Johannesburg - Employers can do more to help foster a savings culture in South Africa, a survey released by Old Mutual on Tuesday has found.
According to the Old Mutual Savings Monitor, only 41% of South Africans working in formal employment in metro areas belonged to a retirement fund.
The survey included 1 000 South African households in the main metropolitan areas, working in both the formal and informal sectors.
It showed that only 54% of South Africans ofpre-retirement age, 45 to 59 years, had formal retirement savings.
"In countries with such a low savings culture, there is an increased burden on the government to provide retirement assistance, which in turn, could increase the need to raise taxes.
"Households often underestimate their future liabilities, especially the cost of educating children and the cost of retirement," Old Mutual said.
Many South African households did not know whether their retirement provision was sufficient.
Seelan Gobalsamy, MD of Old Mutual Corporate, said the Savings Monitor found that recognition of the need to save for retirement did not necessarily result in changed savings behaviour, nor did the fear of not having enough savings at retirement.
"Behaviour seems to be driven chiefly by individuals' attitudes to organisation, planning, financial knowledge seeking and a sense of optimism.
"Employers can therefore play a major role in encouraging savings, firstly by ensuring that a retirement vehicle is available to their employees, and secondly, by making every effort to convince them to join the scheme," Gobalsamy said.
He said many employers did not offer retirement funds to their employees because they perceived them as being costly, complicated and time consuming.
"However, there are options, such as umbrella funds, which address many of these concerns."
Contributing to a retirement fund was often seen as a luxury by South Africans, he said.
Basic necessities such as food, housing, education and medical expenses obviously came first.
"However, a fair number of people who can afford to contribute towards retirement savings, choose to spend their extra income on discretionary items such as new cars, eating out and luxury items.
Gobalsamy said it was these people who employers needed to be communicating with about the importance of saving for retirement.
"Employers have the option of structuring retirement schemes to allow for variable contribution rates by employees.
"For example, employees can be given the option of selecting a monthly contribution rate of either 15 percent or five percent of their monthly salary."
People generally needed to save around 15% of their monthly salary over a period of up to 40 years to retire comfortably.
"While affordability obviously plays a role, with younger employees tending to earn less than their older colleagues, there is also an element of apathy amongst younger people who perceive retirement as something to be worried about sometime in the future."
Gobalsamy said employers could play a much bigger role in encouraging especially younger employees to start contributing towards their retirement as early as possible.
"Financial education programmes are one of the many tools employers can make use of to do this.
"Providing these tools will improve the employees' perception of the employer's care for their well-being, which can improve retention of key staff."
- Sapa