Retirement shock for South Africa
Only 10% of South Africans believe they’ll be able to retire comfortably at age 60, and many older citizens are increasingly reliant on credit to survive.
This is according to Eighty20 director Andrew Fulton, who said South Africa’s ageing population is facing growing financial pressure in retirement.
Speaking about findings from Eighty20’s latest credit stress research, he explained that the research examined the credit behaviour of people aged 65 and older.
He noted that Eighty20 divides older South Africans into two distinct segments: “comfortable retirees” and “humble elders”.
The first group consists of around two million relatively affluent retirees who had access to stable employment and the opportunity to save during their working lives.
“These are the people who had good jobs during apartheid, were able to save for their retirements, and actually the second most affluent of our segments,” Fulton said.
The second group, known as the humble elders, includes about four million South Africans who are financially fragile and often depend on family or the state for support.
“They really are that lost apartheid generation. They weren’t able to earn or save or invest, and now they’re retiring dependent on the family and the state with SASSA grants or family,” Fulton said.
Despite their financial vulnerability, this group is still turning to credit. Fulton said humble elders took out about 610,000 loans in the fourth quarter alone, mainly through retail credit and personal loans.
“They don’t qualify for credit cards, so they’re using those two credit vehicles in order to cover their household expenses,” he said.
The more affluent retirees are also borrowing, although in different ways. Fulton noted that the two million people in this segment took out about 230,000 new loans during the same period.
Around 30,000 of them still have mortgages, making up roughly 13% of all home loans in the country. Fulton said. However, even this group is beginning to feel the strain.
“They’ve scaled back on their secured credit since last year, probably due to repayment pressures and disposable income shrinking because of inflation and other costs.”
Older generation defaulting on their loans
Many retirees live on fixed incomes and have limited financial resilience, while digital exclusion and age discrimination can make it harder for them to access opportunities or financial services.
One of the most concerning trends identified in the research is the rise in loan defaults among older South Africans.
While default rates across the general population have declined steadily since 2023, the trend is moving in the opposite direction for those aged 65 and older.
“We saw a sustained rise in the number of defaulters, which is accelerating rather than stabilising,” Fulton said.
This makes older consumers unique among Eighty20’s eight consumer segments and highlights the growing pressure they face.
The broader outlook for retirement in South Africa is also concerning. Fulton pointed to research showing that very few South Africans believe they will be able to retire comfortably.
“If you read the research on retirement, it is quite frightening and sobering. FNB finds that only 10% of South Africans believe they’ll be able to retire comfortably at age 60.”
He warned that some people are worsening their long-term prospects by tapping into retirement savings early to cover current expenses.
“With the two-pot system, what we’re seeing is that a lot of people are making that future situation even worse to pay for today’s needs and expenses, and they’re not replacing that,” Fulton said.
Rising costs, particularly healthcare, are another major risk for retirees. Fulton noted that medical expenses typically increase at roughly double the rate of inflation.
“If you didn’t plan properly during your career, that can come back to bite you,” he said.
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