Nearly 40 per­cent aren’t sav­ing for re­tire­ment

Weekend Argus (Saturday Edition) - - PERSONALFINANCE -

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.

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