How many people can retire comfortably in South Africa

Under-saving for retirement remains an issue in South Africa, and the majority of people cannot afford to retire, let alone continue to support their current lifestyle, a new study by Genesis Analytics and the Financial Sector Conduct Authority (FSCA) shows.

Genesis Analytics noted only 12% of the 3.6 million individuals in the retired age group received a form of income in 2020. More than 90% of retirees are unable to maintain their standard of living prior to retirement and two-thirds of members have less than R50,000 in their retirement funds.

Since 2017, the average value of benefits paid out has slightly increased in real terms, averaging approximately R39,000 per month. The average contribution to pension funds has, however, remained relatively stable at around R900 per month in real terms.

Notably, South Africa’s pension fund coverage looks very different in the public sector compared to the private sector.

In the public sector, 92% of workers have a retirement product, whereas only 50% and sometimes less have a retirement product in the private sector. Coverage, the proportion of individuals with a retirement product, is particularly low for individuals earning below R14,000 per month.

“There is limited demand for pension products in the lowest income brackets due to the government’s pension support. The pensioners’ government grant pays R1,890 per month and therefore individuals in LSM groups 1 – 4 (between 8 – 10 million South Africans) earning approximately R1,300 – R3,000 per month have little incentive to contribute to a private pension fund,” Genesis Analytics said.

Many experts recommend using the 80% rule as a benchmark for what you will need to cover your monthly expenses once retired in South Africa.

If you currently earn R15,000 per month, and apply the 80% rule, you will need at least R12,000 per month after retirement to maintain your current living standard.

Widening gap 

Dumo Mbethe, chief executive at Momentum Corporate, warned that the retirement gap has only widened due to the Covid pandemic which has resulted in reduced salaries and retirement fund contributions that have been put on hold for a period of time due to companies’ cash flow pressures.

He added that many households also face the additional burden of supporting family members who have lost jobs.

“If we look at the retirement savings status of members on our FundsAtWork Umbrella Funds, with over 340,000 members across 4,700 employers spanning 21 broad industries, we see that the average amount they have saved for retirement as of 31 January 2022 is almost R190,000.

“Around 49% have saved more than R30,000, which means approximately 51% have less than R30,000 in accumulated funds. The latest proposal is that third of the funds will be made available annually, with a minimum of R2,000 being withdrawn, up to 10% of the total, not exceeding R25,000. A second withdrawal can occur but only if it doesn’t exceed the limit stated above.”


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How many people can retire comfortably in South Africa