SA saves for education, not retirement

2011-06-28 14:11

Johannesburg - South Africans are not saving enough for retirement because they are putting money aside for their children's education, the 2011 Old Mutual Retirement Monitor released on Tuesday has found.

"The possibility exists that some respondents regard their children as a form of substitute retirement policy," Old Mutual Corporate MD Bongani Madikiza said.

"However, irrespective of respondents' views on the role of their children in their retirement, it remains very concerning that only 54% of respondents who are currently 10 years or less away from retirement are actually saving for that retirement," he said.

The survey found that the primary savings motivation of respondents aged 35 to 49, was the need to save for their children's education.

Lack of awareness about retirement savings and contribution to retirement schemes was a key reason why the majority of South Africans were not saving enough for their retirement.

"... (I)t is clear that long term, mindset-changing interventions are needed in order to educate people regarding disciplined retirement savings from an earlier age," said Madikiza.

"As a society we also need to investigate mechanisms that help make this affordable for the majority of South Africans," he said.

Seventy percent of respondents believed their contributions towards retirement were 'about right' while 15%  said they were contributing too little towards retirement.

Around 58% said they expected to need to work after retirement, primarily for financial reasons.

"Unfortunately this again points to the fact that individuals are not able to accurately assess their post-retirement needs and carefully calculate their pre-retirement funding requirements to meet those needs," said Hugh Hacking, umbrella fund manager at Old Mutual Corporate.

Fifty-eight percent of respondents earning less than R3 000 felt that death, funeral and disability cover was more important than retirement savings.

Many of them were even doubtful about reaching retirement age.

"This mindset is concerning as it does not take inter-generational savings into account and contributes to the cycle of poverty," said Madikiza.

Few people knew the value of their retirement savings.

"Only 23% of respondents knew the approximate value of their retirement savings," said Hacking.

"In addition the respondents reported contributing on average only 8% of their salary, while it is generally accepted that on average people should contribute around 15% of salary."

The survey comprised 1 005 face-to-face interviews about pre-retirement perceptions and respondents' confidence about the financial provision they had made for their retirement.


  • Ano Nymous - 2011-06-28 14:34

    Who will benefit from people saving for retirement? Oh, of course, Mr Madikiza and colleagues...

  • GT - 2011-06-28 14:34

    Taxed at 40% VAT + private medical + fuel + rates + high school costs means that unless you work for a cash flush corporate who bankrolls your pension, there is little hope for most people saving anything. That is a fact. Don't even start on car and housing costs for middle income earners.

  • zulufox - 2011-06-28 14:34

    researches... they are good at making obvious findings... they have found everything except the cure of cancer and all the other dreaded diseases ... how useful they are!

  • teboho - 2011-06-28 14:37

    the way i understand it is that, the education policy taken out for a child, upon maturity still gets paid directly into the account of the person who`s been contributing, so they can still do whatever they want with that money. am i wright?

  • GJDH - 2011-06-28 14:38

    my childs education is more important than my retirement , unfortunately I cannot count on government schooling or quality Universities in SA, thus the sacrifice needs to be made .. if that means I have to live on bread, water and a government pension.. so be it!!!

  • Sanegran - 2011-06-28 14:43

    how does one save when there is no money. We are downgrading every year still no funds to save.You get an increase after deduction of R400. Rent increases 450+medical aid 300 etc

  • teboho - 2011-06-28 14:44


  • Badballie - 2011-06-28 14:45

    Only the rich can afford to have a retirement plan the rest of us live from hand to mouth, why worry about whats going to happen in 20 or 30 years when you can't even make it through the month now. FACT the average South African earns around R10.00 a day, the average increase in utilities is currently in the region of 45% per annum, the average so called middle class worker has to earn around R10.00 in order to keep R4.00 after paying the government in taxes, rates, vat etc 99% of the population cannot afford to pay out any more than whats taken for retirement annuities by law. 90% of retirement annuities over a full working career will only net you 50% of your required retirement income. The Rich don't have to much of a problem and the poor cannot survive. Report like this create false expectations and are not based on fact.

  • Judith - 2011-06-28 14:47

    Well exactly how much money can we save and still live? What is most important? When you look at the returns on retirement policies, they are pathetic. Let's face it, we're in for working until we drop dead - which is far more satisfying than sitting around doing nothing

  • DeonL - 2011-06-28 14:48

    You can never save too much money, most saves too little.

  • Maestro - 2011-06-28 14:48

    well..think about it....we are bieng taxed approximately 40% of our salaries. 14% vat 15% fuel 20% medical aid.....if not more So please explain to me how you can contribute 15% of your currrent salary to retirement if the current cost of living is so expensive. Please do look at this realisticly...... how long do we have before we can no longer be milked

  • FranklySpeak - 2011-06-28 14:56

    Yes Old Mutual, let's take your retirement annuity for example. In the 10 odd years that I've been contributing, my projected payout more that halved, while my monthly contribution almost doubled. What then is the use of saving for retirement if the products on offer doesn't help? Luckily I've taken the responsibility of securing a good retirement income into my own hands and don't have to rely on you or other companies when I do retire.

  • Virginia - 2011-06-28 15:00

    Yes we are saving for retirement. We have been for many years,but un forunately between the bank charges and SARS taxes on interest we do not seem to make much headway, and lets face it old mutual we have policy's that also dont seem to be making headway, all our "life" policy's that are not worth anything we a cancelling them and reinvesting in a money market scheme, maybe we will then see an improvement.

  • - 2011-06-28 15:11

    Investing in our children's education IS investing in our retirement

  • Ms Practical - 2011-06-28 15:16

    When you hear all this natonalisation talk why would you want to put any money into savings? Someone is always threatening to take it away and give it to someone else!

  • Jonathan Jensen - 2011-06-28 15:38

    I can tell you why they say "mindset-changing interventions are needed in order to educate people" No insurance salesperson can clearly explain how to save for your retirement. You can't predict what you'll get out, and they don't explain what R10m in 20yrs is worth... You have no way to check if it will be enough.... you can budget time, petrol, food, cash flow... but people who can master don't know how to check if your RF is sufficient. The policies are too complex too.

  • nicola - 2011-06-28 15:38

    Although this is very concerning, it's also true that for a lot of South Africans, the return on investment is much greater from their children's education than from a pension fund.

  • Fikile - 2011-06-28 15:40

    There's NO (ZERO) value in retirement saving. Companies like old mutual are actually the reason why most people don't save for retirement, as their the FEE to brokers and old mutual "management" FEES are more than the returns on a retirement policy. Now put that in your pipe and smoke it. I would rather invest in myself or my kids. Buy a commercial prop, learn from the Jewish and Indian people.

  • Vernon - 2011-06-28 15:47

    Most of the people can't save because we are taxed to death.

  • umlaut - 2011-06-28 15:48

    If the 'strange' arms deal didn't happen then that money would have gone a long way to make education cheeper. Controlling corruption would also help--but all this is like talking to an anc brick wall. the fighter jets can't get off the ground now and so it seems to be the same for the education in this country.

  • narike lintvelt - 2011-06-28 15:51

    With the cost of living and education, ordinary South Africans can't AFFORD to save for retirement. It's all we can do do keep our heads above water! Nothing to do with lack of awareness or inability to calculate costs.

  • gordon - 2011-06-28 16:27

    If Malema and co do become future South African leaders ... and they do nationalize mines and banks and indiscriminately grab land ... what will the value of a life time of retirement savings in South Africa be? NOTHING!!! Is there any need to save anymore? What will the "pension value " be? Shouldn't reasonable South Africans not rather pay off their debt such as homes ... ask Zimbabwean pensioners what the value of their pensions are ... you WILL BE SHOCKED TO THE CORE!!! OLD MUTUAL ... i haven't heard you yet commenting on the possible severe negative impact on retirement savings of South Africans caused by the wild and reckless utterances by Malema?

  • Brett - 2011-06-29 11:35

    Oh, please you guys, stop blaming everyone else for things in life and take responsibility for yourself. Make sure your finances are in order and stop whining. How you do it is up to you but being an ostrich will not help anyone!

  • George_III - 2011-06-29 21:22

    I was surprised to read the conclusions reached in above article by a an exec of a leading assurance company. Why should it come as a surprise that education (a basic need) in a country such as South Africa is a priority? Why also, should it come as a surprise that life assurance (another basic need) is a priority? The issue to me seems to be one of educating South African's at school level on the importance of financial planning - people are unaware because they just don't know - or have not been educated. I am speaking from experience of having sold all these products many years ago as an Insurance Agent - what I found particularly distressing was advising people, at (or close to) retirement age - that they had no hope of retiring - because they had made little to no provision for it. I also studied Financial, Estate Planning and Income Tax at university level - unfortunately - that is the level that such 'education' is available at. If we are to have any hope of encouraging South African's to become a saving nation - such 'encouragement' needs to be done at grass-roots level.

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