This is the real retirement age in South Africa

 ·2 Feb 2025

Most South Africans will now need to work until they are 80 to retire comfortably. 

This was revealed by Sanlam Corporate’s study based on over 300,000 Sanlam Umbrella Fund members, demographic trends, actuarial data, and economic factors affecting the country’s retirement outcomes.

“Our internal member data indicates that while 65 remains the official retirement age, the majority of South Africans cannot afford to retire at this age,” said Sanlam Corporate CEO Kanyisa Mkhize.

At the traditional retirement age, the average South African would have much less retirement savings than the industry benchmark for maintaining their lifestyle. 

The industry benchmark for a comfortable retirement is a 75% replacement ratio. The replacement ratio is the percentage of the final working salary they’ll receive as retirement income.

The average citizen is expected to achieve a 25% replacement ratio at the traditional retirement age 65. 

This was determined, supposing projected investment returns are 9.25% per annum, the inflation and salary escalation rate is 5.25% per annum, and people start working at 30 and work for 35 years.

However, South Africans near the retirement age said they would need an even higher replacement ratio than the industry benchmark. 

They said they would need an 80% replacement ratio to maintain their lifestyle into retirement. 

Most people will need to work an additional 15 years to achieve financial security in retirement,” said Mkhize.

This gap between the ‘retire-at-65’ expectation and the ‘working-until-80’ reality presents significant challenges for individuals, businesses, and the broader economy. 

The extended working years have profound implications for individuals’ financial planning and career development. 

Sanlam Corporate CEO, Kanyisa Mkhize

Workers now need to maintain employability and skills development well into their 70s while managing their health to remain competitive in the job market. 

Employers, meanwhile, have to manage an ageing workforce while balancing transformation objectives. 

Sanlam Corporate’s member data highlights the tensions between retaining experienced older workers and creating opportunities for younger employees. 

Almost 60% of South Africans are under 25, and South Africa’s youth unemployment is at 45.5%—so young people face even more competition for jobs. 

This delays the age at which people start saving for retirement. The later someone starts saving for their retirement, the greater the portion of their salary they need to put towards their retirement savings

This high retirement age also has critical implications for social policy and welfare systems in South Africa. 

The old age pension means test, which evaluates financial hardship among older citizens, presents a challenging paradox, said Sanlam Corporate’s business insight. 

Those with preserved retirement funds may be disqualified from accessing state support through social grants but might not have adequate funds to ensure a comfortable and secure retirement. 

This leaves many pensioners caught in a financial grey area.

Therefore, it is important to start saving for retirement as early as possible and save as much as possible. It is also important not to rely on somebody else for retirement.

10X’s recent Retirement Reality Report also found that most South Africans do not plan for retirement. 

Those who plan for retirement doubt they can support themselves, considering long-term inflationary pressures and the economic climate.

The report found that 29% of people over 50 said their retirement plans were “definitely not” or “probably not” on track.

The 10X Retirement Reality Report found that it is very difficult to make up for a deficit in savings after age 50.

At 50, people would need to save around 60% of their income if they want to retire comfortably

A large majority of retirees say they do not have enough income or could live more comfortably with a higher income. 

Additionally, the report found that the majority of people who did not save for their retirement did not save for it because they do not have the means to do so.

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