Earlier this year the Old Mutual Savings and Investment Monitor painted a grim picture of South Africans’ money matters. The just-released 10X Investments report on retirement readiness in South Africa adds to this bleak picture as it reveals that South Africa’s retirement crisis is set to worsen, with even fewer people prepared for retirement than previously thought.
The report by 10X, in collaboration with Brand Atlas, is based on online surveys among 10,780 economically active South Africans with a monthly income in excess of R7,600.
A key issue that cropped up again and again in the data was that mounting financial pressure is preventing people from saving for retirement. This is on par with a similar study in America that showed that saving for retirement is also Generation X’s top source of money-related stress (40%), followed by credit card debt (27%) and keeping up with monthly expenses (23%). This shows that globally many people are struggling with their personal finances.
Another scary statistic from the South African research is that even among those who are saving for retirement, an alarming number have no idea whether their savings plan is on track or what proportion of their savings they are paying away in fees.
One of the questions that the research posed to the select group was how they feel about their current retirement plan. Participants could select from the following options:
- I don’t have a plan
- My retirement plan is a bit vague
- I have a pretty good idea of what I’m doing
- I have a thought-through plan which I am executing
The results show that there has been a 5 percentage increase in the number of people who say they don’t have a retirement plan, from 41% last year to 46%. There is also a 5% decrease in the number of South Africans who feel good or pretty good about their retirement plan, from 38% to 33%. The proportion of South Africans who feel their plan is somewhat vague is the same as last year, at 21%.
The data also indicated that two out of every three South Africans have no retirement plan and the number who are confident that they have a well-executed plan has declined from 7% to 6% over the past year. This figure aligns with the statistics from National Treasury that only 6% of the country’s population are on track to retire comfortably.
A big question and concern is why South Africans are struggling to commit to a proper retirement plan. The report shows that, of the respondents who said they were not saving for retirement, the majority (55%) said they simply could not afford to save money towards retirement, and 36% said retirement saving was not a priority for them at this stage.
As might be expected, younger people are more likely to say retirement saving is not a priority – 80% of people under 35 in this group said retirement saving was not a priority at this stage.
The fact that 67% of people surveyed either have no retirement plan at all, or just a vague idea, highlights the need for more education. A significant majority of respondents just do not seem to have the tools or the know-how to prepare for a financially stable life after work. This is where the role of the financial adviser cannot be more emphasised.
Click here to download the report that also analyses the differences between men and women’s savings plans, the stark differences in people’s financial situation along racial lines as well as a chapter on the role of employers in South Africa’s retirement crisis. In addition, it contains links to a number of DIY tools regarding retirement planning which your clients can use to do some personal introspection.
