{"id":863657,"date":"2026-07-12T10:00:00","date_gmt":"2026-07-12T08:00:00","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=863657"},"modified":"2026-07-10T16:41:44","modified_gmt":"2026-07-10T14:41:44","slug":"warning-to-south-africans-with-retirement-funds","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/finance\/863657\/warning-to-south-africans-with-retirement-funds\/","title":{"rendered":"Warning to South Africans with retirement funds"},"content":{"rendered":"\n

The volatile inflation environment has highlighted the inherent risk of inflation for retirement planning in South Africa. <\/p>\n\n\n\n

South Africa’s inflation rate rose to 4% in April, driven by high fuel prices amid the Iran War.<\/p>\n\n\n\n

This is at the upper end of the Reserve Bank’s new tolerance band, which allows for swings of one percentage point around the 3% target. <\/p>\n\n\n\n

Although Iran and the US have now agreed on a peace deal, the Reserve Bank’s higher-for-longer interest rate outlook and revised inflation expectations have highlighted the challenge of generating real returns. <\/p>\n\n\n\n

“The biggest flaw in modern retirement planning is not a failure to calculate inflation, but a failure to anticipate the risk of the inflation rate changing,” said Hugh Hacking from\u00a0Momentum Corporate. <\/p>\n\n\n\n

“Human nature means we tend to anchor ourselves to current conditions. When inflation is high, we assume it will stay high. When it falls, we plan as though low inflation is a permanent fixture.” <\/p>\n\n\n\n

This was the case recently, when the new 3% target came into effect last year, with many models assuming low inflation was the new normal, ignoring the risks posed by global shocks and policy changes. <\/p>\n\n\n\n

While the idea of anchoring is a minor inconvenience for short-term savings, it’s a structural fault line for retirement funds. <\/p>\n\n\n\n

80-year timeline on the cards<\/h2>\n\n\n
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Retirement planning is a unique issue as it has a long-term horizon. The planning horizon, which includes accumulating retirement savings, can reach 80 years. <\/p>\n\n\n\n

“The danger is that prolonged periods of low inflation can reshape how funds and members perceive risk,” said Hacking, who is the Executive Head of Structured Investments and Annuities. <\/p>\n\n\n\n

“Over time, the focus shifts from protecting purchasing power to avoiding short-term market volatility.” <\/p>\n\n\n\n

This often leads to overly conservative portfolios, which are concentrated in cash or fixed income. Although these are safe in the short term, they are vulnerable if inflation rises. <\/p>\n\n\n\n

The opposite can also be true. When inflation spikes, the panic response is to move into excessive market risk, right before a correction. <\/p>\n\n\n\n

This risk is the most apparent at the point of retirement, when members commit their life savings to an income-generating product.<\/p>\n\n\n\n

When inflation is low, retirees often choose level or fixed-escalation annuities, typically with 5% annual increases. 5% feels generous when inflation is 3%. <\/p>\n\n\n\n

However, if inflation rises to 8% or 10% for a sustained period, Hacking said that the fixed-income stream is eroded year after year.<\/p>\n\n\n\n

“Complicating matters further, inflation does not hit all retirees equally. CPI measures an average basket of goods, but older South Africans face a very different personal inflation reality,” he added. <\/p>\n\n\n\n

“As people age, spending shifts from transport and lifestyle towards healthcare and specialised housing, sectors where costs have historically risen faster than broader CPI.” <\/p>\n\n\n\n

A retirement model that ignores shifting personal inflation baseline over a 30-year post-retirement period fails to build genuine financial resilience. <\/p>\n\n\n\n

Hacking said that maintaining growth assets such as equities remains essential to generating long-term real returns during the accumulation phase. <\/p>\n\n\n\n

While traditional life-stage models reduce equity exposure as members approach retirement, de-risking too aggressively can undermine a portfolio’s ability to outpace inflation. <\/p>\n\n\n\n

For retirees selecting life annuities at retirement, he said that CPI-linked annuities provide an explicit inflation hedge, but are capital-intensive and less accessible for funds with smaller balances. <\/p>\n\n\n\n

<\/p>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

South Africans with retirement funds have been warned about the potential risk that inflation has on generating real returns. <\/p>\n","protected":false},"author":95,"featured_media":862876,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"posted","_sma_x_autopost_error":"","_sma_x_post_id":"2076215240358760716","_sma_x_attempts":1,"footnotes":""},"categories":[11121],"tags":[16092],"class_list":["post-863657","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance","tag-momentum-corporate"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/863657","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=863657"}],"version-history":[{"count":1,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/863657\/revisions"}],"predecessor-version":[{"id":863666,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/863657\/revisions\/863666"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/862876"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=863657"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=863657"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=863657"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}