Moneyweb writes that SA’s tough economic climate over several years, coupled with the financial pressure put on households by the Covid-19 pandemic, is threatening to create a lost generation who will not be able to retire because they simply could not save enough during this period.
With the protracted recovery from the pandemic, and the fact that most of those who are saving for retirement find themselves part of the sandwich generation (where they must financially support children as well as ageing parents), there is a focus on survival at the expense of saving for a period that is 30 to 40 years in the future. The 2020 Sanlam Benchmarks Survey, which presents a snapshot of retirement vehicles across the country, paints a worrisome picture when it comes to current saving towards retirement. It indicates that eight out of every 10 local retirement fund members have experienced a reduction in their annual salary increase and/or their net income. In addition, some of these people took a forced sabbatical or went through a retrenchment process during the pandemic. The survey adds that up to 41% of employers who offer umbrella funds gave financial respite to fund members by suspending employees’ retirement savings contributions in 2020. According to Kobus Klein, a financial planner at Kainos, with financial service providers allowing premium holiday periods of up to a year with no contributions, there was an opportunity lost on both contributions and allowable tax deductions. “We may believe 12 months is not an extended period, but as Albert Einstein stated, compound growth is the eighth wonder of the world, and every year lost does make a difference,” said Klein. The pandemic has created a dark cloud when it comes to retirement savings. However, to avoid the creation of a lost generation of South Africans who cannot retire, innovation will need to be brought into the market.
- Read the full original of the report in the above regard by Jonathan Faurie at Moneyweb
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