Issue: September 2012 / November 2012
Editorials

SAVINGS MONITOR

Trends at stalemate

They’re pretty bleak. The pattern of the past continues into the present, but maybe not into the future.


Ralebitso...clear signals

If OMIGSA’s Peter Brooke is right – and there can hardly be doubt that he is – the world has entered a protracted period of low returns on almost all asset classes. There are at least three foreseeable corollaries.

First, the search for yield will motivate less conventional and perhaps riskier investments. Second, there’ll be a squeeze on investment fees to support nett returns; without it, returns can turn negative. Third, paltry returns are a disincentive to save; paradoxically, they should promote more saving to compensate for diluted retirement pots.

The latter is utopian, borne out by the latest Old Mutual Savings & Investment Monitor. It’s a case of same old, same old. A little improvement here, a little deterioration there. But no serious deviation from entrenched trends, dream-like in people’s comfort zones.

They’re still delaying financial decisions, the survey shows, blaming it on economic uncertainties and immediate cost-of-living exigencies. More respondents than previously (40% in July 2012, 35% in November 2011) believe that their children should care for them when they’re older. And over the same period those who believe that government should look after them has increased from 29% to 38%.

“It’s clear that South Africans are generally feeling unsure,” finds Old Mutual communications head Mohale Ralebitso. “They’re not confident that sound planning will secure a positive outcome. Unless this is immediately addressed, the long-term consequence is that many working South Africans may not be spared economic hardship later in life.”

He’s putting it mildly. Besides, how it’s to be addressed – either immediately or anytime soon – is debated, and debated, and then debated some more.

As many as 44% of working South Africans have no formal retirement savings. Obviously, millions of unemployed and informally employed don’t either. And while those in the lowest income groups are worst off, those in the higher are worrisome too (see tables). Of course, the fact of being in a retirement fund or annuity is in itself no assurance of a comfortable retirement; it’s all a function of how much one saves for how long.

Some other key findings:

  • Only 35% of respondents indicated that they would save or invest a windfall equivalent to one month’s salary, while 23% said they’d pay off debt and 13% would spoil themselves;
  • About two in three consumers believed that “there is no alternative but to get into debt”;
  • Store-card usage has risen marginally, now at 63% of respondents;
  • Of mothers polled, 56% are single and receive no financial help from their childrens’ fathers. Neither have they made provision for retirement. They typically believe that their children’s education is more important.

This regular Monitor is factually informative. But please can the facts take us elsewhere than to despair?


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