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Johannesburg - Many of those who lost or changed their jobs in the first six months of this year cashed their pension payouts instead of preserving the funds for retirement.
This alarming trend has emerged from the latest statistics on long-term savings products from the Association for Savings & Investment SA (Asisa).
According to Statistics South Africa, 246 000 people lost their jobs and one would have expected that at least a portion of their pension payouts or severance packages would be saved.
From Asisa's figures it appears, however, that regular and lump-sum payments into retirement annuities, endowment policies, living and compulsory annuities, as well as life-assurance products, have fallen sharply.
Asisa deputy chief executive Peter Dempsey said it is a disturbing phenomenon that people are not saving the money from severance packages or pension fund payouts, but there were several reasons for this.
From the huge decline in single-premium investments it is evident, he explained, that many in the current economic climate cannot afford to save their payouts.
Seasonal investments
He pointed out that Asisa's statistics also indicate that so-called seasonal investments in retirement annuities have declined dramatically.
These seasonal investments are usually made at the end of February by people who do not belong to pension funds, and invest lump sums in annuities before the end of the tax year to take advantage of tax concessions.
Another factor is the tendency to save less because of uncertainty about the national social savings fund. Initially this fund was to have been established by 2010, but less and less is being heard about it today.
The target date for the introduction of the savings fund is only 2015, and it seems that it has been put on a back burner on account of government's proposed national health plan.
With all the rumours about the savings fund that were circulating last year, uncertainty was created, scaring people off putting away anything for retirement.
Dempsey reckoned a formal announcement by government as to progress or otherwise in terms of the national savings fund would do much to counteract the uncertainty.
- Fin24.com