Call for rethink on compulsory savings model

Plan sought to balance employees’ retirement and living needs

Saving for a comfortable retirement has been drummed into employees’ heads for years, with a call now for employment authorities to consider the average South African’s savings needs and rethink the current long-term savings model.

While retirement remains a savings priority, buying property, saving for children’s education and health and the socalled black tax are some of the expenses the average South African worries about daily.

Yet the current long-term employee benefits still place a dogged focus on retirement, often neglecting life before reaching one’s pension age.

Financial services company Alexander Forbes is appealing to employers and policymakers to rethink how compulsory savings are structured in order to speak to South African employees’ needs.

The company is calling for a coordinated savings plan that, while saving for retirement, can meet people’s need for emergency, housing, education and health savings catered for at the same time.

Because of South Africa’s perceived poor savings culture, compulsory savings plans are geared at securing a somewhat comfortable retirement that will ensure less burden on state coffers. In the first of a series of discussions to be held across the country, the company addressed about 150 trustees of retirement annuity funds at the Radisson Blu Hotel in a bid to highlight the changes in the country’s savings needs landscape. According to a survey by the company, conducted by non-profit organisation ReThink Africa, more than 80% viewed long-term savings as important.

But they were conflicted as to whether getting a monthly income at retirement was as important as owning a house or paying for children’s education.

Alexander Forbes Research Institute head Anne Cabot-Alletzhauser said there was a need for a coordinated savings solution fluid enough to address people’s savings priorities.

“We are not saying ignore the retirement income question,” she said.

“But we are questioning whether we couldn’t create a controlled savings environment that provides more flexibility in terms of allowing individuals to more effectively address issues such as housing, education, health and other financial risks at the same time,” she said.

Alexander Forbes senior product development specialist Lettah Mpanza said the reality was that South Africans were over-indebted, with more people tapping into their retirement savings by, for example, accessing their pension upon resignation to service their debts.

“Households have different priorities – education, health and putting bread on the table,” she said.

“So we have to balance the two priorities of both social protection and social mobility.”

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