Retirement Planning: Why not South Africa? Why Not?  

01 Oct 2018: Johannesburg Andrew Smit

There is a popular and albeit worrying statistic amongst many individuals in South Africa these days, only six percent of the South Africa’s citizens have enough retirement funds to live comfortably after retirement. Just think about that for a second, that means that only 3 354 600 individuals out of roughly 56 million will be able to retire by the end of their working lives and be financially stable. The biggest question that should be asked is why? Why are our country’s citizens so poor at planning for their retirements? Well let’s investigate and uncover the reason why so many will have so little, for so long. 

Former minister of finance Pravin Gordhan warned South Africans last year in July, that the country’s rampant spending and bad consumer habits would spell an end to the country and there is little reason to doubt him. The reason for South Africa’s poor saving habits is that the citizens are impulsive buyers. In addition to this, they do not have a culture of saving which results in them making poor financial decisions. They also do not practice the financial discipline that is required for saving for retirement.

In addition to the non-existent saving culture, is the amount of debt that South African’s have. IOL reported  that last year there were 48 162 court summons for South Africans who were not paying their debts, this translates to a monetary value of  R350 million. To really understand how debt affects an individual’s ability to save, examine this explanation. The lending interest rate in South Africa that is charged by banks is 10.25%. This means that if an individual wants a loan from a bank, the bank will charge a base interest of 10.25% on the amount of the loan. So, for example, if an individual takes out a loan for R100 000 from Bank A, they will be required to pay back that R100 000 plus R10250 (10.25%) over the loan period. It is this high expense that South Africans are incurring mixed with the fact that in 2014/2015 the World Bank labelled South Africans as “the world’s biggest borrowers” that makes a recipe for a savings disaster.

There is a chance that most of the readers of this article will not know about retirement planning stats, interest’s rates or REPO rates let alone what a retirement annuity is or a pension preservation fund, and this is the biggest issue. If one does not know what avenues are open to them for retirement planning and how they work, how can they even begin to plan for retirement? According to Business Tech, a study done by the Organisation for Economic Co-operation and Development (OECD) shows that out of 30 countries drawn from North America, Asia, Europe, Africa, Australasia and South America, South Africa ranked last in terms of financial literacy. South African adults have 30% literacy rate in finance. With such a low financial literacy rate in South Africa together with the preceding two points, one can conclude that the mystery has been solved.

Yes, it is the triple threat of not wanting to save, not knowing how to save and not knowing anything about the benefits and the importance of the two, that results in 94% of South Africans arriving at retirement age  with insufficient retirement funds. Only when the country as a whole comes together to change this status quo, can more South Africans live a financially secure post- retirement that they deserve.

About the Financial Planning Institute of Southern Africa
The Financial Planning Institute of Southern Africa (FPI), a South African Qualifications Authority (SAQA) recognised professional body for financial planners, which serves the public by ensuring that people who carry the CFP® designation are qualified, experienced and professional. FPI has recently been approved by the South Africa Revenue Services (SARS) as a Recognised Controlling Body (RCB).

The Institute is also recognised internationally and is a founding, and a current affiliate member, of the international Financial Planning Standards Board Ltd (FPSB) based in the USA, along with 25 other affiliate member countries who offer CFP® certification, the highest recognised professional designation worldwide for a financial planning professional. 

In 2012, FPI was highly commended by FPSB and awarded Tier 1 Affiliate Status for receiving 96% in the global assessment. This is the highest achievement any affiliate has ever received. For more, visit or follow @FPISANews.