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SA retirees don’t want to gamble on their retirement savings

06 November 2020 Just SA
Bjorn Ladewig, Longevity Actuary at Just

Bjorn Ladewig, Longevity Actuary at Just

• New research shows a 25% jump in the number of retirees less willing to take risks with their money for saving or investment
• Percentage of respondents who now set goals and are planning for their financial future up by 10% from 2019
• Only two fifths are confident that their retirement savings will last

A greater importance is being placed on retirement planning due to the effects of COVID-19, but findings from Just SA’s 2020 Retirement Insights also show that retirees and soon-to-be retirees have suffered a knock in confidence, which has altered their views on the best way to invest their retirement savings.

The key findings of the latest insights were released today by retirement income specialist Just SA. The tracking study aims to better understand the South African retirement market and this year, specifically assessed the impact of COVID-19 and the subsequent lockdown on retirement planning.

83% of respondents said they had re-evaluated what is important in retirement and almost three quarters said they had looked more closely at retirement risks over this period. Two thirds of those who are already retired have been financially affected by the repercussions of COVID-19, while around half have had to source an alternative means of income and make special arrangements to meet payments.

The age group whose confidence was hardest hit by the pandemic is the newly retired (ages 65-70), where 78% expressed a lack of confidence that their income would cover monthly expenses throughout their retirement. Children and grandchildren remained first point of call for financial assistance, with just under half saying they would turn to them should they run out of money. Unsurprisingly, the number of respondents saying they would rely on the government for help dropped by 19% year on year.

For a second year in a row, the ability to guarantee income in retirement remained the top priority for respondents, of which 88% wanted to know exactly how much money they would get each month. But in the face of changing market conditions, respondents also revealed that the flexibility to change how much income to draw each year was more important than before.

“The increased desire for income security has been heightened by the uncertainty surrounding COVID-19 and its impact on the global economy,” suggests Ladewig. “Market noise and broader research indicates that more and more people are impacted by and concerned about poor investment returns. South Africans who are currently retiring are likely to find their assets worth about 15-25% less than they would have been in normal investment conditions.”

For South Africans facing retirement in the time of COVID-19, Ladewig says that the pandemic has heightened risk awareness and increased the need for certainty as well as flexibility.

“Commentators suggest that our ability to manage money worsens as we get older, yet also indicate that we are happier when we have a predictable income,” he says. But historically, retirement income products were limited to a choice between an investment product, in the form of a living annuity, and an insurance product, in the form of a guaranteed life annuity.

“Retirement income products have evolved and your choices are not limited to an either-or decision,” says Ladewig. “A blended annuity allows you to ‘dial up’ the level of guaranteed income to where you feel comfortable, while providing flexibility from the living annuity component for discretionary spending, or to leave a financial legacy.”

To access the full Retirement Insights 2020 report or to listen to an audio-visual presentation, please click here.

 

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