Retirement industry needs reformation

By Staff Writer
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.

Recent Articles

Featured Rating agencies may come knocking

It is only the middle of February, but the rand has already made two big moves. The first was the rand moving from R14.60 to R 13.20 at the beginning of the year, as emerging markets (EM) became fashionable again. The second was where the rand gave away nearly 90 cents in 2 weeks as the EM rally ran out of steam, and local events started to hit the headlines.

Read more

The cost of sending money home to neighbouring countries

Transferring money home within the Southern African Development Community (SADC) provides vital financial support for many households in neighbouring countries.

Read more

Student bank accounts: Which come out on top?

Being a student signals budgeting and not having a lot of money at your disposal. This means streamlining expenses such as your grocery costs and entertainment budget. But what if your bank account is in fact costing you more than you can afford?

Read more

Can you afford an ambulance in South Africa?

When a loved one is straddling the line between life and death, you won’t hesitate to call an ambulance. This week, Justmoney found out how much an ambulance ride costs in South Africa, whether you can refuse to get into an ambulance, and who pays the bill if you’re unconscious. 

Read more

Sign Up

To our weekly newsletter for advice you can bank on

Deals

President Hotel Easter Special

Price: From R1,500
When: 15 March to 30 April
Where: Cape Town

Kulula-Preskil Island Resort Special

Price: R16,999
When: 11 May -14 September
Where: Mauritius

A Touch Of Madness Tuck In Tuesday Special

Price: R70
When: Tuesdays
Where: Cape Town