Pension system ‘already in crisis’

Inge Lamprecht

The percentage of working South Africans likely to cash in their retirement savings if they changed jobs has almost doubled over the last four years.

According to the 2017 Old Mutual Corporate Retirement Monitor, the percentage of people saying they would withdraw their benefits has increased from 19% in 2012 to 35% in 2016.

Even where people earn more than R40 000 a month, 27% of respondents still said they would cash in.

Malusi Ndlovu, head of Old Mutual Corporate Consultants, says people earning at this level have access to financial advice, and “one would have expected them to be budgeting and saving, not to be in crisis mode”.

Even among people closer to retirement, a large percentage signalled that they would withdraw a part or all of their benefits if they changed jobs.

The findings come amid a retirement crisis in South Africa, with only a small percentage of people in a position to maintain their standard of living in retirement. Early withdrawals are one of the main reasons for the dire situation.

According to the survey, about 30% of working locals have no formal retirement provision (58% of those earning less than R5 000 per month).

Andrew Davison, head of implemented consulting, says about a quarter of people don’t think they will reach retirement age.

Debt is also a problem – not only are low-income earners highly indebted, but it is often the most expensive debt available.

But is South Africa setting itself up for an enormous crisis 20 years from now?

Davison says this is a difficult issue “because it is already a crisis. People cannot afford to retire.”