Johannesburg - In the face of worsening economic conditions, South African employers and employees are contributing more to retirement, a survey has found.
The annual Benchmark Survey from Sanlam Employee Benefits, released on Wednesday, found that the total average retirement fund contribution made by employees and employers amounted to 11.3% of salary this year, up from 10.9% in 2008.
According to the survey, employees contributed an average of 5.9% (versus 5.5% in 2008) and employers contributed 9.9% (versus 9.5% in 2008).
However, these higher contributions were still insufficient.
"South African contribution levels are far from what they were in 2002 and well off a recommended minimum of 15%," said Dawie de Villiers, survey co-author and CEO of Sanlam Structured Solutions.
Total contributions were an important indicator of whether individual South Africans would have enough to maintain their standard of living when they retire.
Calculations conducted by Sanlam showed that current contribution levels resulted in an average replacement ratio of only 30%.
A replacement ratio is a measure of one's income during retirement relative to that enjoyed during productive years, De Villiers explained.
Given this low figure versus an average of 59% for mandatory savings and 68% for voluntary savings among Organisation for Economic Co-operation and Development countries - as well as South Africa's high levels of unemployment and poverty - the survey indicated that the majority of South Africans were not adequately preparing themselves for retirement.
"We hope that the increase in contributions is a continuing trend and the result of government and industry's efforts to communicate the importance of savings," De Villiers said.
"Recognising this improvement might be a response to the global economic crisis, we trust that it is mainly due to more South Africans taking a prudent longer term view of retirement," he said.
Turning to HIV/Aids management, the survey found that the percentage of employers with programmes in place to manage the disease, including awareness campaigns and counselling, had plateaued at 69%.
The proportion of employers providing HIV/Aids testing, however, had grown to 83%, up from 67% last year.
"Encouragingly, the costs to manage the disease seem to have stabilised," De Villiers said.
Over the past three years, the proportion of funds that had seen an increase in HIV/Aids risk costs had declined to 12%, versus 16% in 2008 and 22% in 2007.
"This declining trend is likely due to the establishment of disease management programmes, particularly among larger funds, and employer-provided testing, as well as greater insights into costs of the disease and associated risk benefits," De Villiers said.
Turning to the impacts of the global economic crisis, the survey found that while only seven percent of funds had a "large exposure" to so-called toxic assets (both locally and internationally), 88% of them expected their investment returns to be negatively impacted by the global economic crisis, of which 36% expected a "large" impact.
More than 50% of funds indicated they would not be changing their credit exposure conditions for their assets and 34% were considering doing so or unsure, the survey found.
"Although in its early days in South Africa, the ramifications of the global economic crisis are still to be fully realised," De Villiers said.
"Fortunately, those in the industry and everyday South Africans are confident in our financial institutions to weather what will be a rough storm."
Among retirement fund members surveyed, a majority (57.5%) were confident the local financial services industry would endure the crisis, while around one quarter (24.7%) were unsure.
Almost 87% of respondents to the industry survey believed that the local banking industry was stable and secure relative to its global peers.
The survey also found that in the context of the current economic climate, 48.5% of members thought they would have enough time to recover from the economic crisis before they retired, while a troubling 23.2 thought they would not and 28.3% were unsure.
When asked if they were "more or less prepared for retirement" given the current economic crisis, 40% said they were, 40% admitted they were not, and 20% were unsure.
- Sapa