Many South Africans fear they will never be able to retire – Sanlam Benchmark report

The dire financial situation of the average employed South African is evident in a new report that shows 63% are anxious about their finances, 87% are financially stressed and 58% feels the impact on their physical and mental well-being, while one in five does not have medical aid, 25% do not have any form of retirement savings and 46% struggle to meet basic monthly needs such as food and rent.

These concerning statistics come from Sanlam’s 42nd Benchmark report and it paints a bleak picture of the state of retirement and medical aid savings.

One in five consumers believe they may never be able to retire at all and another 42% said they felt a sense of insecurity or lack of control over their financial future.

The insights were gathered through interviews with over 500 full-time employed South Africans and in a departure from previous years, this year’s research took a consumer-centric approach to gain insight into the state of South Africa in a post-Covid-19 world.

“Their biggest financial concerns revolve around the fear of running out of money during retirement and the risk of facing unexpected financial challenges such as significant medical expenses without sufficient savings as a safety net,” says Kanyisa Mkhize, CEO of Sanlam Corporate.

“These numbers underscore the urgent need for improved financial literacy, comprehensive savings plans and adequate support systems to address the pressing financial challenges faced by a significant portion of the South African population. Our results suggest that people’s preoccupation with immediate financial priorities leaves them with little capacity or resources to save for the future.”

She says shifting the research focus to consumers and their financial situation is important to understand the challenges and realities individuals face in their financial journeys.

“The findings highlight the need to tackle these pressing concerns and explore strategies that can bridge the gap between short-term financial priorities and long-term savings goals.”

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No more retirement?

Will much of the population be unable to retire by 2040 and what does this mean in a nation where youth unemployment escalates every year? The Benchmark research indicates that 75% of respondents at least contribute to some form of retirement fund but 25% do not.

“There is a clear need for education and awareness campaigns to bridge this gap. It is worth noting that 30% of individuals were unsure about how much to save, 47% lacked clarity about which pension product to invest in and 48% failed to include future medical aid contributions in their financial planning,” Mkhize points out.

It was worrying that 40% said if they opted out of their retirement fund, it would be due to their current financial situation where their needs are too large and they need the money now.

Mkhize says the goal of the proposed two-pot system aims to provide early access to retirement savings and strike a balance between long-term retirement savings goals while providing access for emergencies and life’s other unexpected events.

The research findings show a mix of sentiments around the proposed Two-Pot system for retirement funds. Surprisingly, 57% of respondents were sceptical and said they are wary of the long-term impact on their retirement savings.

On the other hand, 21% said they would consider withdrawing funds in an emergency, while 13% expressed a willingness to access a portion of their benefits in any way.

However, only a small segment, 8%, said they probably would take advantage of this new system, while a resolute 23% stated they would not touch their savings at all.

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Medical aid also left behind

Regarding medical aid, 44% of respondents had medical aid from their employers which highlighted the prevalence of health benefits as part of compensation packages in South Africa.

What is worrying is that 20% of respondents had no medical aid at all, raising concern over the potential financial risks these individuals face in the event of health emergencies.

When it came to medical benefits after retirement, a substantial 62% of respondents indicated they do not contribute to a specific savings vehicle for post-retirement healthcare needs.

Mkhize says the fact that 40% said they were unable to afford necessary medical treatments or long-term care in old age due to their financial situation, is a significant financial worry as it points to a significant gap in retirement planning that needs to be addressed.

“The 2023 report underscored the critical need for long-term, holistic financial planning. While many South Africans equate financial confidence with a stress-free, debt-free retirement, the reality paints a stark contrast.”

Mkhize says high stress and high inflation conditions are causing anxiety and uncertainty, making it even more important to seek guidance from trusted advisers.

“The industry also needs to reassess the traditional concept of retirement in the context of longer working and lifespans. Retirement planning is not just about the financial aspect. It is also about comprehensive well-being that includes prioritising healthcare as well.”