WeeklySA_AdminAFFORD:Many people are struggling to make ends meet
By Isaac Moledi
Scores of South Africans face a bleak retirement future with many of them with little or no income unless something dramatic is done, the 10X Investment Retirement Reality Report (RRR21) has revealed.
The report, released this week, revealed that Covid- 19 pandemic has given the country “a taste of what retirement will be like – a fate that awaits most of them at the end of their working lives.”
“Retirement preparedness among South Africans has continued on its established path of deterioration in the time of the pandemic,” says the report. “As in the past, around half of the respondents admit they have no savings plan at all, and not even one in 10 people are carefully executing a thought-through plan.”
The report says unless something dramatic is being done to remedy the situation, many South Africans will face a bleak future with little or no income during their retirement.
The report, which is based on findings of the 2021 Brand Atlas Survey, which tracks the lifestyles of the universe of 15 million economically active South Africans (those living in households with a monthly income of more than R8, 000), acknowledges that many South Africans are just not able to make ends meet, let alone putting money aside for the future.
“The report shows how the pandemic has exposed our society’s fault lines and magnified its vulnerabilities,” says Tobie van Heerden, 10X Investments CEO. “It highlights the lack of a safety net for those around us who are just hanging by a thread.”
Even before the pandemic turned our lives and economy requirements upside, Van Heerden says many South Africans were in financial distress, symptomatic of the huge challenges facing the country. “Millions are unemployed but even for many of those who are working, the money coming in does not cover their immediate needs, let alone their retirement funding.”
In terms of the report, economic hardship for many South Africans is real and widespread, with workers across all age groups and demographics saying they are barely making ends meet and cannot afford to save at all.
Van Heerden says another issue highlighted among those who are not saving at all is that many people see retirement saving as “a luxury”.
“The report also interrogates the other half: the 50% of survey respondents who say they have some sort of a retirement savings plan but, for the most part, know little-to-nothing about it, and don’t even seem to care.
“Having something that resembles a retirement savings plan often gives a false sense of security. How false becomes clear when looking at answers to such questions as: Are you on track? Will you have enough money to support yourself in retirement? How much are you paying in fees?”
According to van Heerden, respondents admit to being largely in the dark about the answers to these key questions, arguing “Education is now at a critical stage . It is obvious that employers are in a good position to deliver it, but they need the right resources to do so.”
The 10X retirement report found that more than half of those respondents who had a retirement savings plan of some sort were current members of a corporate retirement savings fund or had at some point belonged to one. “60% of those people said they knew little or nothing about their fund, which highlights the missed opportunity of actively engaging employees in the savings process,” says Van Heerden.
According to him, one green shoot of hope in RRR21 was that the number of people who said they just couldn’t be bothered to know more about their fund declined from 11% last year to 7%, with many saying they wished they knew more.
He says a Treasury proposal on retirement reform promises to tackle at least some of the extreme issues highlighted in the RRR21. Treasury’s idea is to give retirement savers access to a portion of their savings in times of distress on the condition that they preserve the rest.
Van Heerden says at least, this will mean that workers would no longer be tempted to quit their job just to access their retirement savings.
He says the topic of a universal compulsory state-sponsored pension system is one that keeps cropping up in the media, mostly presented as newsworthy in the context of fear that the government is trying to get their hands on people’s savings. However, “quicker and more affordable wins can be achieved through compulsory saving and preservation within the existing system.”
Although the dismal numbers throughout the report “must surely represent a tipping point,” Van Heerden argues for regulation saying this is needed urgently “to bring millions of people back from the brink.”
