The sudden and widespread Covid-19-induced financial insecurity seen in South Africa gives a glimpse into the future for most South Africans unless we start taking steps to defuse our national retirement savings timebomb, says Chris Eddy, Head of Investments at 10X Investments, as the company prepares to release its pandemic-delayed third annual Retirement Reality Report.
“By magnifying many vulnerabilities in our society, Covid-19 has highlighted the urgency of tackling the retirement savings crisis,” he said.
Compilation of the Retirement Reality Report 2020 (RRR20) was delayed when the pandemic hit South Africa in the middle of data collection. The report, which takes into account the early effects of the pandemic, will now be published on October 24.
RRR20 is the third annual report from 10X Investments, the first two having clearly laid out a worsening crisis even before Covid-19.
RRR18 and RRR19 made it clear that South Africa was sitting on a retirement time-bomb, with the data aligning very closely to a widely quoted National Treasury statement that only 6% of the country’s population was on track to retire comfortably.
In identifying key reasons why so many South Africans will face a bleak reality after their working lives come to an end, 10X has found that the vast majority of South Africans have not formally planned how they will fund their retirement.
Some of this is down to economic hardship: it is simply impossible to save without a minimum level of income. This year more than half of the survey’s respondents indicated severe financial stress.
Beyond that, it is not just an income issue, though, because people in the low-, medium-, or high-income brackets are equally worried about making ends meet in retirement. Rather, it is a savings problem that is rooted in the widespread lack of retirement planning, which in turn manifests hubris and unrealistic expectations, financial ignorance and ill-discipline, and disengagement from the funding process.
Of those who do have retirement saving plans, dangerously few are monitoring their progress. Most don’t know whether or not they are on track to meet their goal to be able to support themselves in retirement, never mind in any comfort.
“Even before the pandemic and lockdown, many South Africans, including many thousands of pensioners, were in crisis,” says Eddy. “Covid-19 has magnified the crisis for many and brought it forward for others.
“By forcing many to suddenly cope with dramatically reduced income, the pandemic effectively fast-forwarded South Africans to a potential future where they no longer have an income and little-to-no savings to fall back on.”
Eddy said it was not obvious that there was a silver lining as the data painted a picture of a population sailing blindly into a worsening crisis, but there was a chance that some lessons might be learned as sudden lifestyle downgrades became reality for many.
If there is to be a positive from our state of economic and financial disaster, perhaps it is the increased awareness of our vulnerability to life’s unexpected broadsides,” he said.
“In giving a glimpse into the future, of what it feels like to be suddenly living off a low income and the strain of great financial insecurity, it may finally convince people that they cannot afford to ignore planning for retirement.”
He added that the RRR20 would show that “the need to create resilience in our communities and build sustainability into our lifestyles is beyond urgent”.
10X Investments hopes this report will draw attention to the long-running retirement saving crisis and help to foster a better understanding of how existing vulnerabilities have been magnified by the global pandemic. It is hoped that the RRR20 will broaden the discussion on the steps needed to improve the situation that continues to be downplayed by some and ignored by the majority.
This report is based on findings of the 2020 Brand Atlas Survey, which tracks and measures the lifestyles of the universe of 15.1 million economically active South Africans, currently those living in households with a monthly income of more than R8 000, through online completion surveys. The data are weighted to reflect the profile of this universe as defined by Unisa's Bureau of Marketing Research in their 2019 Household Income and Expenditure report.
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