South Africans’ low savings rate needs to be addressed through legislative support for compulsory savings and increased education on retirement options.
This was shown in the results of the 2013 Old Mutual Retirement Monitor. The annual survey, which measures pre-retirement perceptions among working South Africans, was based on 1 180 interviews.
Craig Aitchison, general manager of customer solutions at Old Mutual Corporate, said a large portion of the population still has no form of retirement savings in place.
The need to reform South Africans’ savings culture
Pension Funds Adjudicator, Muvhango Lukhaimane, told iol.co.za that many retirement funds are placing their credibility at risk by not carrying out their most basic functions.
Regarding the monitor participants, Aitchison said only 50% of the respondents listed retirement as a specific savings objective.
“Strengthening the savings culture among South Africans has been identified by Treasury as the primary driver of the current retirement reform proposals,” he said.
The results also showed that saving for education remains a high priority among respondents.
“Funeral policies continue to enjoy steady support while the incidence of formal retirement products has declined steadily over the past four measures and is at the lowest level to date at 58% of respondents,” he added.
South Africans’ saving habits
The 2013 Retirement Monitor showed that the total monthly savings differs significantly between members of retirement funds and non-members, with non-members typically saving almost R1 000 less than members.
“This is strong evidence of the benefits of a compulsory savings vehicle and a key reason why we applaud this particular proposal by government,” said Aitchison.
Low levels of engagement and knowledge
The monitor showed that the participants’ levels of engagement with and knowledge of their retirement funds was very low.
“Just fewer than 60% of respondents indicated that they did not know who their trustees are – an increase from 42% of respondents who indicated the same thing in last year’s survey. In spite of this, members still demonstrate high levels of trust in the trustees of their funds,” said Aitchison.
Aitchison concluded that the 2013 Old Mutual Retirement Monitor results showed a concerning lack of education in retirement annuities across all income, age and fund membership levels.
“About 33% of respondents had only heard about annuities previously, while 29% have never heard the word ‘annuity’ used in the context of their retirement planning.
The research has shown that members often make uninformed decisions upon retirement. This has raised the question of how trustees and other stakeholders can better assist members on retirement – especially when it comes to annuities,” he said.