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Cape Town - Most South Africans are financially not ready to leave the world of work at the traditional retirement age of 60 or 65 and many embark on a "second career", according to the 2014 Sanlam Benchmark Survey.
This "second career" could mean either working longer in their current job or starting their own business.
“Of the 300 pensioners surveyed this year, one in five indicated that they supplement their retirement income with part-time work," said Kobus Hanekom, head of strategy, governance and compliance at Simeka Consultants and Actuaries.
"In most instances, this is out of pure financial necessity. People are living longer and it has therefore become much more expensive to retire."
The problem is that South Africans are currently compelled to retire and buy an annuity regardless of whether or not they intend to continue working.
"You then lose out on the benefits of compound interest that works in your favour over the last few years and have less time to save for a longer and more expensive retirement,” said Hanekom.Changing world of work
The world of work is changing and tax laws need to "catch up" to enable phased retirement, in his view.
This will make it possible for individuals to continue working – either in their jobs or doing another type of work – and keep their money growing in a pension fund.
“This means that when you retire from your first career at age 60, you will be allowed to remain in the system and continue to contribute to a retirement fund during a second career," said Hanekom.
"This will allow you to increase your retirement savings, benefit from the applicable tax advantages and retire more comfortably at a later stage.”
He said delaying retirement by six years can double one’s capital upon retirement, while retiring six years earlier will leave you with half the capital to last an extended time period.
The retirement age of many corporate employers has, however, decreased and is now closer to 60 than 65.
There are many reasons why employers prefer an earlier retirement date, including the need to remain BEE compliant.
Hanekom encourages retirement fund members to take ownership of their own retirement planning with the assistance of a qualified financial adviser.
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