Publications
Partners
Cape Town - It is unlikely that South Africa will follow the path of developed European countries by extending the official retirement age, as South Africa does not have an ageing population, therefore South Africans need to start adequate provision for retirement, says Windall Bekker, partner at Rezco Investment Consulting.
As the first month of 2013 comes to a close, most people are breathing a sigh of relief as their January salaries are finally paid, and for most, their New Year resolutions are now long forgotten and in the past.
However, if there is one set of New Year resolutions that should not be forgotten, it is the steadfast intention to ensure adequate provision for your retirement.
Bekker says this is particularly important as many people who believe they can simply carry on working after the normal retirement ages of 60 or 63 are often disappointed.
“In our experience, employers are not willing to extend the retirement age of employees unless they have specialist skill sets that cannot be easily found elsewhere.
Those members who do have specialist skill sets already tend to be higher income earners and are more likely to have provided sufficiently for their retirement, and so do not generally need to extend their working lives.
“One of the problems is that we tend to see lower skilled retirement fund members, who have not provided for their retirement adequately, needing to extend their working lives - and employers not being open to the idea.”
Bekker says it is also unlikely that South Africa will follow the path of developed European countries by extending the official retirement age, as South Africa does not have an ageing population.
“Combined with the extremely high levels of unemployment, especially among younger people, this means it is highly unlikely we will see retirement ages extended. Of course, older fund members with specialist skills remain in demand and will continue to be in a position to extend their working lives.”
For those people who believe they do not have sufficient retirement capital, there are various options available.
“Firstly, people need to reduce their lifestyle expectations post-retirement and accept that they will not be as financially secure as they would have liked. If they are still working, it is critical that they reduce their current consumption levels and increase monthly contributions to their retirement fund and try to put lump sums such as bonuses into their retirement fund.”
He notes that in tougher economic climates it may also be advisable to take other steps, such as making sure that you have sufficient savings to last if you become unemployed.
“Previously, people used to assume that three months of savings was sufficient to enable them to find another job but increasingly, and in the current economic environment, a year is no longer an unreasonable expectation.”
Bekker says it is also advisable to ensure that there are two breadwinners in the family and that these people ideally work for different companies in order to reduce the possible impact if a company decides to downsize.
“Should a redundancy happen and you are unable to preserve your retirement fund, then it is crucial to ensure that the money is placed into another investment vehicle, for example your mortgage bond, which will reduce debt levels but can still be easily accessed when required.”
He says it is a good idea for anyone who is committed to providing adequately for their retirement to speak to a qualified financial planner.
“People should, however, take special care when selecting a financial adviser and check such issues as whether they are independent or tied agents, whether they have the required qualifications and licences, and whether they are incentivised to recommend any particular products,” Bekker says.
