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SA pensioners in dire financial state, report shows

Mar 06 2020 05:00
Marelise van der Merwe

Under a fifth of South Africans over the age of 60 are receiving private pensions, a new report has shown.

In addition, state old age grants can provide significant relief to even private pensioners, many of whom receive under R6 000 a month - around a quarter of the country's average salary.

A special report by BankServAfrica – which also manages the BETI report, an indicator of economic activity – has analysed private pension data to gain insight into the lives and pension income of South Africa's older population.

The 60-plus group is one of the fastest-growing segments of the population in South Africa

"The state’s old-age grants have the potential to provide massive relief for the typical private pensioner who gets paid just R5 531 in their bank account. Receiving another R1 780 pm on top of that means that the typical individual pensioner should then have a combined R7 311 a month available," BankServAfrica said.

The BankservAfrica private pensions data for January shows an increase of 3.1% for the average pension in real terms. Private pensions averaged R8 239 in nominal terms.

But the typical private pensioner receives only R5 531, it noted.

The current old age grant is R1 780 monthly. It has been increased to R1 860 per month in the latest Budget. 

And, according to a 2019 Old Mutual report, nearly half of survey participants across income groups say they are saving less now than they were a year ago.

Who gets what?

The SA pension system has about a million people out of an estimated 5.3 million over the age of 60 receiving private pensions, BankServAfrica said. 

The government's old age grants, for which private pensioners receiving less than R6 510 per month are eligible in this financial year, cover 3.566 million people.

BankServAfrica believes overlap between the two groups could mean as many as 200 000 pension-age people are receiving no income at all – not from the state or from a pension. 

It did not verify the estimate independently.

"In January 2020, BankservAfrica had about 649 000 banked private pensions on record," it said. "Of these, about 341 000 received less than the old age grant threshold, which means that more than half of individual pensioners could apply for the state’s grants pay-out […].

"We estimate that there are just over half a million other private pensioners, not on our records, who are also eligible for old age grants." 

Taking into account the nearly 3.7 million who receive grants, a million who receive private pensions, around 400 000 who are still employed and around 200 000 who have their own business, according to their records, this should theoretically mean that all pensioners have an income of some sort, BankServAfrica said.

"[A]ssuming that a quarter of a million private pensioners also get an old age grant and, say 100 000 of those are self-employed, then about 350 000 people over the age of 60 get no income directly either from government, work or pension," BankServAfrica said. 

"Some could be members of other private pensions or have access to other financial means from their partner or a spouse. An estimated 70 000 people over the age of 60 would love to be employed – an indication of the need for extra income. So we believe that at least 200 000 older people probably do not get any income even if from a partner or a spouse," the authors added.

Cost of living

The researchers believe that having pensioners in a better financial position will have a broader economic benefit. It will also provide indirect benefits to municipalities, who could collect higher income from water and lights, they say.

"The average water and lights account was estimated to be R1 444 in September 2019. Add rates and taxes and the ordinary municipal account increases to over R2 000 pm (R2 104 estimate). Even in a small property, this amount will easily be well over R1 300 pm," argues BankServAfrica.

"So, for the typical private pensioner, just the monthly bill takes over a quarter of their income. Some local governments have reduced this but it is still a challenge to get that bill to under 20% of the typical pension."

Medical treatment and visits to hospital centres would also increase their costs, the report authors note, leaving very little for other essentials, such as food and clothes.

The researchers believe relief could be provided to pensioners by using the tax threshold for over 65 to determine state grant amounts; and reconsidering the assets used to determine eligibility for old age grants. They also said prescribed assets on pension funds could potentially provide lower returns for private pension funds.

pensions  |  retirement
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