Most South Africans who have some sort of retirement savings plan worry about whether they will have enough money to live on in retirement, according to this year’s Retirement Reality Report published by 10X Investments.
Only 8% were not worried at all (up from 7% last year, but still down from the 12% in 2020), while 17% (2021: 14%) were only somewhat worried. On the other end of the scale, 62% were worried about not having enough to live on after they retire. This was down from 67% last year.
High levels of concern about having enough money in retirement continue to present across all income brackets, although the numbers have improved a little.
Of respondents with a total monthly household income (HHI) of between R20 000 and R50 000, 76% (2021: 80%) felt concerned or were unsure about having enough money in retirement, as were 69% (2021: 70%) of those whose HHI was upwards of R50 000 a month.
Most respondents, 71% (2021: 74%; 2020: 77%), believe they will have to generate some income after they retire. Another 21% (up from 19% last year) are not very sure, leaving an unchanged 7% of respondents feeling confident that they are on course for what the report called is “increasingly becoming an outdated notion of retirement, based on full financial independence”.
By income group, 87% of those in the R20 000 to R50 000 category and 80% of those whose households earned more than R50 000 a month a year say they might have to or would definitely have to earn some income in retirement.
More are being forced to retire
Of the survey respondents who have retired, 62% said they retired when they wanted to, a steep decrease from 70% last year. A high percentage of reluctant retirees – 34%, up from 29% last year – were forced out before they were ready.
Also, there was a significant increase in the number of people who ended up working for longer than planned, although that was from a very small base (4% from last year’s 2%).
“Owing to relatively small percentage of respondents in the survey who have retired (about 3%), the numbers tend to vary from year to year. However, the trend confirms what our population pyramid tells us must happen: the number of workers being forced into retirement sooner than they had hoped is increasing,” the report says.
Gender gap persists
The gap between men and women in terms of the number who do not have a retirement savings plan at all narrowed this year, but at 49% (2021: 54%; 2020: 53%) is still higher for women than for men, at 44% (2021: 46%; 2020: 45%).
This year’s report found no change in the small cohort of people who are confident they are on a clear and positive path to a comfortable retirement: 11% of men and 5% of women say they are executing a considered retirement savings plan.
However, a lot of men (45%, up from 44%) and women (46%, up from 41%) remain clustered in the ambivalent middle ground of “My retirement plan is a bit vague” and “I have a pretty good idea”.
The report says that the retirement readiness gap between the sexes is not only the result of disparities in pay and education and women interrupting their careers to raise children. Women are also often victim of their own poor behaviour and choices.
It says women are less likely than men to plan for retirement (49% versus 44%) and have a good understanding of their corporate retirement savings scheme (30% v 41%).
Women are more likely not to save or invest (44% v 35%) and are less likely to invest in growth assets (15% v 23%), or at least split their savings between cash and growth assets (12% v 16%).
Yet to see the benefit of retirement benefits counselling
The report noted that it has been more than three years since it became compulsory for retirement funds to provide counselling to exiting members on the choices – and the effect of these choices – available to them.
“The data for the year’s survey has not yet illustrated the benefits of this, which would be a decline in the percentage of respondents who don’t preserve at least a part of their savings on changing jobs (although, admittedly, the survey also incorporates behaviour before the new rules came into effect).”
Respondents who at some time belonged to a corporate retirement savings fund were asked about their level of knowledge about the scheme. Most admitted to knowing very little about what is likely their biggest investment.
The report said poor communication by the employer and/or fund, or the complexity and lack of transparency in some corporate schemes might be partly to blame for this.
At the same time, there is no shortage of insight freely available online, enabling those with the necessary interest to inform themselves. “But this survey confirms that many South Africans, especially younger people, just don’t consider this an important topic.”
