The risk of running out of money during retirement and facing significant financial expenses without sufficient savings as a safety net are South Africans’ biggest concerns, according to Sanlam’s latest annual Benchmark Survey.
The report paints a bleak picture of the state of retirement savings and medical scheme membership in South Africa.
One in five adults did not have any form of medical scheme cover, while 25% did not belong to an employer’s pension or provident fund, indicating an absence of retirement savings.
“These statistics are not entirely surprising, considering that 46% of respondents admitted to struggling to meet basic monthly needs, like food and rent,” said Kanyisa Mkhize, the chief executive of Sanlam Corporate.
The results of the survey are based on interviews with more than 500 respondents in full-time employment.
The 42nd edition of the report found that 63% of South Africans were anxious about their finances, with 87% saying they felt financial stress. For 58%, this was impacting their physical and/or mental well-being.
The lack of adequate savings suggests that concerns about the future are valid. One in five respondents believed they may never be able to retire. A further 42% said they felt a sense of insecurity or lack of control over their financial future.
The survey also found that:
- 30% of individuals were unsure about how much to save;
- 47% lacked clarity about which pension product to invest in;
- 48% failed to include future medical scheme contributions in their financial planning; and
- 40% said that if they were to opt out of their retirement fund, it would be because their financial needs are too large, and they need the money now.
Notably, 62% of respondents were not contributing to a specific savings vehicle for post-retirement healthcare needs. “Given that 40% cited the inability to afford necessary medical treatments or long-term care in old age as a significant financial worry, this points to a significant gap in retirement planning that needs to be addressed,” according to the report.
Decline in compulsory medical scheme membership
An analysis of Simeka Health’s medical scheme clients shows that 57% of employees are not participating in a scheme. However, this figure does not take into account employees who are covered by schemes where their spouse is a principal member.
In addition, there has been a “concerning trend” of fewer employers making participation in a medical scheme a condition of employment. Employers that made participation in a medical scheme a condition of employment has fallen from 80% in 2018 to 76% in 2022.
It can be argued that if it had not been for Covid-19, the shrinkage could have been worse, said Mbali Khumalo, the managing director of Simeka Health, Sanlam’s healthcare consulting and advisory business.
According to the Council for Medical Schemes’ 2022 Report, only 14.95% or 8.9 million South Africans are covered by medical schemes. More than 50% of these beneficiaries are dependants on their spouse’s or their parents’ cover. This means that about 4.5 million principal members, which is only 25% of the 16 million economically active South Africans, buy medical scheme cover.
Medical scheme coverage has remained the same for the past decade, despite population growth.
Khumalo flagged the concern of young and healthy people delaying joining a medical scheme, which undermines the cross-subsidisation of older and less healthy members.
According to AfroCentric, only 15.4% of the 3.8 million lives administered by Medscheme participate voluntarily in medical schemes and are therefore not linked to a corporate or payroll-related membership. Of this group of voluntary participants, 18.1% are below the age of 35, which represents only 2.8% of total membership.
Corporate wellness: a missed opportunity
Employers that relax compulsory participation are not replacing it with corporate wellness solutions, such as on-site clinics, primary health insurance, and employee assistance programmes (EAPs), Khumalo said.
In addition to the low take-up of corporate wellness by employers, most employees do not take advantage of the value these services provide in terms of preventative care and early detection.
But there was an increase in employees’ engagement with EAPs during the pandemic, according to Sanlam Corporate Wellness statistics. Although engagement is beginning to stabilise to pre-Covid-19 levels, there is a sharp increase in employees reaching out to seek support for a range of psycho-social and practical issues. Data included in the Benchmark Survey shows that mental health problems and relationship issues are the main reasons employees seek support.
