

Friction between the present and future selves

The first is that many people feel they simply can’t afford to save. Of those who have no retirement plan, or only a vague plan, 55% said this is because they don’t have enough money.

Source: 10X South African Retirement Reality Report

It’s also significant that a large number of respondents noted that saving is not a priority for them. Taken together, these two responses point to how poorly retirement planning is understood by South Africans generally.

“The data show that many South Africans prioritise their current lifestyle, at great expense to their future selves,” the report notes. “Most are leaving it perilously late to start applying their minds to implementing a retirement plan. It’s a terrible trade-off because while current lifestyle improvements made by not saving, or saving too little, are marginal, the resultant drop-off in retirement will be dramatic.”

Financial literacy

It also seems apparent that South African savers are not equipped with the knowledge they need to make informed decisions about saving for retirement. The graph below shows that many people have little sense of how important it is to save over the long term.

Source: 10X South African Retirement Reality Report

While a majority of respondents did acknowledge that saving for retirement should be over at least 30 years, 19% felt that it could be achieved in less than 15 years.

In other words, almost a fifth of South Africans hold the view that saving for retirement is a short-term endeavour.

How much does this cost?

This is compounded by the fact that most people have no sense of one of the most important impacts on their saving – how much they are paying for their retirement products.

As the graph below shows, half of respondents do not know how much they are paying. A further 18% believe they are paying nothing.

Source: 10X South African Retirement Reality Report

As the report notes: “The fee paid on an investment might be difficult to find (and almost impossible to understand), but you can be sure there will be a fee.”

That almost a fifth of respondents feel they are investing at no charge is not just an indication of a gap in knowledge, but an indictment on the industry.

It should not be possible for any investor to be under the impression that they are not paying for whatever product they have taken out.

This is clearly a failure both on the part of whoever advised them and whoever is providing their investment reports. Charges should be obvious, transparent and prominent. This response shows that this isn’t always the case.

So what now?

South Africa’s savings problem is not just an issue for individuals, but the country as well. As the Investec Gibs Savings Index, which was released last month, points out – a country cannot spend its way to prosperity. We have to save our way there.

South Africa’s current household savings rate is, however, zero.

For every rand saved, another rand is ‘disinvested’ through short term debt.

Correcting this problem should therefore be an imperative. The basics of investing should be taught at schools, saving should be encouraged by employers by offering compelling employee benefits, and government should prioritise reforms that will incentivise saving.

As the report notes: “According to information released by Stats SA in April 2019, 49.2% of South Africa’s total adult population of 35.1 million live below the upper-bound poverty line.

“Without action taken to tackle the retirement savings crisis in South Africa this will be pushed significantly higher.”



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Great article Patrick!! Now how about one on how to get your pension money overseas with the least tax possible!!!

100%. Now how about an article comparing the options and costs for forex. Please.

I am a bit gatvol for meaningless articles like this one. We are not “failing” ourselves. The corrupt ANC and cadres looted the country into bankruptcy for which the few remaining taxpayers must now pay so they have no money to save. Plus they must pay extra for services which the government should provide. so call it what it is.

Between 90 – 95% of the members of the five largest umbrella funds in South Africa are taking their retirement funds in cash when they resign from their employment, instead of preserving their retirement funds for old age.

These members are indeed “failing” themselves, despite all the well-meaning advice offered to them in the world.

They/You can blame the government and the ANC and corruption and SARS and retirement funds and anyone and everyone else as much as they like, ad infinitum ad nauseum – but I can guarantee you they will pluck the fruits of their own endeavours at retirement age.

When it’s too late to do anything about it, they will only have themselves to blame.

I am afraid that should we have a Zim outcome (or worse) in the future nobody with a SA pension will have enough money to retire regardless of your plan or ability to plan. Reg 28 and your caring ANC government ensures that.

“South Africa’s current household savings rate is zero.”
This statement is patently false. Strangely it is nonetheless repeated as though it was otherwise.
Worse, the methods used by banks to determine savings is just plain lame.

Agree. Then there’s the report about SA having the “8th largest retirement savings pot in the world”.

(This is while SA economy comprises 1% of global economy….I think Saffas punch way above their weight.)

Doesn’t goes hand-in-hand with statements that we are poor savers. Ranked 8th place, we are great savers, right(?)

And not a word about Reg 28 and how this is making investors poor. Why would I invest my money pre-tax when I am forced to invest 70% in SA equities which have lost you money after inflation over 5 years and more?
How can MW hope to be taken seriously when all it does it regurgitates the press releases from investment companies? Please publish the 5-year results from TenX for all to see….and then they can decide whether to put their money into these products.

@Patrick Cairns

What are you doing? You write this whole long article about people not knowing to put savings towards their pension, makes it look a little like you’re trying to get 10X a few clients, but let’s not make any assumptions now.

Also, you somehow manage to not mention Regulation 28, the exchange controls and everything else should you wish to put your hard earned money into overseas savings or investments. Do you expect everyone in SA to just invest their prescribed 70% in a country which is hardly a water droplet in a ocean of investment options?

Saving for when you are old and can’t earn an income is great, don’t get me wrong. Otherwise you sit with a middle age generation, and we already have this globally, not just in South Africa. Where the working adults have to financially look after their parents and their kids, so one generation paying for three generations, so is it a problem, yes, BUT…

Now the BIGGER question is, what are those savings going to be worth when this country gets downgraded to junk and the whole scenario plays out where the people paying the largest portion of tax leaves and the ANC can’t bail the SOE’s and country out of it’s debt pit.

You’ll notice I said ‘when’ and not ‘if’ because I believe if you look at the direction of policy and the economy, it’s only going one direction and that is down. I would be willing to change the ‘when’ to an ‘if’ when the ANC makes positive changes that can fix things such as the unemployment disaster staring us in the face.

Upper-Bound Poverty Line:

You quoted Stats SA and it reads something like that, ‘49.2% of South Africa’s total adult population of 35.1 million live below the upper-bound poverty line’. I assume that’s the population from 18-80+? There are no reports published during April 2019 on Stats SA’s site under the categories ‘Economic growth’ or ‘Population characteristics’ so I don’t know. So taking these figures, it say that 17.3 million people in South Africa live below the upper-bound poverty live.
Question, what is the definition of the upper-bound poverty line?

Stats SA published the report ‘P0310.1 – National Poverty Lines, 2019’ on 31 July 2019 and this is their definition.

‘Upper-bound poverty line – R1 227 (in April 2019 prices) per person per month. This refers to
the food poverty line plus the average amount derived from non-food items of households
whose food expenditure is equal to the food poverty line.’

So you’re worried about people not saving for their pension, but you wish to not unpack the box that shows us that of 35.1 million, that 17.3 million have less than R1 227 per month?

Number of people employed in South Africa:

I’ll go on the stats from ‘Quarterly Labour Force Survey (QLFS), 2nd Quarter 2019’ published 30 July 2019.

Apr-Jun 2019:

Population 15-64 yrs: 38 433 000
Labour force: 22 968 000
Employed: 16 313 000
Unemployed: 6 655 000
Not economically active: 15 465 000

So the so called labour force is made up of the employed and unemployed categories, so Stats SA just ignores the 15.5 million that is not economically active?

So if 16 313 000 (or 42.4%) out of 38 433 000 is employed, I can’t help but question the definitions of unemployed and not economically active.

I am the only one that notices that 22.12 million (or 57.6% of) people are not employed?

Should you chose to remove the age group of 15-24 for the sake of argument that they are still attending school and university, this is what it looks like for the age group from 25-64 years.

Population 25-64 yrs: 28 140 000
Employed: 15 145 000
Unemployed: 5 145 000
Not economically active: 7 851 000

So 15.1 million out of 28.1 million are employed, so 53.8% leaving 46.2% either unemployed or not economically active.

Tell me again how you are worried about people not saving for their pension when hardly 50% of people are employed.

Surely we as a country (not matter who is in charge of government) should be looking at far greater problems such as the unemployment and the economic environment that is causing this disaster to play out?

Your comment is more insightful than the article … moral of the story? Read with an open, inquiring mind and challenge the facts.

End of comments.





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