{"id":683217,"date":"2023-04-30T07:00:16","date_gmt":"2023-04-30T05:00:16","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=683217"},"modified":"2023-04-28T16:14:28","modified_gmt":"2023-04-28T14:14:28","slug":"south-africas-massive-pension-problem","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/683217\/south-africas-massive-pension-problem\/","title":{"rendered":"South Africa’s massive pension problem"},"content":{"rendered":"

South Africa has one of the worst pension systems in the world, according to the Allianz<\/span> Global Pension Report 2023.<\/p>\n

The report looks at 75 pensions systems across the globe using the Allianz<\/span> Pension Index (API), which consists of three pillars: Analysis of basic demographic and fiscal conditions, determination of the sustainability – funding and contribution periods –\u00a0 and adequacy – degree of diffusion and pension level –\u00a0 of the pension system.<\/p>\n

Despite the Covid-19 pandemic resulting in a decline in life expectancy across several countries, with a few nations even registering a baby boom, Allianz said that this is only a short-term interruption to the accelerating trend of societal ageing.<\/p>\n

“The latest data from China, Korea or Italy, for example, point to speedup of demographic change,” said Michaela Grimm, co-author of the report.<\/p>\n

“In particular, birth rates are developing even worse than assumed, despite all family policy efforts. But it doesn’t help to lament; we have to face the facts: The intergenerational contract has become fragile.”<\/p>\n

“The younger generations Y and Z in particular are being called upon to make (even) greater provision for old age themselves. The inconvenient truth is: they have to work longer as well as to save more and in a more focused way.”<\/p>\n

South Africa has an overall score of 4.2, which is in the bottom half of the global ranking for pension systems – coming 58th out of 75.<\/p>\n

Allianz said that low coverage, the low benefit level and the lack of retirement savings imperil the adequacy of South Africa’s pension system.<\/p>\n

A small consolation for South Africa is that the majority of other African countries also have low scores.<\/p>\n

For context, Denmark has the best pension system in the world, according to the report, with an API of 2.2.<\/p>\n

 <\/p>\n

\"\"<\/a><\/p>\n

In addition, South Africa has the “poorest” pensioners in the world<\/strong>, with a gross benefit level of only 15%.<\/p>\n

Kenya and Lebanon join South Africa with a measly score of 15%.<\/p>\n

The report said the benefit ratio of a first pillar pension should range between 40% and 60% of the average wage as per International Labour Organisation standards, as public pensions are very often the only source of income in old age.<\/p>\n

According to the OECD, Brazil’s 89% benefit ratio is the best in the world.<\/p>\n

The gross benefit ratio in percentages across nations can be seen below (click to enlarge):<\/p>\n

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Some positives<\/strong><\/p>\n

Despite the issues found within South Africa’s pension system, there are a few positives.<\/p>\n

South Africa’s pension system scores slightly better when it comes to sustainability, which is due to low contribution rates\u00a0 – this could ease future reforms.<\/p>\n

In addition, South Africa has financial leeway as public spending on the elderly is very low and the country remains relatively young.<\/p>\n

With an old-age dependency ratio only expected to rise by 16.3% by 2050, South Africa is set to be one of the countries with the youngest population worldwide.<\/p>\n

However, Allianz stressed that reforms are needed for pensions in South Africa.<\/p>\n

Moreover, financial services and financial literacy need to be improved to support capital-funded pension provisions.<\/p>\n

Allianz said that all the thriving pension systems \u2013 notably Denmark, the Netherlands and Sweden – set the course for sustainability very early on when the demographic boom was starting.<\/p>\n

These models should thus be used as a model for developing counties, which still have the opportunity to stabilize their pension systems.<\/p>\n

\n

Read<\/strong>: Warning for pension fund members in South Africa<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The Allianz Global Pension Report 2023 says South Africa has one of the “poorest” pension systems in the world. <\/p>\n","protected":false},"author":95,"featured_media":673099,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[26],"class_list":["post-683217","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-headline"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/683217","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/95"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=683217"}],"version-history":[{"count":8,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/683217\/revisions"}],"predecessor-version":[{"id":683925,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/683217\/revisions\/683925"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/673099"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=683217"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=683217"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=683217"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}