Nearly 40 percent aren’t saving for retirement

Almost 40 percent of working South Africans do not contribute to a pension/provident fund or a retirement annuity (RA) fund, which suggests they are making no provision for their retirement. This is according to the Old Mutual Savings & Investment Monitor.

And it’s not just people in poorer households who aren’t saving for retirement. According to the survey, 19 percent of respondents in households with a monthly income of R40 000 or more don’t contribute to a pension/provident fund or an RA. The percentages of the other income brackets are: 25 percent in the case of households with an income of between R20 000 and R39 999 a month; 31 percent of households with an income of between R14 000 and R19 999 a month; 37 percent of households with an income of between R6 000 and R13 999 a month; and 58 percent of households with an income of less than R6 000 a month.

Jaco Gouws, product actuary at Old Mutual, says: “Only two things drive savings: the willingness to save and the ability to save – in other words, having sufficient income to save. In South Africa, many people simply do not have the ability to save; their only option is to rely on the state or their families. Many, however, do have the ability to save, but choose not to or fail to realise that they need to save more.”

LOOKING TO THEIR CHILDREN OR THE STATE

This year’s survey shows that 38 percent of all respondents say their children will take care of them when they are old. Last year, 40 percent of all respondents said they were relying on their children to look after them in retirement.

The belief that children will look after one in retirement is more prevalent among lower-income people, although a significant percentage of wealthier people are also planning to depend on their children in retirement. Twenty-five percent of respondents in households with an income of more than R40 000 a month say they are looking to their children to support them when they are old, compared with 51 percent of those in households with an income of less than R6 000 a month.

One in three of respondents are looking to the state to support them in their retirement.

Unsurprisingly, lower-income households are more inclined to regard the state as a source of support. Half of the respondents in households with an income of less than R6 000 a month say the state will take care of them if they can’t take care of themselves, whereas 13 percent of respondents in households with an income of more than R40 000 a month expect the state to come to their rescue.

The survey shows that 21 percent of respondents find themselves in the “sandwich generation” – a term used to describe people who are supporting two generations: their offspring and their parents.

Most people in the “sandwich generation” are aged 40 to 49 and have a household income of between R6 000 and R13 999 a month.

The problem facing people in the “sandwich generation” is that they are supporting their parents at the expense of making adequate provision for their own retirement.

“The biggest present you can give your children is to never become dependent on them – in other words, make provision for your retirement. And the biggest present you can give yourself is to make your children independent – by giving them a good education,” Gouws says.