The South African savings reality

Over the past twelve months, millions of South Africans have had to make emergency financial plans to survive the loss of income experienced as a result of national lockdown and pandemic-related restrictions. Now more than ever before, numerous individuals are struggling to make ends meet. When paying the bills and putting food on the table become close to impossible, the sad reality is that saving for the future is at the bottom of the list of one’s priorities.

In fact, National Treasury estimates that a mere 6% of South Africans can look forward to a financially secure retirement. This statistic was sourced from a 2020 Brand Atlas Survey, which took into account over fifteen million economically active people earning a minimum of R8?000 per month.

With roughly half of South Africans living in poverty, and an unemployment rate of over 40% for the general population and a shocking 74% for the 15-24 age group, the savings reality is a bleak one. Added to this is the fact that even those individuals in the middle- and upper-income brackets are feeling the pinch.

Unfortunately, we cannot simply place all blame on the pandemic. The financial strain caused by lockdown simply served to highlight the fact that we are not a nation of savers. Low financial literacy levels, poor financial discipline, an excessive use of credit and an apathetic attitude towards retirement planning were always present, and lockdown simply exacerbated the existing problems. Many retirement funds reported receiving requests from their members to access their savings early during 2020, simply to get by financially.

According to a report by TransUnion, a consumer credit reporting agency, only 3% of the South Africans who were surveyed could say that their finances have recovered from the negative impacts of lockdown.

It is clear that Covid-19 has highlighted just how poorly equipped we are to handle financial emergencies. The lack of understanding around the long-term effects of decisions taken today cannot be overestimated. So, what can be done to ensure that this situation does not give rise to a generation of impoverished retirees?

The information in this communication is for information purposes and is not intended to be detailed advice described in the Financial Advisory and Intermediary Services Act. The fund, administrator and trustees cannot be held liable for damage or loss suffered as a result of any action that you take based on the contents of this communication.