Sobering retirement statistics in South Africa

The standard of living in South Africa has dropped over the last few years. The average South African is finding it difficult to pay for basic necessities and as a result, instead of saving, most are heavily in debt. Around half of all South Africans do not have a retirement plan, while as few as 6% are able to retire comfortably. A report from the FSCA indicated that:

• 90% of South African retirees cannot maintain their standard of living prior to retirement, and two-thirds of members have less than R50,000 in their retirement fund.
• Despite the average value of benefits being paid out, increasing since 2017, the average contribution to pension funds has remained relatively stable at around R900 per month in real terms.

The most recent 10X South African Retirement Reality Report showed that 38% of the 15 million economically active South Africans (households with a monthly salary of more than R8,000) strongly agree that they will need to keep earning money after retirement. A further 36% agreed in part with that statement. The report detailed that 79% of respondents worry about having enough to live on after they retire, and 74% expect to need some additional income.

“A nickel ain't worth a dime anymore.”- Yogi Berra

The rising interest and inflation rates have negatively impacted the spending power of many individuals. South Africa’s inflation challenges are partly due to the sudden increase in the prices of products such as wheat and oil as a result of supply shortages due to the war in Ukraine, the Rand weakening against currencies like the US Dollar and high inflation in other markets such as the United Kingdom where the annual inflation rate in August 2022 rose to 9.87%. In comparison, the annual inflation rate was 8.3% in the US and 9.1% in Europe.

With all their earnings being spent on the essentials that are required today, it seems that most South Africans are relying on hope and prayers for their retirement.

In order to retire comfortably it is recommended that individuals save at least 15% of their annual income each year. Furthermore, it is encouraged that as individuals grow older the following saving milestones are achieved:

• 45 years old: should have saved up to 3 times their annual salary.
• 55 years old: should have saved 7 times their annual salary.
• 65 years old: saved as much as 11 times their preretirement annual salary.

These are almost impossible tasks for the average South African.

Taking note of the economic constraints, the Funds administered by Master Builders KwaZulu-Natal have endeavoured to provide a well-balanced retirement product with enhanced employee benefits at subsidised costs with no agent or broker commission payable, which translates into more savings for members of the Funds. Please refer to the table below.

To find out more about the Funds and how we could assist to tailor an employee benefits solution for your company, please contact our offices on 031 831 3217 or email vishane@masterbuilders.co.za.

Vishane Pramrajh

Employee Benefits Manager

Source:

https://resources.10x.co.za/retirement-reality-report