Saving for retirement is not only about you

You may have a strong personal imperative to save for retirement, but there is also a national imperative to do so. reports

If all working people in South Africa saved an appropriate amount for their retirement, children’s education and housing, it would provide investment funding that could help pull our country out of the economic doldrums, according to a paper presented at the Actuarial Society of South Africa’s annual convention in Cape Town this week.

Actuaries Guy Chennells and Keagan Kistan from Old Mutual told the convention that increasing our savings through our retirement funds is the most effective way to boost the nation’s savings and meet the need for economic growth.

Yet they found that more money is leaving South African retirement funds than is going in: total retirement savings are actually declining because we are drawing out more than we are contributing when the costs of group life assurance and administration are included.

Chennells and Kistan say in their paper, “Can retirement savings save South Africa?”, that this was the case in 2014 and last year, when funds experienced a net outflow of 1.88 percent of the country’s gross domestic product (GDP), which means the country is “being starved of a critical savings pool”.

Although improved retirement savings alone cannot save South Africa, it can play an important part and will at the same time improve our individual lives, as most of us do not save enough for retirement, the pair say.

They say if we all contributed closer to the maximum 27.5 percent that we can deduct from our taxable income, it would have a huge impact on the country’s savings. They say that while policymakers should address the issue of preserving savings, stopping the leakage of retirement savings through non-preservation will have less of an impact on the economy than an increase in contributions.