• Adrian Saville

A Path to Prosperity for SA and shifts in thinking about savings and retirement

Investec and Adrian Saville, professor of Economics and Competitive Strategy at the Gordon Institute of Business (GIBS) have joined hands in researching and analyzing the major issues regarding savings and investment in SA. The Investec GIBS Savings Index for SA, started three years ago, has become an important barometer and measure of savings levels in the country. At the same time, Investec has just released a comprehensive report "Path to Prosperity for SA" which is attached to this email as background.

Adrian is interviewed by Jenny Crwys-Williams in this podcast - link provided here - https://tilt.egnyte.com/fl/m2qE3HD3Tx

in which they touch on some of the major insights from the report and how it impacts retirement, careers and lifestyles.

Here are some relevant extracts and insights from the podcast:

SA savings changes direction. Positively.

The most recent Investec Gibs Savings Index data shows South Africa has improved markedly on all three factors – the stock (pool) of savings, the flow of savings, and the environmental factors impacting savings – with a score of 63.7, higher than the 60.0 in the fourth quarter of 2018. (A score of 100 corresponds with a healthy and robust savings environment.) Please see page 41 of the attached report for full details.

Adrian comments, "It is the first time in a number of years that we have seen such a coordinated upturn which I really take as an encouraging sign, not of euphoria, or suddenly emerging to miracle status, but certainly an improvement on where we were 12 or 18 months ago.”

The Gig Economy: Retiring the concept of retirement

Adrian Saville mentions that the replacement ratio of income for individuals at retirement in OECD countries are 60% while in SA it is as low as 20% - a dire state of affairs! The panellists consider the Gig Economy and how it might help in the retirement savings challenge as retirees look at alternative sources of income to supplement their pensions. In addition, companies are using more senior people – shifting their tasks and responsibilities to become mentors and coaching interns. People are also quite capable of re-inventing themselves to pursue second and even third careers – research has shown. Interestingly, mortality rates are the highest in the first years after retirement, and additional work can provide a purpose in life.

Changing behaviour

Saville proposes the importance of behaviour changes in shifting our saving dynamics. “As much as we might be able to legislate better retirement saving practices, I don’t think the issue sits with legislation as much as it sits with our behaviours and our decisions. So how do we build a much healthier retirement? We get saving earlier, we consume less, we save more; when we shift jobs, we don’t cash out. If you can get those basics of savings and retirement practices right, you don’t need legislation, you just need better behaviour.”

“If you don’t aspire to an affluent, over-the-top, retirement, and you are able and prepared to maintain a modest lifestyle after retirement, then early savings, plus compounding before the age of 40, gives you the ability to sustain you for a very, very long time.”