Despairing families giving up on retirement saving – Absa

Urgent action has to be taken to reverse a major new trend in the retirement savings industry – the big uptick in despair.

The trend to savings despair has been identified by Absa Investments after studying feedback from financial advisers nationwide.

Johan Gouws, an executive director at the investment and fund management company, says people are starting to give up in the face of rising unemployment, higher food bills, burgeoning household expenses and the debt trap they are still entangled in.

“The growth of savings despair is one of the major insights from our end-of-year national roadshow to promote better retirement provision,” says Gouws.

“We started out telling financial advisers about the urgent need to build a savings culture. They told us the savings message is increasingly difficult to convey because lots of people are simply giving up on long-term saving.”

Savings industry research confirms that South Africans feel increasingly embattled.

A recent study showed that 53% of canvassed households ascribe their lower savings provision to the high cost of living and rising inflation. They complain that ‘everything is more expensive’.

Another 22% find it tough to save because they’ve been retrenched or unemployed family members in the household put pressure on discretionary income or they now receive less commission, depleting the extra money they might have saved.

Some South Africans admit they dip into retirement savings in their working years. Others say they are so deep in debt that reducing their indebtedness comes first.

Official statistics show household debt to income is just below 80% after threatening to reach 84% at the credit extension peak in 2008. The level was close to 35% back in 1980.

Gouws says these pressures have forced a rethink within the South African family, with 51% of families planning on supporting parents in the years to come.

At the same time, retirement is being redefined. Many no longer see it as the end of working life, but as a period of reduced activity that permits continued income generation.

A positive perspective like this is one way to counteract the onset of despair, says Gouws.

“Positive messages like this need to be stressed by saving product providers and financial advisers,” he adds. “By extending your productive life you increase the opportunity to build a nest-egg through extra time in the market.

“In the past, there was a tendency to convey messages with worrying connotations; for instance, that to save enough you have to start early and stick to it – which can be de-motivating for those who start late because of various crises in their working lives.

“A more empowering message is that ‘you’d be surprised what you can accomplish when you start with what you’ve got’. Our industry has to foster hope, not fear. It’s never too late to start and every little bit helps – those messages have to be stressed going forward.”