There is a lack of member engagement when it comes to pension funds according to Old Mutual’s 2012 retirement survey. “There is still very little inclination among members to involve themselves in the trustee election process,” explained Hugh Hacking, head of retirement fund solutions at Old Mutual Corporate. “90% of respondents who are fund members indicated that they did not vote in their most recent trustee election. However, in spite of this, members remain very trusting of their trustees and are mostly confident of their abilities and willingness to act in their best interest.”
Another worrying concern was that most (64%) respondents spend all the income they earn and are unable to save anything. This figure has increased dramatically from 39% of respondents in 2011 and Old Mutual warned that this could have major consequences on the growth of the economy in the future.
“As pressure of rising costs weighs on South African households, respondents are increasingly relying on their children and the government to support them after retirement. This reliance on future generations only entrenches the cycle of poverty,” says Hacking adding that an increased number of people will have to work past retirement.
Despite most people taking cash withdrawals, there is a growing realisation that preservation is important. “As was the case in the past two Retirement Monitors, the vast majority (66%) took their entire available benefit when withdrawing from their fund. This remains an area of major concern for the South African retirement industry. Unfortunately economic realities see these retirement benefits spent on immediate needs,” explained Hacking.
Some positive findings were also unpacked in the Old Mutual Retirement Monitor, including that people are more aware that they are not providing adequately for retirement. “When asked about the savings, investments and other sources they will draw on in retirement, respondents said they expected only 20% of their retirement funding would come from cash resources. This figure dropped from 21% in 2011 and 29% in 2010,” said Bongani Madikiza, managing director of Old Mutual Corporate. “It looks as if the realities of the past few years have made people much more aware of the impacts that market conditions can have on cash savings.”
The survey also found that more people have invested for retirement. The data showed that 33% of respondents own a retirement annuity – up from 24% of respondents in 2011. Old Mutual said it was encouraging that 58% of respondents belong to a pension or provident fund – an increase from 51% of respondents in 2011 and 57% of respondents in 2010.
“However, the fact remains that about one third (31%) of respondents do not have any formal retirement product at all,” added Madikiza.