Pensioners battling dwindling pensions

Pension funds invest in property assets and any decline in rent collected for commercial property, such as shopping malls, will reduce the returns of pension funds, says Prof Jannie Rossouw, head of the Wits Business School.

“This will reduce the returns on investment that pension funds receive. The same holds true for office space, with people working from home.”

Rowan Burger, head of strategy at Momentum Investments, said the economic consequences of the Covid-19 pandemic lockdown are severe, with a significant short-term impact on the economy while the extent of the longer-term impact is still to play out.

The pandemic has had a number of impacts on retirement investments in the short term that include shares of companies, properties and borrowings.

“The longer-term impact is likely to be lower growth due to governments needing to tax to repay the borrowings or cut other developmental plans,” he said.

It is also better to postpone retirement a bit if you can. Burger says, unfortunately, we think of retiring more in terms of when we reach an age rather than when we can afford to retire.

“You need advice on whether you have enough money and you should never retire while in debt,” he said.

Rossouw said it was always a good idea from a financial perspective for people to retain employment for as long as possible so that they can earn for a longer period, save for pension for a longer time and reduce life expectancy after retirement that would require pension for a shorter period.

Burger’s advice for people saving for retirement is to move to money market funds or fixed income funds which will benefit from the higher interest rates earned on longer-term borrowings.

“Covid and the lockdown have been a significant jolt to the system. Any rash short-term decision can easily create an even worse financial outcome. The key destroyers of investment wealth are fear and greed.”

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