How many individuals can retire comfortably in South Africa

Under-saving for retirement stays a problem in South Africa, and nearly all of folks can’t afford to retire, not to mention proceed to assist their present life-style, a brand new examine by Genesis Analytics and the Financial Sector Conduct Authority (FSCA) exhibits.

Genesis Analytics famous solely 12% of the three.6 million people within the retired age group obtained a type of earnings in 2020. More than 90% of retirees are unable to keep up their lifestyle previous to retirement and two-thirds of members have lower than R50,000 of their retirement funds.

Since 2017, the common worth of advantages paid out has barely elevated in actual phrases, averaging roughly R39,000 per 30 days. The common contribution to pension funds has, nevertheless, remained comparatively steady at round R900 per 30 days in actual phrases.

Notably, South Africa’s pension fund protection appears to be like very totally different within the public sector in comparison with the personal sector.

In the general public sector, 92% of staff have a retirement product, whereas solely 50% and typically much less have a retirement product within the personal sector. Coverage, the proportion of people with a retirement product, is especially low for people incomes beneath R14,000 per 30 days.

“There is limited demand for pension products in the lowest income brackets due to the government’s pension support. The pensioners’ government grant pays R1,890 per month and therefore individuals in LSM groups 1 – 4 (between 8 – 10 million South Africans) earning approximately R1,300 – R3,000 per month have little incentive to contribute to a private pension fund,” Genesis Analytics stated.

Many consultants advocate utilizing the 80% rule as a benchmark for what you’ll need to cowl your month-to-month bills as soon as retired in South Africa.

If you at present earn R15,000 per 30 days, and apply the 80% rule, you’ll need at the very least R12,000 per 30 days after retirement to keep up your present dwelling commonplace.

Widening hole 

Dumo Mbethe, chief govt at Momentum Corporate, warned that the retirement hole has solely widened as a result of Covid pandemic which has resulted in diminished salaries and retirement fund contributions which have been placed on maintain for a time period attributable to firms’ money circulate pressures.

He added that many households additionally face the extra burden of supporting relations who’ve misplaced jobs.

“If we have a look at the retirement financial savings standing of members on our FundsAtWork Umbrella Funds, with over 340,000 members throughout 4,700 employers spanning 21 broad industries, we see that the common quantity they’ve saved for retirement as of 31 January 2022 is sort of R190,000.

“Around 49% have saved more than R30,000, which means approximately 51% have less than R30,000 in accumulated funds. The latest proposal is that third of the funds will be made available annually, with a minimum of R2,000 being withdrawn, up to 10% of the total, not exceeding R25,000. A second withdrawal can occur but only if it doesn’t exceed the limit stated above.”

Read: Interest fee hike and cargo shedding double-blow to hit South Africa

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