{"id":828323,"date":"2025-06-18T09:00:00","date_gmt":"2025-06-18T07:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=828323"},"modified":"2025-06-18T08:56:17","modified_gmt":"2025-06-18T06:56:17","slug":"retirement-shock-for-south-africa","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/828323\/retirement-shock-for-south-africa\/","title":{"rendered":"Retirement shock for South Africa"},"content":{"rendered":"\n

South Africa is facing a retirement crisis, with the latest 10X Retirement Reality Report revealing that only 6% of South Africans are on track to retire comfortably. <\/p>\n\n\n\n

10X Investments (10X) is an authorised Financial Services Provider, a licensed Retirement Fund Administrator and Investment Manager.<\/p>\n\n\n\n

According to the firm, to be considered financially prepared for retirement, a person should be able to replace around 75% of their final salary through their savings and investments.<\/p>\n\n\n\n

The benchmark used by 10X Investments suggests that by age 63, a person would need around R7.5 million saved to earn roughly R25,000 per month before tax, assuming a safe annual drawdown of 4%. <\/p>\n\n\n\n

Andre Tuck, Senior Investment Consultant at 10X, noted<\/a> that the shortfall in retirement savings is driven by people not saving enough during their working lives and starting too late.\u00a0<\/p>\n\n\n\n

As a result, millions of South Africans will have to continue working well past traditional retirement age.<\/p>\n\n\n\n

Due to the country\u2019s poor savings rate, Kanyisa Mkhize, CEO of Sanlam Corporate, added that most working South Africans will have no choice but to work until they\u2019re 80.<\/p>\n\n\n\n

She highlighted the gap between retirement expectations and reality. \u201cThe consumer portion of a Sanlam study showed that respondents expected to retire comfortably at 60,\u201d she said<\/a>.\u00a0<\/p>\n\n\n\n

\u201cHowever, a separate piece of work by Sanlam Corporate showed that South Africans, on average, may need to work a full two decades past the normal retirement age to maintain their lifestyle.\u201d<\/p>\n\n\n\n

Mkhize added that a large part of the problem is that people are not seeking financial advice soon enough. <\/p>\n\n\n\n

\u201cOur 2025 Benchmark study found that almost half of respondents use Google for financial information and just 22% consult a financial advisor,\u201d she said.  <\/p>\n\n\n\n

\u201cRetirement outcomes are unlikely to improve if people aren\u2019t seeking professional guidance and don\u2019t fully understand their realistic retirement age.\u201d<\/p>\n\n\n\n

Two-Pot Retirement System compounding the problem<\/h2>\n\n\n
\n
\"\"<\/a>
Kanyisa Mkhize, CEO of Sanlam Corporate.<\/em><\/figcaption><\/figure><\/div>\n\n\n

Adding further pressure is the newly implemented Two-Pot Retirement System, which took effect on 1 September 2024. <\/p>\n\n\n\n

The system allows South Africans to withdraw a portion of their retirement savings early, intended as a short-term relief mechanism. <\/p>\n\n\n\n

However, 36% of survey respondents have already accessed this option, either in part or in full.<\/p>\n\n\n\n

Mkhize warned that while these withdrawals may offer short-term relief, they significantly reduce the likelihood of a confident retirement. <\/p>\n\n\n\n

Nearly half of the people who changed jobs cashed out their retirement savings completely, and 26% said they would only start seeking retirement advice within the last five years before retirement. <\/p>\n\n\n\n

\u201cThese findings from retirement fund members point to a system under pressure,\u201d she said.<\/p>\n\n\n\n

The early withdrawal trend also drew attention from the South African Revenue Service (SARS). <\/p>\n\n\n\n

Commissioner Edward Kieswetter revealed that SARS expects to collect between R11 billion and R16 billion in taxes from two-pot withdrawals, far exceeding the original estimate of R5 billion to R6 billion.<\/p>\n\n\n\n

At an Allan Gray webinar this year, Kieswetter said<\/a> about 2.4 million fund members had already withdrawn over R43 billion, accounting for nearly 40% of the 6.5 million South Africans who contribute to retirement funds.\u00a0<\/p>\n\n\n\n

While this spike in withdrawals has temporarily boosted tax revenue and VAT through increased consumer spending, Kieswetter warned of longer-term dangers. <\/p>\n\n\n\n

\u201cThis represents a troubling depletion of South Africa\u2019s national savings pool,\u201d he said, adding that this could have serious consequences for future financial security.<\/p>\n\n\n\n

To illustrate the impact of early withdrawals, Leone Hitge, Investment Marketing Manager at Ninety One, compared two hypothetical investors contributing R100,000 annually to a retirement annuity over 20 years, with an assumed return of CPI plus 5%. <\/p>\n\n\n\n

Investor A withdrew their available savings each year and ended up with R2.26 million. Investor B, who left the savings untouched, accumulated R3.39 million, more than R1 million higher.<\/p>\n\n\n\n

\u201cIn a nutshell, withdrawing all the funds from your savings pot every year can reduce your total retirement portfolio by approximately a third compared to leaving it untouched,\u201d Hitge explained. <\/p>\n\n\n\n

She also reminded investors that two-pot withdrawals have an added tax liability, further eating into their long-term savings.<\/p>\n","protected":false},"excerpt":{"rendered":"

South Africa is facing a retirement crisis, with the latest 10X Retirement Reality Report revealing the country’s shocking savings rate. <\/p>\n","protected":false},"author":92,"featured_media":820392,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11121],"tags":[11953,6756,19703,21568,853,19922],"class_list":["post-828323","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-10x-investments","tag-allan-gray","tag-ninety-one-2","tag-sanlam-corporate","tag-south-africa","tag-south-african-revenue-service-sars"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/828323","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\/92"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=828323"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/828323\/revisions"}],"predecessor-version":[{"id":828344,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/828323\/revisions\/828344"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/820392"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=828323"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=828323"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=828323"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}