Post-lockdown South Africa

The Pandemic Sent South Africans Raiding Pension & Ruining Retirement Plans


November 3, 2020

Retirement is generally deemed a time of rest. It is a point attained, where work is no longer done, and all the savings gathered during the years of work are lived off of.

Retirement could either be a time looked forward to in excitement or a time greatly dreaded. The latter is known to be a case of poor retirement planning.

The bells that retirement planning rings are for there to be proper saving, investment, and distribution of money for sustenance during retirement. A proper retirement plan is a major determinant of how pleasing retirement would be. 

On the flip side, in a situation where there is a constant battle between having to meet an immediate need and meeting a future need, there’s almost no doubt that the immediate need to be met would be of topmost priority. 

This perfectly explains the current battle facing South Africans, who are seen to be in a situation where they, as a result of the lockdown, have been forced to dip into their retirement savings.

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This undesirable state is seen to have occurred as a result of the pandemic which drove multiple retrenchments, and has led to the loss of jobs for many and ultimately resulting in an overall rise in unemployment in the country.

Due to all those issues, there has been a surge in the demand for pension fund access in South Africa. According to reports, the pandemic revealed how little the emergency funds of South Africans are. It showed how lacking South Africans were in keeping an emergency fund, which normally would have been the “saviour” in the rainy days.

In this event (of lack of emergency savings), their pension savings became the lifeline.

Retirement Planning – A problem in SA

Before the pandemic, the country was already seen to be lagging in the area of retirement planning.

The South African National Treasury disclosed that only 6 percent of the country’s population was on track to retire comfortably.  “Retire comfortably” here means to maintain in retirement, the standard of living that was the case during active work years.

This means that in a nation with a population of approximately 50 million people, only 3 million people can retire comfortably. This further exposes that the majority of working South Africans do not put themselves in a position where they will be able to retire comfortably. 

The pandemic has worsened the case, as more and more South Africans dip into their retirement funds.

It is no doubt that the already existing problem of poor retirement planning culture has been heightened, as a survey by Sanlam’s 2020 Benchmark Survey revealed that 16 percent of retirement funds have had members request access during the lockdown.

10X Retirement Reality Report

South African’s veteran investment management firm, 10X, released its third edition of the Retirement Reality Report. 

In the report outlook for this year, it was revealed that the economic impact of the Covid-19 pandemic has further worsened the retirement planning culture of South Africans.

Contained in the report was a survey which traced the lifestyles of about 15 million economically active South Africans. Economically active here refers to households whose income is greater than ZAR 8 K (USD 490.00)

As found from the survey, only 51 percent of the respondents have some sort of retirement plan, and just about 6 percent are confident that it will get them through retirement.

The remaining 49 percent of respondents don’t have a retirement savings plan at all, up from 46 percent in 2019

The Head of Investments 10X, Chris Eddy, in an interview, attested that the Covid-19 pandemic has highlighted the urgency needed to tackle the retirement savings crisis. The pandemic, having heightened the retirement planning crisis, was seen to have led to a continuous dip into individuals’ retirement savings.

With normalcy gradually returning and the economy recovering, there is some hope that the trend of having to raid those pension funds prematurely might let up.

Featured Image Courtesy: Discover

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