BUSINESS MAVERICK: Most South Africans can’t afford to retire, but there is a possible solution

July is savings month. It has been an active awareness campaign of the South African Savings Institute in the country for many years. Sadly, South Africans have remained pretty bad at it. Saving, that is.

According to the research, the monthly contribution from a pension for nearly 80% of people makes up only 27% of their income, with other investments or savings contributing only 7%. As a result and similar to the results from the non-retiree market, pensioners are actively cutting down on expenses in order to cope financially.

And it is an issue very relevant to millennials. The group comprises 70% of the South African workforce and makes up over 40% of the country’s respective retirement fund membership bases.Research shows they will change jobs more so than any previous generation and are therefore exposed to the temptation of withdrawing their savings more so than ever before,” says Viresh Maharaj, Chief Executive of Corporate Sales & Marketing at Sanlam.

One of the Retirement Fund Default Regulations in terms of section 36 of the Pension Funds Act, that came into force on 1 March 2019, requires members to have access to Retirement Benefits Counselling before leaving the funds and when he/she retires from the fund. It must also be made available when a new member joins a fund.

However, according to Kenny Meiring, an independent retirement benefits counsellor, it is not sufficient for retirement funds to just tick the regulatory boxes and say that they have a retirement benefits counselling strategy in place, by sending each member a brochure on the defaults and provide access to a call centre.Most fund members are not financially literate enough to properly understand the products and the implications of the choices.

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