A dramatically transformed SA scenario

PRESENTLY 19 million adult South Africans benefit from pension funds, more than voted in the 2014 general election. And, if those funds were to be nationalised without compensation it would hurt many more blacks than whites, according to economist Mike Schüssler.

Addressing ‘Retirement Funds and Social Development’ at the recent IRFA conference, he highlighted how in 1995 whites were contributing 75 percent of pension funds whereas today blacks contribute 70 percent.

“We have come a long way in a short time. By 2016, with more than 6.5 million blacks contributing to funds compared to one million whites, we'd experienced a seismic demographic change,” he added.

Since 1990 the number of accounts have more than doubled to reach the 16 million plus mark and over 35 million South Africans, about two thirds, now benefit from pension funds.

He reasoned, “If one could add the indirect beneficiaries and other direct shareholders that number could be as high as 44 million and 80 percent could benefit if the accounts were managed.”

Schüssler told delegates, “Astonishingly we have the 8th most pension assets in dollar terms in the world. More than Germany which boasts the world’s 5th largest economy and we have twice our GDP weight in pension assets. To put it in perspective, our pension assets are the 5th largest in the world in GDP terms. In 2015 Korea, Russia, Colombia, Sweden and New Zealand combined had $310 billion and SA had $316 billion in retirement assets.”

While SA has only 0.8 percent of the pension world population it has 1.2 percent of its assets. According to the uniquely South African BEE assets as calculated for the Top 100 companies by Intellidex, the average South African has 62.5 percent more in assets than the average world citizen.

That means South Africans have double the value per person in pension fund assets than in per capita income.

Despite more benefits being withdrawn than contributed, the growth in pension fund assets has been fast and spectacular both in terms of GDP and overall size. SA has more assets in other countries than foreigners have here.

Funds have invested major resources in other countries ensuring fluctuating markets will not have a devastating effect and safeguarding member assets.

“Even in SA you just have to look around to realise pension funds own most of our shopping malls,” he commented.

It is estimated that the value of each person with a pension fund would be R326 000.

The average salary today is R220 000 so pension value is 50% more. In real terms South Africans have withdrawn R600 billion more from their pension funds than they contributed to them.

Despite this the average value per pension account has increased with 135 percent over the past 25 years.

Schüssler did warn, however, “During 2015 the average withdrawal by adults and dependants was R292 000. This equates to 133 percent of the average salary and will not be sustainable in the long term.

“Today 90 percent of South Africans are on the grid, in India it is only 20 percent. Astonishingly we are a very asset rich country but very poor job wise and this will have to be addressed.

“Moreover, our contribution rate to pension funds is five percent of GDP while the government's overspending is three percent of GDP.”