The inaugural BankservAfrica Private Pension Index released today shows that pensioners are struggling to make ends meet.
BankservAfrica is the continent’s largest automated payments clearing house and the index was compiled in partnership with independent economic research company economists.co.za.
The index was compiled from private pension payments made to individuals aged 60 and older.
The index reported that there were a total of 621 523 pension payments in December 2014, slightly fewer than in November and October.
The most recent results for December 2014 stands at R5 722 on average, making this the fourteenth month where the “take-home pension” has been over R5 000 per month.
The December 2014 average pension payment was 8.7% higher than December 2013, which means that on average pensioners receiving a private pension saw real income growth of 2.8% for the year to December 2014.
According to the index, more than 85% of all pensions are below R10 000, which is less than the average disposable salary also measured by BankservAfrica using a similar methodology.
In fact the average pension for 2014 is less than 45% of the average disposable salary in the formal sector.
“On average, formal sector workers are therefore seeing a major decline in income when they retire if they are solely reliant on a private pension. This is a sign that retirement savings are not enough for the majority of pensioners,” said Mike Schüssler, chief economist at economists.co.za.
While the average pension has kept up with inflation, the typical pensioner had a nominal increase of only just 2% over the last year, with many pension payments seemingly stagnant.
“This means that pension payment growth for those at the upper end is much better than for the typical pensioner or person in the middle,” said the index.
“If the median pensioner can get access to government old age grants it would increase their income by 38%, which by any standards is a meaningful amount. Nevertheless, the grim reality is that most pensioners are in a struggle to maintain their lifestyles, and most will struggle to make ends meet unless they access some form of an old age grant.”
Schüssler said while pension funds have performed well on equity markets, pensioners are not doing as well and attributed this to too many costs in the system such as medical costs and administrative costs.
“And I think that’s why the government and treasury are working on changing this,” he said.