Almost 50% of South Africans are not planning for their retirement, and this is largely due to a combination of economic pressures and a lack of financial literacy.
These were the key findings of the 2024 FNB Retirement Insight Survey, which revealed persistent challenges around retirement in Mzansi, with many of South Africa’s less affluent individuals struggling to save due to the harsh economic realities.
It also showed that an increasing number of pre-retirees believed that they would need to continue working even after reaching retirement age. While many planned to seek part-time work, a worrying 50% of respondents indicated that they intended to continue working full-time.
“The relatively high proportion of respondents who intend to continue working indicates that retirement is increasingly being seen as a transition phase rather than a complete withdrawal from the workforce,” FNB said.
On the upside, 75% of those South Africans that do have retirement plans in place stated that they felt on track for a good retirement.
Younger South Africans deluded
Yet, while the higher-income respondents reported better preparedness for retirement, for less affluent South Africans each month is simply a game of survival that revolves around immediate expenses.
However, psychological constraints could pose as big a challenge as the economic challenges, says Sizwe Nxedlana, CEO of FNB Private Segment, who believes that urgent supportive measures are necessary to address both the financial and emotional aspects of retirement.
Lytania Johnson, CEO of FNB Personal Segment feels that financial education also needs to be tailored to specific age groups and financial literacy levels.
“The gap between retirement expectations and reality is also concerning, with many respondents anticipating maintaining their living standards despite inadequate provisioning, particularly among younger respondents,” Johnson said.
The survey also showed that those from lower-income groups were less likely to seek financial advice from professional sources.
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“It’s clear that financial services providers need to take a more inclusive approach to retirement planning and investment advice, because the income groups who are most in need of our guidance and support are still accessing their advice from other, often less reliable sources,” Johnson said.
Drawing money too early
Among those in the survey who had already retired, FNB found that a growing portion of affluent retirees were opting for living annuities to manage their retirement income. A living annuity allows retirees to withdraw a percentage of their retirement savings annually while the rest remains invested.
However, one in five retirees are withdrawing the permitted one third of their savings upon retirement, which not only lowers their income in years to come, but also potentially puts them above the R500,000 tax threshold, meaning they ultimately pay more to Sars.