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South Africans face rising costs and debt quandaries that are driving them to draw from their retirement savings to make ends meet, cut out spending on pleasant pastimes, or both. Samukelo Zwane, head of product at FNB wealth & investments, told a conference of the Institute of Retirement Funds Africa (Irfa) in Cape Town this week that the image of a retiree who has saved diligently all their life “sitting at a resort and having lots of fun” is far from reality for many retirement fund members.“The people that are actually enjoying themselves, they’ve retired and all that stuff. They do not reduce their spending on hobbies and enjoyment. And then there’s the other 50% that need to support their families and children,” he said.“They do not have enough saved for retirement. Sometimes they have to be supported by their own children. So it shows the contrast between those two worlds with regards to people not being able to take care of their welfare when it comes to retirement.”Retirement funds under the Irfa umbrella manage an estimated total of R5.8-trillion in assets.Zwane said rising costs and debt are major challenges for those in retirement or close to it, even those who have been saving.“One of the things that’s going to trip you up a lot is debt. And 61% of those that are retired are saying: ‘If I had managed to pay off my debt earlier or actually reduced my debt and have healthy debt levels, I would have been in a better place come retirement.’”The message, Zwane said, was “control debt, try and have healthy levels of debt so that you can free up money ... to save towards your emergency”.Guy Chennells, chief commercial officer for corporate & employee benefits at Discovery, noted that the conventional wisdom had long been that only 6% of South Africans would reach retirement with enough money to retire comfortably. This percentage, he said, “is not moving”. Nashalin Portrag, head of FundsAtWork and distribution at Momentum Corporate, said Momentum’s data shows that among the 87% of retirement fund members who qualify to make withdrawals under the two-pot scheme, 52% had done so. Research tells us that the age an average South African can afford to stop working is closer to 80 than 65. Yet the industry keeps printing brochures with silver-haired couples on golf courses at 60— Barry Kaganson“People aren’t withdrawing to pay for holidays or investments but to survive: 44% of withdrawals go toward paying off debt, 23% to cover everyday living expenses and 20% toward education,” Portrag said. “Before the system launched, many expected an even split between paying off debt and building savings. Instead, rising interest rates, inflation, and existing debt repayments have pushed people toward using their two-pot savings simply to stay afloat. For the established middle class in particular, salary increases are not keeping up with debt and rising costs.”Portrag said once other finance options such as credit cards, loans and family support run out, retirement savings become the last resort. Last year 74% of members said they would access their savings component only in a “real emergency”, but a year later 52% of eligible members had already done so. Barry Kaganson, CEO of Auria Senior Living, said households need to make a mental shift, because a plan that budgets for holidays and hobbies but skips frail care has misread where the real costs of a long life sit.“Research tells us that the age an average South African can afford to stop working is closer to 80 than 65. Yet the industry keeps printing brochures with silver-haired couples on golf courses at 60.”He said StatsSA’s latest “Healthy Ageing Report” illustrated that the number of people aged 60 or older grew from 3.6-million in 2002 to 6.6-million in 2025, rising from 7.7% of the population to 10.5%, and that people are reaching their later years in better health than any generation before them.Kaganson said almost every retirement plan in South Africa was built around a single age, usually 65, with an unspoken assumption that the money needs to last just another 12-15 years longer. Business Times
