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Cape Town - Pensions' growth in South Africa has shown "remarkable resilience" over the past year and a half, according to the latest BankservAfrica Disposable Salary Index-BankservAfrica Pension Payment Index (BDSI-BPPI) for June 2016.
While pension payments are typically of lower value than salaries, over the past 18 months, BankservAfrica data has shown the average pension banked has improved at a faster rate than pocketed salaries.
Since January 2013, when the BPPI began, the cumulative increase in pensions has been 30.3%, compared to the cumulative inflation increase of 21.7%.
"I have been surprised by the continuous increase in pensions. Our pension funds are doing relatively well,” Mike Schüssler, chief economist at Economists dotcoza, told Fin24 on Wednesday.
June figures show recent salary increases were generally linked to last year’s inflation rate, which averaged 4.6%, but were not high enough to compensate for the increased levels of inflation. This trend has become evident since December 2015.
“Take-home salaries grew at a rate slower than the inflation rate as effective tax increases, along with above inflation medical insurance, nullified gross salary increases. This slowed cumulative average take-home pay growth to only 17.3%.” explained Schüssler.
READ: Average salaries grow just above inflation
He said it is likely because about 25% of SA pension fund assets are invested abroad and the weaker rand has, therefore, played a positive role. SA companies' dividends are likely also not doing too badly as many have more of their turnover outside the boarders of SA.
"My feeling is that asset managers have been doing well over the last number of months and this has benefited pensioners a bit more. I like the idea that pensioners are doing well - they worked hard and saved for it. If this carries on it will make pensioners a more important factor in retail sales, for instance. Maybe retailers will realise that if they run specials for pensioners they will come out and spend," said Schüssler.
“The retirement fund industry has delivered reasonable returns for pensions. This growth has been assisted by the lower starting value of pensions and higher tax threshold levels, meaning that pensions have avoided the negative influence of tax bracket creep."
The typical pension increased by 6.4% year-on-year compared to 5.7% year-on-year growth in salary payments.
“Take-home salaries – paid through the interbank South African payments system – increased by 5.7% year-on-year. This is less than the June inflation rate and, therefore, reflects a 0.5% real decline,” explained Dr Caroline Belrose, head of knowledge and risk services at BankservAfrica.
Pensioners, when compared to salary earners, only clear on average an income that equates to 47% of the money salaried workers get. However the latest figure is an improvement - up from the 42.6% in June 2012. The average banked salary in June this year was R13 266, while the average pension paid into a South African bank account was R6 351.
The typical (or median) pension and salary reflect similar trends. Over the last year, the typical salary increased to R9 831, which was just a 3.8% increase on June 2015. The typical pensions increased by 13.5% – nearly four times the rate of the typical salary increase. The typical pension was however just R4 383 in June.
The typical salary pocketed by employees increased by 19.7% over the three and a half year period from January 2013 to June 2016. Over the same period, the typical pensioner saw a 38.6% increase in the pensions paid into their bank account.
The SA Reserve Bank (Sarb) and the International Monetary Fund (IMF) both forecast that the SA economy will struggle to grow this year. This is likely to weigh heavily on employees.
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