Sanlam’s 2019 Benchmark study paints a grim picture for South Africans looking to retire.
According to the report, the majority of umbrella and standalone funds surveyed believed just 20% of their members would be able to retain their standards of living into retirement.
David Gluckman, head of special projects at Sanlam Employee Benefits, said that these statistics are incredibly alarming and that South Africans need to be focusing more on financial resilience.
“There needs to be more focus on what consultants, administrators and providers are doing to proactively improve members’ outcomes,” he said.
“The current scenario can only be solved by a perfect combination of factors. Better member communication, education and counselling can only do so much. A focus on better investment by clients can only do so much.
“A regulator with strong leadership can only do so much. Ultimately, it’s a coordinated effort by all stakeholders that has the best chance of assisting South Africans towards achieving financial resilience.”
Cashing out early
One of the biggest issues contributing to not having enough for retirement is ‘cashing out’ early.
According to Hilan Berger, head of Institutional Business Development at 10X Investments, 70% to 80% of South African employees opt to ‘cash out’ when leaving an employer.
“This behaviour is partly borne out of ignorance, because people believe they have time to play catch up. But to do so, they would have to work much longer, or save much more, to make up the shortfall,” he said.
The earlier you start to save for retirement, the longer your money has to work for you, Berger said.
“Early on, the return component is just a tiny fraction of your total savings, and it takes quite a few years to become significant.”