This one retirement statistic should shock you
Data from Alexander Forbes shows that more than half of its members retire on 20% or less of their final salary before retirement.
The latest Member WatchTM analysis, commissioned by Alexander Forbes, has the biggest membership and employer groupings data sample of all retirement fund surveys available in South Africa.
“Millions of South African employees rely on the money saved in their employer’s retirement fund to provide them with an income in retirement. For many people, this is their only formal savings for retirement. Unfortunately, too often, this money is not enough to sustain them in retirement,” said Michael Prinsloo, managing executive of research and product development at Alexander Forbes.
The 2018 Member WatchTM also identified a narrowing of the salary differential between men and women. The average salary for female members increased by around 47% to R211038 in the 2018 Member WatchTM (2010: R14,3154), while the average salary for male members increased by 41% to R24,1831 (2010: R171576).
Prinsloo said the trend of increasing normal retirement ages can clearly be seen in the findings of the 2018 analysis. A few years ago, the most common retirement age set by employers was 60 years. That has now increased to 65.
“Increasing one’s normal retirement age by two years can add 8% – 15% extra income at retirement,” said Prinsloo. He added that retiring at 65 rather than 55 can almost double a replacement ratio due to the compounding effect.
A comfortable retirement is, however, possible if employees contribute sufficiently from a young age and do not cash out when changing jobs.
Members need to be given clearer and more useful information, with milestones indicating at which age certain achievements should be reached. For example: “Someone who is 40 years old should have saved 3.2 times their annual salary to be on track to achieve a 75% replacement ratio,” Prinsloo said.
Member WatchTM is now in its 12th year. It analyses the data of more than one-million South African employees to gain insights into the savings behaviours of South African retirement fund members and the outcomes these members can expect at retirement.
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