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Cape Town - South Africans close to retirement lack crucial knowledge needed to make sound decisions about their retirement savings, especially when it comes to annuity options.
This is according to the recently released Old Mutual Retirement Monitor, which found that respondents in the pre-retirement group, aged 55 and older, have a very low level of understanding of their options.
According to Karabo Morule, GM of Member Solutions at Old Mutual Corporate, pre-retirees are feeling less well-informed than younger members, probably because they are realising how little they know about their retirement fund now that they are approaching retirement age.
Ignorance a major concern
“Of major concern is the fact that about half of the respondents said they do not know how much they have saved and do not know anything about annuity options,” says Morule.
“Approximately 46% of respondents in the pre-retiree group indicated that they do not know how much they have saved for their retirement. Just under 20% of respondents in the pre-retiree group have never heard of an annuity, and 28% have heard only a bit about them,” says Morule.
After the different annuities were explained to this group, they were then asked about their preferred annuity structure. Of them, 49% said they would prefer an income on retirement that would keep up with inflation, even if that meant it was lower, while 29% would prefer to decide on a monthly income, even if it meant it could run out if they lived a long time.
The remaining 22% wanted a reasonable income on retirement, even if it might not keep up with inflation in the long term.
Their responses do not concur with what many people actually do. Because retirement savings are often inadequate in relation to their pre-retirement income, most people choose the annuity that provides the highest immediate income.
They tend to prioritise maintaining their pre-retirement lifestyles over enabling their income to grow with inflation and lasting longer. The reality is that this choice can mean that they run out of money quite quickly. Adequate retirement savings over a long period would allow members to ensure they make better choices at retirement.
Default annuity would be welcomed
“In spite of the apparent lack of knowledge about annuities, just under 80% of respondents indicated that they would feel positive about a default annuity," says Morule.
The data also revealed that only 43% of pensioners indicated that they received pre-retirement advice from their fund or employer.
“Given the lack of knowledge of pre-retirees in terms of their options and financial position in retirement, this figure is a major concern. It is clear that members need to be supported by both the fund and their employer when it comes to financial decisions on retirement,” says Morule.
This is according to the recently released Old Mutual Retirement Monitor, which found that respondents in the pre-retirement group, aged 55 and older, have a very low level of understanding of their options.
According to Karabo Morule, GM of Member Solutions at Old Mutual Corporate, pre-retirees are feeling less well-informed than younger members, probably because they are realising how little they know about their retirement fund now that they are approaching retirement age.
Ignorance a major concern
“Of major concern is the fact that about half of the respondents said they do not know how much they have saved and do not know anything about annuity options,” says Morule.
“Approximately 46% of respondents in the pre-retiree group indicated that they do not know how much they have saved for their retirement. Just under 20% of respondents in the pre-retiree group have never heard of an annuity, and 28% have heard only a bit about them,” says Morule.
After the different annuities were explained to this group, they were then asked about their preferred annuity structure. Of them, 49% said they would prefer an income on retirement that would keep up with inflation, even if that meant it was lower, while 29% would prefer to decide on a monthly income, even if it meant it could run out if they lived a long time.
The remaining 22% wanted a reasonable income on retirement, even if it might not keep up with inflation in the long term.
Their responses do not concur with what many people actually do. Because retirement savings are often inadequate in relation to their pre-retirement income, most people choose the annuity that provides the highest immediate income.
They tend to prioritise maintaining their pre-retirement lifestyles over enabling their income to grow with inflation and lasting longer. The reality is that this choice can mean that they run out of money quite quickly. Adequate retirement savings over a long period would allow members to ensure they make better choices at retirement.
Default annuity would be welcomed
“In spite of the apparent lack of knowledge about annuities, just under 80% of respondents indicated that they would feel positive about a default annuity," says Morule.
The data also revealed that only 43% of pensioners indicated that they received pre-retirement advice from their fund or employer.
“Given the lack of knowledge of pre-retirees in terms of their options and financial position in retirement, this figure is a major concern. It is clear that members need to be supported by both the fund and their employer when it comes to financial decisions on retirement,” says Morule.
