Bleak reality of retirement in SA

South Africa is sitting on a ticking retirement timebomb, with National Treasury saying that in 2019 only 6% of the country’s population was on track to retire comfortably.

Chris Eddy, head of investments at 10X Investments – which released its third annual Retirement Reality Report on Wednesday – said the Covid-19 pandemic has highlighted the urgency needed to tackle the retirement savings crisis.

The report is based on findings of the 2020 Brand Atlas Survey, which tracks and measures the lifestyles of the 15.1 million economically active South Africans living in households with a monthly income of more than R8 000 (through online surveys).

The report revealed that South Africans do not retire with dignity and there is seemingly little sign of improvement, as 49% of people surveyed said they don’t have a retirement plan; last year it was 46%.

Women are the worst when it comes to saving, with 53% saying they don’t have a retirement plan.

The key reasons

The report states that many South Africans will face a bleak reality after their working lives come to an end.

“A frightening number of people have not formally planned how they will fund their retirement. Of those who have, few are monitoring their progress.

“Most don’t know whether or not they are on track to meet their goal to be able to support themselves in retirement, never mind in any comfort.”

Another reason for South Africans not saving for their retirement is because there is simply not enough money to live a decent life and save.

“Some of this is down to economic hardship. It is simply impossible to save without a minimum level of income,” according to the report.

“This year more than half of the survey’s respondents indicated severe financial stress.”

Beyond that, it is not just an income issue, because people in low-, medium- and high-income brackets are equally worried about making ends meet in retirement.

The report indicates that it is rather a savings problem that is rooted in the widespread lack of retirement planning.

“[Of those] who do have retirement saving plans, dangerously few are monitoring their progress. Most don’t know whether or not they are on track to meet their goal to be able to support themselves in retirement, never mind in any comfort.”

The last hope

Eddy said the silver lining is not obvious, as the data paints a picture of the population sailing blindly into a worsening crisis.

The coronavirus pandemic might however have helped drive the message home, with Eddy saying that there is a possibility that some lessons may have been learned as sudden lifestyle downgrades became a reality for many.

“If there is to be a positive from our state of economic and financial disaster, perhaps it is the increased awareness of our vulnerability to life’s unexpected broadsides,” he said.

He said that the glimpse into the future of what poverty feels like for many may finally convince people that they cannot afford to ignore planning for retirement.

This article first appeared on Moneyweb and was republished with permission.

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