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National Treasury and the South African Revenue Service (SARS) provided important feedback at the recent sitting of the Standing Committee on Finance as part of the parliamentary process regarding the much anticipated two-pot retirement system.
According to the most recent Marriages and Divorces report released by Stats SA, fewer South Africans are tying the knot – a possible indicator of the cultural move away from the traditional institution of marriage in favour of domestic partnerships.
We often hear that South Africans are not saving and investing enough. A report from Genesis Analytics in partnership with the Financial Sector Conduct Authority (FSCA) showed that 90% of South African retirees can’t sustain their standard of living prior to retirement, and two-thirds of members have less than R50,000 in their retirement fund.
South Africa’s retirement outcomes will improve radically if all retirement funding contributions are kept invested when fund members change jobs. Other quick wins include increasing the minimum government pension; delaying the government retirement age beyond 60 years; and refocusing the industry from saving a lump sum at retirement to providing a sustainable income in retirement.
It is, statistically, an inescapable part of life that our medical costs and expenses will rise considerably as we become older. Retirees who are drawing down fixed incomes must deal with escalating costs of medical aid and expense shortfalls, creating a significant challenge in coping with erosion of their income at a rate that outstrips the growth of their invested capital.
Statistics indicate that only about 6% of South Africans are able to meet their retirement income objectives and retire comfortably. Compounding this issue is that 97% of South Africans elect to withdraw their retirement fund savings in cash when they resign or are retrenched.