SA saves for education, not retirement, according to survey

2011-06-28 13:26

South Africans are not saving enough for retirement because they are putting money aside for their children’s education, this year’s Old Mutual Retirement Monitor released today 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 in a statement.

“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.

70% of respondents believed their contributions towards retirement were ’about right’ while 15% said they were contributing too little towards retirement.

About 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.

58% 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.

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