Retirement readiness remains a challenge for most South Africans

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JIMMY MOYAHA: On Thursday 16 July, at the Goodman Gallery here in Johannesburg, the team at FNB provided us with their Retirement Insights Survey results. This is the fourth year that they have been running this particular survey and providing the market with their insights.

We’re going to be taking a look at these findings in a bit more detail with the head of product at FNB Wealth and Investments, Samukelo Zwane, and he joins me on the line now to see what we make of this.

Sam, lovely having you on the show. Thanks so much for taking the time. Give us an overview of the particular survey that you run and what it was intended to achieve when it was initially launched four years ago.

SAMUKELO ZWANE: Thank you and hello to all the listeners. The survey is called the FNB Retirement Insights Survey. This is our fourth edition of the survey and what we try to achieve with this survey is to actually unpack the retirement readiness of South Africans.

We’re basically testing are South Africans saving for retirement? Do they actually have the right tools as they’re saving for retirement? We are checking on their confidence with regard to the plans that they’re making when it comes to retirement planning. That is basically with regard to those who have not yet retired.

But for those who have retired, with the survey we check how they are experiencing retirement – is it in line with their expectations or are things different from what they were expecting?

Also, just to find out if they had to go back 20 years or 30 years earlier, what type of things would they have done differently in regard to retirement planning and retirement savings. That’s what we’re trying to look for with regard to the survey.

Then, in terms of unpacking the survey, it then helps us to understand people, how they engage with retirement. That also gives us tools that can help us to enable people to retire better and improve their confidence scores as they’re saving for retirement.

JIMMY MOYAHA: Sam, let’s get into some of the insights from this year’s survey. What did we focus on and what did we learn about the retirement readiness of South Africans?

SAMUKELO ZWANE: Thank you, I think that’s a great question. Maybe I’ll split it up in terms of engaging with regard to the statistics that we unpacked on the survey.

Maybe let’s look at the under 60s, and what we see there is that about three quarters of the people who are actually saving for retirement, they have retirement annuities, which are basically the structured retirement savings products that you expect them to have as they’re saving for retirement.

However, the interesting part around it is that most of them are not confident around their retirement readiness.

This speaks to the fact that they’re probably not aware in terms of are they saving sufficiently on these particular products for retirement. Do they have the right underlying solutions as they are saving for retirement and so on. So that’s basically what we’re unpacking with regard to those who are under 60.

Then we looked at the barriers for those who do not have retirement solutions or are not making plans. They’ve highlighted a number of barriers. So we see that 53% do not have retirement plans, and they’re saying ‘My barrier is the fact that I believe that I do not have sufficient money for me to save towards retirement’.

Others are saying ‘As much as I do not probably have money to save, I think the state is going to take care of me’.

So those are the barriers that they are highlighting.

Cost of living is coming out strongly with regard to people saving for retirement.

We are seeing those who are approaching retirement, that most of them are not planning on retiring fully – about 72% of those in the private segment market.

Just to highlight to you, the private segment market is people who have a household income of about R750 000 per annum, and it’s a very small portion of the population. They are able to have the liberty of extending because they have not saved sufficiently and so they plan on actually extending their working lives.

But those who are in the personal segment, which is the majority of South Africans, as much as they have not saved sufficiently for retirement, they do not have options around continuing. So we are seeing that most of them are talking about taking up a side hustle or a second profession so that they can supplement their retirement income.

So that’s what we are seeing with those who are approaching retirement.

Then with those who are in retirement, we see that they also have a struggle when it comes to the cost of living and how this cost of living is actually impacting their retirement.

We see the majority of the people are struggling with that, both on the personal level and the private segment. Also, when we unpack with those in retirement, 60% of them are saying, listen, if I paid off debt earlier, I think I would be in a better retirement position.

We see about 30% of those in the personal segment who are going into retirement with some debt, and those are the challenges that people are highlighting when it comes to their retirement.

JIMMY MOYAHA: Sam, when it comes to retirement, a significant portion of South Africans are having to go through things like extra income opportunities, side hustles, as you alluded to, because the cost of living is so significantly high and a lot of people can’t actually afford to retire.

If we are to look at that as perhaps the starting point for improvements, what should South Africans be doing today to improve their chances of achieving their retirement goals before they retire?

SAMUKELO ZWANE: Thank you, that’s a great question, and it’s quite pertinent in that we are picking up the struggle with regard to the cost of living being higher than expected.

To such an extent that close to about 14% of people are dropping having private medical care.

That is those who have private medical care, and then they rely on the public system. So we are putting a strain on the public system.

Some of them are cutting back on holidays, they’re downsizing on houses and so on.

So what we advocate in terms of trying to prepare for retirement is to have a holistic retirement plan and start early with having that particular plan and be able to set up structures which will enable you to save properly for retirement.

What we see is that people are saving for retirement, they get disturbed by emergencies whilst they are saving.

If you have a proper plan, you probably have money that is set aside for emergencies, you’re reducing your debt on a monthly basis, or you have structured debt that is slightly different and less costly. You have some policies that are going to cover you in the event of when life happens. So you’ve got all those things.

Once you have all those things, that enables you to have a much more stable retirement plan. You do not get disturbed and you are able to actually have a proper plan, and you can stick with the plan over a long period of time.

JIMMY MOYAHA: Planning for retirement is something that is essential and something that everybody needs to be focusing on, regardless of where in your retirement planning journey you are.

The latest FNB Retirement Insights Survey, suggesting that South Africans need to improve their retirement readiness if they are to retire comfortably. We’ll have to leave the conversation on that note.

Head of product at FNB Wealth and Investments, Samukelo Zwane, joining us to reflect on the Retirement Insights Survey that FNB has been putting together for the last four years.

Brought to you by First National Bank (FNB).

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