Unpacking SA’s gloomy retirement reality (and the nation’s rather sunny expectations)

Tobie van Heerden, Chief Executive Officer of 10X Investments

10X Investments releases the South African Retirement Reality Report 2022 (RRR22), the fifth annual report tracking SA’s retirement savings crisis, today (September 30).

68% of people have no retirement savings plan at all, or just a vague idea of one
Just 8% are executing a properly thought-through retirement plan

The RRR22 is based on the Brand Atlas survey which tracks the lifestyles of the 15,4 million economically active South Africans (16 years or older, living in households with a monthly income of more than R6,000 pm, with access to the internet).

70% of people who are not saving say that is because there simply is nothing left at the end of the month.

With SA’s high unemployment (33,9% in Q2 2022, according to Stats SA) it is surely all the more important for people to get the most value from their savings and investments.

Tobie van Heerden, Chief Executive Officer of 10X Investments, says: “Even for those who do have some sort of a retirement plan, focusing on near-term circumstances that are largely beyond their control likely condemns them to living in perpetual financial crisis.”

As well as confirming the dire state of retirement readiness in South Africa across all ages and income groups, RRR22 focuses the lens on a number of small changes individuals could make to significantly improve their retirement outcome.

Van Heerden adds that many people are ignoring their long-term needs “very possibly not knowing that there are a few rather painless modifications that can deliver huge returns down the line”.

According to Anton Eser, 10X’s Chief Investment Officer, the most obvious tweak is to save more, even just a little bit.

“That is not to be glib about the financial pressures that most South Africans are experiencing, but saving 12% of income versus, say, 10%, would make a significant difference … it means saving 20% more, and hence 20% more income in retirement, with a loss in take-home pay of just 2%,” says Eser.

Another key factor is fees, yet more than 50% of respondents saving towards retirement don’t know what fee they are paying, or believe there is no fee. Another 30% are paying more than 2% pa.

“Paying 1% pa less in fees also stands to build a 25% bigger nest egg,” adds Eser.

Of those who say they do have a savings plan:

Nearly three-quarters (74%) worry about whether they will have enough money to live on in retirement, and another 17% are on the fence
Just 7% are confident that they are on course for that seemingly old-fashioned notion of retirement: living off accumulated savings.

People are not joining the dots

10X’s Head of Investments Chris Eddy points to what he calls cognitive dissonance in the findings.

“People just don’t seem to appreciate that not having enough money in retirement will impact the lifestyle they will be able to afford.” He explains: “92% of those respondents who are saving for retirement don’t feel confident they will have enough money to live on, yet 60% of them believe they will be able to maintain their standard of living in retirement.”

Women worse off and reject the best chance they have of closing the gap on men

Women are worse off than men, according to almost all measures, and 74% of female respondents indicated that they don’t save, or, if they do, don’t invest their savings for growth.

Women are:

Less likely to plan for retirement than men (44% v 49%)
Less likely to have a good understanding of their corporate retirement savings scheme (30% v 41%)
Twice as likely to have no idea what is going on (19% v 9%).
50% more likely to cash in their retirement savings when leaving their employer

Ishani Khoosal-Kala Head of Employee Benefits Corporate Distribution 10X Investments, said: “None of this is to make light of the very real struggles many people in South Africa, and women in particular, face to survive, never mind save money for another time. It is just a terrible pity because there are situations where women would make a different choice if they just knew what the outcomes would be.”

The role of employers

The report shows that employers could be playing a big role too. More than half of all of those who are saving have belonged to a corporate fund at some time. Just over a third said they had ‘a good understanding’ of their fund, a quarter have no idea aren’t really interested and 39% say they know little but wish they knew more, that is surely a captive and keen audience.

Yet 60% of corporate members cash out their saving when they leave a job, thereby resetting their savings to zero and severely damaging their chance of retiring with dignity.

Khwezi Jackson, Employee Benefits Consultant at 10X Investments, said: “It seems that employee benefits teams at corporate funds and HR departments are missing a trick by not educating members to maximise on the benefits offered by fund membership.”

Download the full report – click below…

ENDS

The content herein is provided as general information. It is not intended as nor does it constitute financial, tax, legal, investment, or other advice. 10X Investments is an authorised FSP (number 28250)