In this month’s edition, John Chikoki, Senior retirement fund consultant at Chartered Employee Benefits, shares extracts from the 2022 FSCA- Financial Sector Outlook Study relating to the Retirement Fund industry.

Under-saving for retirement remains a significant challenge in South Africa today. Most workers cannot afford to retire, let alone retire financially comfortable. Comfortable in this context, meaning being able to support their desired quality of life when they eventually retire.

The study conducted in April 2022, by Genesis Analytics and the Financial Sector Conduct Authority (FSCA) revealed the following:

• Genesis Analytics noted that only 12% of the 3.6 million individuals within the retired people group received some form of income in 2020. Over 90% of retirees are unable to maintain their standard of living prior to retirement, and two-thirds of members have less than R50 000 in retirement savings, and that is usually their only savings.
• The study indicated that since 2017, the average value of benefits paid out has slightly increased in real terms, averaging approximately R39,000 per month. However, the average contribution to pension funds has remained comparatively stable at around R900 per month in real terms.
• Notably, South Africa’s pension fund coverage looks vastly different within the public sector compared to the private sector. Within the public sector, 92% of workers have a retirement product, while in the private sector, 50% and in certain instances, less, have a retirement product. The proportion of people with a retirement product is particularly low for people earning below R14,000 per month.
• The study also revealed that there is limited demand for pension products within the lowest income groups, as they rely on the government’s pension support. The government old age grant pays R1,890 per month, to eligible pensioners, who satisfy the means test criteria. There are between eight and ten million South Africans who earn approximately R1,300 to R3,000 per month. They have little incentive to contribute to private pension funds, due to affordability challenges and the knowledge that they will be eligible for the old age state pension.
• Many experts propose using the 75% rule as a general benchmark for what one would need to cover monthly expenses once they eventually retire in South Africa. For example, if an individual presently earns R10,000 per month, applying the 80% rule, such an individual would need a minimum of R8,000 per month towards expenses when they eventually retire to be still able to maintain their current lifestyle.

Widening retirement gap

The retirement gap has truly widened due to the COVID-19 pandemic, which has caused a reduction in salaries of some workers and retirement fund contributions that had to be placed on hold for a period of time due to companies’ cash flow pressures. Furthermore, numerous households also faced additional financial burdens of supporting family members who lost their jobs.

Despite the recent financial setbacks, chiefly caused by the COVID-19 pandemic, it is advisable to consider working longer than you would have wished before, if your health, family responsibilities, and job status allow. The additional working time allows you to save more and for the markets to continue to recover from past losses. Most importantly, delay accessing your retirement savings for as long as possible so you can hopefully have a larger, inflation-protected benefit when you eventually access your retirement savings.

To access the full report, please click here

It’s always hard to let go of summer, but what makes that goodbye a little easier is the fact that autumn is on the other side, ready to embrace us with open, jersey-clad arms. After the fun-filled craze of summer, autumn is a time to slow down, get cosy, and take a deep breath. Each season has its novelties and delicacies, but the autumn months are a carnival for the senses. Aside from the autumn holidays, there are crisp breezes and even crisper apples, golden light and painted trees.

We have reached the end of a tumultuous quarter that has seen the world go mad. War in Europe (my British marine grandfather must be turning in his grave), ridiculous petrol prices, lengthy electricity cuts, violence at the Oscars and that dreaded albatross around South Africa’s neck, high levels of unemployment.

And lest we forget, the pandemic is still around.

Those who remain full of hope and even patriotic towards our beloved land are often accused of wearing rose-tinted glasses, but let’s take a breath and focus on some of the more uplifting events that have happened of late.

Yes, we will continue to wear masks, but hey, after 750 days, the National State of Disaster was lifted. It is an absolute privilege to watch my son play rugby again on weekends, and a trip to Ellis Park to watch the Lions is now in the calendar.

Black Coffee became the first African to win a Grammy award in the category, Best Dance/Electronic Album for his album, Subconsciously.

“The main reason I do what I do is to carry the flag of my country. To be recognised in this way outside of a ‘World Music’ category makes all of the hard work worth it,” said Black Coffee. Now he wants to use his music, which he describes as “home-brewed but future-focused”, to help more African musicians get recognition on the global stage.

Both the South African women’s and men’s national cricket teams have entertained us over the last few weeks. Despite the ongoing challenges that this sport faces in our country, we continue to defy the odds and produce some incredible performances.

On the business front, one can only applaud the rise of Roelof Botha.

The son of the Minister of Foreign Affairs from way back when, Botha has blazed a trail in Silicone Valley and has been on Forbes’ list of best venture capital investors no fewer than 13 times. On 5 July, he will take over as Senior Steward (lead partner in our parlance) of the world’s most celebrated private equity firm, Sequoia Capital. What I find more endearing is that he is not known for outrageous tweets, opinionated podcasts or anything that draws unnecessary attention to himself.

Botha studied actuarial science at the University of Cape Town, becoming South Africa’s youngest licensed actuary at 22. He moved to the US with McKinsey and enrolled at Stanford’s Graduate School of Business, where he met Elon Musk. He famously declined Musk’s invitation to join PayPal’s finance team, not once, but twice, before relenting and agreeing to join the firm in March 2000. (As an aside, he also declined the CFO role at Facebook in the early 2000s).

There is no doubt that the next few months will be as eventful and concerning as the last three, but we will leave you with a thought to ponder over as the evenings become cooler,
“There is something so special in the early leaves drifting from the trees–as if we are all to be allowed a chance to peel, to refresh, to start again.” – Ruth Ahmed

Enjoy the Easter break!

Simphiwe Mofokeng, Senior Healthcare Consultant at Chartered Employee Benefits, shares a summary of vaccination policies developments.

Developments in Regulations for Mandatory Vaccination Policies for Businesses

Following President Cyril Ramaphosa’s state of the nation address, we have seen further easing of restrictions. It would seem that the end of the national state of disaster is near; however, the pandemic is not over, and there is an ongoing need to prevent and mitigate the risks associated with SARS-CoV-2 exposure in the workplace. The necessity remains to incorporate the provisions in the Regulations and the Direction relevant to preventing and mitigating the risks.

The Department of Employment and Labour, in consultation with NEDLAC, has issued a Code of Good Practice, which was recently published by the government intended to take effect on the date of the lapsing of the Declaration of a National State of Disaster, as the direction on ‘Occupational Health and Safety Measures in Certain Workplaces Regulations’, will cease to have legal effect.

The purpose of this Code is to guide employers and employees in managing exposure to SARS-CoV-2 in the workplace and requires any person interpreting an employment law to take this Code into account.

The code also requires that every employer must take measures to determine the vaccination status of their workers and empowers the employer to require their employees “to produce a vaccination certificate”.

The Code of Good Practice is stricter when compared to the previous Consolidated Covid 19 direction on Health and Safety in the Workplace.

The direction allowed employees the right to refuse to be vaccinated based on constitutional or medical grounds, whereas the Code of Good Practice requires the employer to make reasonable accommodation for an employee’s refusal where the employee produces a medical certificate attesting to the employee having contra-indications for vaccination – and the employer accepts such medical assessment, or has the assessment confirmed at its own expense.

To read more, click on https://www.gov.za/documents/disaster-management-act-code-practice-managing-exposure-sars-cov-2-workplace-15-mar-2022

Updates on COVID Booster Shots

It is still unknown how long protection from COVID-19 vaccines lasts, but current data indicates that most people have strong protection against serious illness and death for at least six months. However, there is increasing evidence that the effectiveness of the COVID-19 vaccine against infection and mild symptoms can wane over time.

Based on data provided to the World Health Organisation (WHO) by the manufacturer of the Pfizer-BioNTech vaccine, it has been shown to be 95% effective in an ongoing large-scale clinical trial. The manufacturer of the Johnson & Johnson vaccine has shown it to be 66.9% effective in an ongoing large-scale clinical trial.

With over 33 million vaccine doses administered for COVID-19 in South Africa to date, part of which is made up of over 43% of the adult population who have been fully vaccinated, the country still has not reached the herd immunity target of 67% through vaccinations.

As of From February 2022, the COVID-19 booster shot was made available to South Africans over the age of 18 years who are fully vaccinated. They must have had either one dose of Johnson & Johnson, or two doses of the Pfizer-BionNTech vaccine.

The timing for the administration of booster doses for immunocompromised individuals differs from the below:

Johnson & Johnson
From Monday 14 March 2022, you may have your first booster dose 60 days after your primary vaccination with J&J. Then, you are eligible to receive an additional booster of either J&J or Pfizer 90 days after the first booster.

Pfizer – BioNTech
For the Pfizer vaccine, you are eligible for the first booster dose 90 days after your second scheduled vaccine dose. You may have either the J&J or Pfizer booster.

To date, just under 2 million booster vaccines have been administered.

To keep up to date with the developments on COVID vaccinations, you can access the following link: https://vaccination.sacoronavirus.co.za/support/home

I delivered a retirement benefits presentation to the staff members of a new client, who had recently concluded an agreement to commence a retirement savings plan and insured risk-benefit scheme for their employees. We suggested that we meet with the staff to assess the level of interest in this new offering. The staff participated enthusiastically, with some questioning the necessity of the new arrangement, while others were intrigued about how the benefits worked and whether they added value to them. Some questions were more complex, relating to the selection of investment managers, investment costs and performance of the recommended investment strategy.

Let’s understand the role of a retirement/employee benefit consultant

Benefits consulting is more than negotiating with insurance companies, presenting renewals, and tweaking cost-sharing. From an employer’s perspective, it’s essential to work with a flexible provider to cater to the needs that are unique to your company. Suppose you contract with an appropriate consulting company; in that case, you’ll have an employee benefits strategy that is compelling for recruiting and retaining employees, maximises employee health and wellbeing, and is aligned with your financial objectives.

No company hires only once a year; therefore, depending on your current solution, you might need more flexible options that provide room for your business to grow and ensure that new employees are not forgotten. It’s essential to find a solution that includes year-round support for employees for questions, comments, and concerns; your appointed consulting services company will also be able to provide this service in several languages.

An accomplished employee benefits consulting company should, at a minimum, perform the following services/functions:

• Retirement plan selection: If a company plans to offer a retirement plan to its employees for the first time, retirement benefit consultants should perform member presentations explaining the proposed fund structure and benefits.
• Plan changes: Retirement benefit consultants can also offer guidance on making changes to an existing retirement plan or changing to a new type of plan altogether.
• Investment oversight: Retirement benefit consulting services can include managing the plan’s investments, preferably with an independent investment consultant, ensuring they align with the member’s and employer’s objectives and goals.
• Plan documentation: A retirement plan consultant can help with creating key documents related to the plan, including an investment policy statement. This document outlines the goals and objectives of the plan and the steps the plan manager will take to achieve them.
• Plan participant/member education: Retirement benefit consultants can take responsibility for educating employees about the plan benefits and how to participate; this should be ongoing and is particularly useful when new employees join the company.
• Governance and compliance: Advise members and employers on the laws and regulations governing certain benefits.
• Communication: Assist the employer with written member communication and presentations should a transfer to another fund be required and all other requirements such as notification of termination to current service providers.
• Administration: Assist the employer with administrative duties, including medical underwriting requirements, claims etc.
• Member queries: Attend to general member queries and product-related queries.
• Management Committee: Assist the employer with the nomination and election of member representatives to the employer/member representative (management) committee. While these committees are not a legal requirement, they form an essential support and communication function for the employer, members of the fund, and the fund itself.
• Meetings: Arrange a management meeting (at least one per annum) to discuss fund matters and perform secretarial functions (recording of minutes).

The importance of independent advice

An independent benefits consultant can present clients with potential solutions of what they believe will best suit the client’s needs without being restricted to a specific provider/s. This means independent consultants have a wide array of service providers and products at their disposal, which can be considered in the advice process.

The key difference between independent consultants and tied agents is that tied agents can only offer you products offered by the company that employs them. The tied agent will be limited to formulating their advice using this specific product suite.

On 30 December 2021, the government confirmed that the curfew would be lifted, ‘there will therefore be no restrictions on the hours of movement of people’. It was certainly a treat to hear the countdown, clinking of champagne glasses and usher in the new year with family and friends. I must admit being out after 12 pm felt a bit strange. Let me use this opportunity to wish you a prosperous year ahead on behalf of the Chartered team.

Humans are intricate; the inherent ability to adapt and readapt is truly remarkable. Granted, we vary in how easily we navigate change, but if the last two years is anything go by, it stands as a testament to our resilience.

New Year’s Resolutions

On the topic of adapting, as is customary of a new year, most of us would have some resolutions put in place, both personally and professionally.

Resolution: /ˌrezəˈluːʃn/ [countable] a definite decision to do or not to do something.

I was at dinner with a dear friend, naturally, the topic came up, and she said to me, ‘how about setting aspirations instead of resolutions?’ What a mind shift, to aspire to something as opposed to setting hard and fast change that is meant to kick in as of 1 January. Let’s not go down the rabbit hole here, and start discussing our past ditched resolutions, which I am sure we will all have a story to share.

Aspiration: /aspəˈreɪʃ(ə)n/ a hope or ambition of achieving something.

In the spirit of being kinder to yourself, which is a well-deserved gift to yourself, given the mental impact of the pandemic, we did some research on how one could better achieve the intentions set out in the practice of resolution-making.

Suppose resolution making is the disciplinarian and aspirations is the more lenient counterpart, both seeking to achieve the same outcome, an improvement in your life, personal or professional. What would be the ‘glue’ that makes this outcome stick?

New Year, New Habits

Your life today is essentially the sum of your habits. How in shape or out of shape you are? A result of your habits. How happy or unhappy you are? A result of your habits. How successful or unsuccessful you are? A result of your habits.

What you repeatedly do (i.e. what you spend time thinking about and doing each day) ultimately forms the person you are, the things you believe, and the personality that you portray.

Habit: /ˈhabɪt/ a settled or regular tendency or practice, especially one that is hard to give up

But what if you want to improve? What if you want to form new habits? How would you go about it?

It turns out there’s a helpful framework that can make it easier to stick to new habits so that you can improve your health, your work, and your life in general.

Click here to read Atomic Habits author James Clear’s article about how to form new habits that actually stick.

Looking ahead

Whichever route you choose, resolutions, aspirations, habits; keep an optimistic outlook. We are excited for prospects that the year ahead holds and look forward to engaging with our stakeholders.

Pension, provident and retirement annuity funds are some of the most tax-efficient ways to save for your retirement. Contributions up to 27.5% of taxable salary are tax-deductible, investment income is not taxed, and currently, the first R500 000 of a lump sum withdrawal on Retirement, death and retrenchment is tax-free.

The commonly accepted advice is that to achieve a retirement outcome of a 75% income replacement ratio, a person should contribute 15% to retirement and achieve a net investment return of 5% to 6% above inflation over their entire working career of approximately forty years.

The key here is “over their entire working career”. The reality is that many people change jobs and do not preserve their benefit on exit, leading to a reduced retirement outcome.

If a fund member has only twenty years fund membership before they retire, the pension fund will not likely provide a 75% income replacement ratio, as it only covers twenty years of a forty-year career. It is not the responsibility of the employer or pension fund to make up for this shortfall.

The second challenge is the investment portfolio that the fund member is in. Suppose fund members have an option to select their investment portfolio from a range of options, in that case, they can choose a portfolio or combination of portfolios, which best suits their needs and risk appetite. Where a person selects too conservative an option, this will also result in a reduced outcome.

If the pension fund is the member’s sole income stream at retirement, this becomes even more important, and members need to supplement their retirement savings.
Many fund members contribute additional voluntary monthly contribution amounts to improve their retirement outcome. This is very tax-efficient for them as these additional contributions are tax-deductible within the total of 27.5% allowed by SARS.

There is only one person that will determine your retirement outcome. That person is you.

Retirement V Risk Provision

A compounding factor is to balance the need between retirement and risk-benefit provision. This has become very relevant in the new normal of Covid 19 and the Coronavirus pandemic and the impact that it is having on the costs of risk benefits. Whether these costs will escalate remains to be seen, while the majority of the population remains unvaccinated.

If you are a member of an inclusively costed fund, the retirement component changes if the administration and the risk-benefit costs increase. The retirement risk is thus on the fund members.

Some funds offer members a choice of the level of death benefits, such as 1x, 2x or 3x annual salary. This allows fund members to select the cover that suits their needs. In an inclusively costed fund, a lower death benefit results in a higher retirement component.

Any additional risk benefits added to the fund will reduce the retirement funding component unless there is an increase in the employer and/or member contribution to compensate for this.

There is a fixed retirement contribution in an exclusively costed fund, and the employer pays the administration and risk-benefit costs over and above this. If these increase, the employer pays the higher amount, and it does not affect the retirement savings component. Thus, the structure and provision of risk benefits depend on affordability and what the employer is prepared to pay towards the fund.

Risk Benefits Provision: Individual Needs V Group Risk Benefits

So, what additional risk benefits should a company provide via its pension fund for its employees? This is subjective, depending on who is being asked.

A benefit becoming more widely provided for by some pension funds is critical illness cover. Insurers have different terminologies to refer to this benefit, and it is referred to as critical illness/trauma / dread disease benefits. This provides cover in the event that a member is diagnosed with a critical illness, as defined in the policy. It pays out a lump sum benefit as a multiple of the member’s salary and can be in addition to, or an accelerated payment of part of the existing death benefit.

Members and employers are questioning whether a benefit such as this should be provided via a pension fund or if this should be a member choice benefit in their personal capacity.

In conclusion, there is a delicate balance as to what is a realistic benefit structure and retirement outcome as to what is affordable. Employers should regularly assess the benefit structure to see if the benefits offered are relevant and cost-effective. Fund members need to critically assess their benefits and needs and make additional provision where necessary.

At the time of writing this, it is hard to believe we have 68 days left of 2021. On the other side of the third wave of Covid 19, I reflect on the scholars of our country who, for the last two years, have adapted to a combination of online and classroom education, limited social interaction opportunities and for the sport-loving children virtually no opportunity to display their talents.

The social unrest and looting, which occurred predominantly in Kwa Zulu and Gauteng, resulted in substantial damage to many businesses, the economy and the personal loss of possessions for many individuals and families.

In October, the country moved to adjusted alert level one, and we have approximately twenty million South Africans who have been vaccinated either partially or fully. Permission has been granted for 12 – 17-year-olds to be vaccinated. South Africa was removed from United Kingdom’s red list, making travel to and from the United Kingdom much easier for vaccinated travellers. These developments have lifted the country’s mood as residents can plan end of year travel and holidays, and families can re-connect over the festive season after many months of separation and isolation.

The year thus far has jolted the psyche of many South Africans. Yet, despite all these challenges and heartache, the proud people of this nation remain resilient, positive, and committed to the success of South Africa.

Over the last quarter, we have seen the following proposed legislation released for comment, which was undoubtedly influenced by the financial impact of Covid on many households.

Green paper on comprehensive social security reform

On 18 August 2021, the Minister of social development released a green paper on comprehensive social security and retirement fund reform, which was very similar to the National Social Security Fund paper of 2012.

In brief, the objective was to create a centralised “National Social Security Fund” (NSSF) intended to provide basic benefits, such as pensions, disability and survivor benefits for all qualifying citizens, up to a certain threshold. The government would manage the Fund, and employers/employees were initially expected to contribute between 8 and 12% of qualifying earnings. In addition, employees could choose to top up their existing retirement savings using their current occupational or individual arrangements.

This meant most employees would only be able to contribute to the “NSSF”, thereby putting their existing private funds at risk. After a huge public outcry, the paper was withdrawn on 1 September for further consultation and consideration.

Two bucket system/Dual access system

National Treasury is considering proposing a “two bucket system” for retirement; the proposal, aimed to be effective by 2022, will allow for pre-retirement withdrawals from a retirement fund while ensuring preservation of savings.

This has come about after growing calls from members to access part of their retirement savings due to exceptional circumstances, like the financial impact of Covid 19 on many employees.

The proposal is considering allowing employees to access a maximum of 30% or R30 000 of retirement savings while employed. Treasury is considering allowing fund withdrawals under very specific circumstances. The proposed two bucket system will enable “bucket one” to be preserved until retirement. The second bucket will allow pre-retirement access to retirement funds during emergencies or extraordinary circumstances.
The proposed trade-off for allowing early access is compulsory preservation, with “Bucket one” not being accessible before retirement.

Business, labour and government are currently locked in discussions to finalise this legislation, thereby replacing the current legislation, which prohibits pre-retirement access to retirement savings unless the employee resigns or is retrenched.

The industry awaits further announcements in this regard.

Changes to unapproved Policies

The definition of beneficiary was recently amended in the Long Term Insurance Act, which has impacted the payment of Death and Funeral benefits. As a result, an employer may no longer determine the beneficiary, and benefits cannot be paid directly to the employer, despite the policies being employer-owned policies.

This means that an insurer may not accept an employer/committee resolution instructing them who to pay, nor may an employer advance a payment and ask the insurer to reimburse them.

Where no beneficiary has been specified on the beneficiary nomination form or where no beneficiary nomination form has been completed, the insurer will pay the Death Benefit and/or the Funeral Benefit to the insured person’s estate.

It is, therefore, critical that each member completes a beneficiary nomination form and that this is kept up to date and on record with the employer. The change will come into effect from 1 December.

Stay Safe

As the year draws rapidly to a close, may I urge you all to remain vigilant and careful so a possible fourth wave does not spoil the current buoyant mood.

Our World in Data statistics reflects that over 7.7 million of the 60.14 million people in South Africa have been fully vaccinated. This makes up only 13,2% of the population, and over 11.2 million have received at least one dose to date. Considering this and the fact that all adult persons over the age of 18 currently qualify for the COVID-19 vaccine, it cannot be denied that vaccine hesitancy is a challenge that our country faces.

What the surveys found

A survey conducted by National Income Dynamics – Coronavirus Rapid Mobile (NIDS CRAM) in July from a sample of about 5 000 respondents indicated that vaccine acceptance had risen from 71% to 76% compared to surveys conducted earlier this year. University of Johannesburg’s (UJ) Centre of Social Justice collaborated with the Human Sciences Research Council (HSRC), and their survey looked at vaccine acceptance and hesitancy in SA. The overall vaccine acceptance rate was 72%, an increase from 67% on their previous survey in late December 2020.

The Afrobarometer survey run by the Institute of Justice and Reconciliation, on the other hand, found that vaccine acceptance was far lower than the figures reported by NIDS or UJ/HSRC, with 43% of respondents indicating they were either very likely or somewhat likely to get the vaccine, 12% of the people were somewhat unlikely to get it, and 42% were very unlikely to get the vaccine. This survey only had 1600 respondents who were carefully selected as a representative of SA’s geographic, age and gender distribution.

Incentivising Vaccines

The Health Department said the government is exploring different ways of ramping up its vaccination drive. Some of the identified problems are access to transportation and basic information on how one can get the vaccine, and scepticism about the side effects being underreported. The Western Cape has been running various campaigns to address vaccine hesitancy with various initiatives, including communication campaigns sharing information on COVID-19 and the vaccines.

President Cyril Ramaphosa announced two weeks ago his intention to introduce a “vaccine passport”. The “passport” is one of the tools currently used in other countries to encourage vaccine uptake; in its simplest form, it would be used as a method to verify the vaccine status of an individual.

Retails companies such as Game are introducing incentives in the form of discounts on purchases for the vaccinated persons.

Mandatory vaccinations in the workplace

We have witnessed private companies such as Discovery, which has led the pack in announcing the introduction of mandatory vaccinations for their employees.
The Employment and Labour Department issued a directive in June 2021 with key principles of the guidelines on the workplace. This is contained in the new consolidated direction on occupational health and safety measures in certain workplaces, which was gazetted by the Minister of Employment and Labour, Thulas Nxesi.

When formulating a vaccination policy, employers must consider constitutional grounds, such as the right to bodily integrity, the right to freedom of religion, belief, and opinion; as well as medical grounds – issues of an immediate allergic reaction of any severity to a previous dose or a known (diagnosed) allergy to a component of the COVID-19 vaccine.

The Consolidated OHS Direction requires an employer to include in its risk assessment whether it intends to make vaccinations compulsory, a three-step enquiry:

1. A risk assessment to be conducted, considering the operational requirements of the workplace.
2. If the employer decides to make it mandatory, once the risk assessment has been conducted, the employer must identify those employees whose work poses a risk of transmission or a risk of severe COVID-19 disease or death due to their age or comorbidities.
3. It must then amend its plan to include the measures to implement the vaccination of those employees as and when COVID-19 vaccines become available in respect of those employees.

We will certainly witness more collaborations between the public and private healthcare industry sectors, hopefully resulting in innovative solutions that will encourage South Africans to vaccinate. Importantly, the key to making an informed decision is the sharing of verified information that is easily accessible and transparent.

Amidst the current era of uncertainty, where people face challenges of many kinds, financial and otherwise, the Government is proposing lifelines to keep their citizens afloat. Our former finance minister, Tito Mboweni filled us in on pending debates to assist those suffocating in a noose of financial distress by allowing limited withdrawals from retirement saving vehicles, alongside increased preservation. This amendment to the legislation will only be implemented in 2022 at the earliest; however, it was a matter of days before enquiries trickled in from members (prematurely) on how to apply for this prospective lifeline, which could, for the first time, permit access to retirement funds prior to termination of service. However, this allowance could come in the form of a proposed two-bucket system to accommodate short term financial relief and long-term financial security.

This urge of accessing these funds whilst under employment is long existing in the industry and has been exacerbated by further financial hardships owing to national lockdown interruptions. Judging from SA’s general savings culture (or lack thereof), – it will come as no surprise for this fraternity to see a significant handful of these investors trying to get their hands on their retirement pots to meet their immediate needs. While this may be the case for many, it can be expected that a handful of these applications could well be unwarranted, notwithstanding the qualifying criteria that will accompany the concession to be granted early access, often with disregard for the implications of this action on their retirement outcomes.

It is paramount to highlight that building wealth with the most modest of salaries is achievable for individuals with diligent saving habits. The prominent narrative of postponing this discipline for when one earns more in future; has proved fatal for financial independence upon retirement, even without this proposed and inevitably colossal disruption of withdrawing your retirement savings. The legislation is intended to assist those in genuine need of this well-intended financial relief; however, it must be kept in mind that it comes at a significant cost to your seemingly far off retirement years. This requires a balancing act that demands difficult and precarious decisions, even with the much-needed guidance of a competent financial advisor.

As it stands, just under half of our citizens do not have retirement savings at all, and of those who do, only about 6% can retire comfortably, according to estimates by the Treasury.

As worrisome as these figures are, the Sanlam Benchmark survey confirms that 41% of employers who have established retirement funds for their staff, suspended contributions (for a period) to these savings in 2020. This has further placed a strain on accumulating sufficient retirement savings. This was done to mitigate the economic struggles faced by employers and/or their employees. Undoubtedly, saving for retirement has become a nauseating expense that will for some time be shifted further to the sidelines – with a focus on immediate financial obligations over long-term saving aggregation.

As bleak as the retirement outcomes look for the vast majority, generally, the size of adequate retirement savings is very often underestimated. Many employees are unaware of the need to save at least 15 times their annual salary to maintain their lifestyle post-retirement; and few realise that about R1million (saved in an average working life of 40 years) will purchase an annuity of approximately R5000 every month, according to Andre Tuck, Senior Investment Consultant at 10X Investments. Women, with higher life expectancy than men may very well need more to retire at this level of income. A member can view their mouthwatering retirement fund balance on their fund benefit statements, and in many cases, it is most likely to prove far from adequate when your retirement is approaching. In addition, an even further detriment could be for those considering early retirement.

A worthwhile deduction could be to consider saving as much as you possibly can, no matter how insignificant it might seem, as it will make a visible and much-needed difference to the accumulation of retirement savings.

Paul Nixon (Head of Investments Behavioural Finance at Momentum Investments) refers to how impractical it is to work on the mindset of wealth being a function of income, but should be considered as a function of saving – if you want to see yourself in a good and sound position to retire comfortably.

At the time of penning this article, chaos has erupted in many streets of KwaZulu Natal and Gauteng as protesters and looters inundate our social media platforms with their violent actions. It’s not the most promising start to a third-quarter that we have experienced in recent times, but in this new crazy world, one has come to expect the unexpected.

Speaking of unexpected, I was pleasantly surprised, if not slightly irked, that my teenage children had more knowledge than I on the topic that I am about to share with you. I was waxing lyrical about the similarities of a 14th-century emperor and Elon Musk. Mansa Musa was the tenth emperor of the Mali Empire in the 1300s. Musa’s wealth came from trading in salt and the substantial gold deposits he had accumulated in his empire. All three of my kids had encountered Musa in their respective school curriculums and were not hugely impressed with my supposed superior knowledge of history.

Be that as it may, I searched for more information and read a fascinating article by Khulekani Magubana in fin24. He draws parallels with Mansa Musa and Elon Musk, our very own Pretoria-born American tech billionaire. Both incredibly rich individuals have made all kinds of unpredictable and impactful waves in a relatively new market. Historical recordings state that Musa embarked on his Hajj pilgrimage in 1324. During his journey, he travelled with a caravan of 60 000 people and gave away so much gold in the cities that passed on the way to Mecca that it caused the value of gold to fall. It did not rise for 12 years. Some 697 years later, Musk (worth more than $151 billion) has influenced the price of cryptocurrencies, Bitcoin in particular, with his comments on social media and subsequent buying or selling of the cryptocurrencies depending on their value at the time.

Efficient Group Economist, Dr Francois Stoffberg, said the comparison between Musk and Musa was apt in the sense that both were extremely wealthy individuals whose influence over a finite commodity had a profound impact on the economy they functioned in. Stoffberg says that it’s a fair parallel as gold wasn’t in such high circulation in the 1300s, and cryptocurrencies are not in high circulation today. Stoffberg did state that the one crucial difference was that unlike the decade it took the price of gold to recover in 1300’s Egypt, if one individual owns many coins and a dump of coins causes a fall in value, the system can self-correct quickly.

I am a passionate history scholar and a firm believer that if we only paid heed to the lessons of the past, we may be able to deal with the challenges of the present. If you enjoyed this economic tale of Musk and Musa with its historical twist, then I would encourage you to read the reviews and perhaps even obtain a copy of a book entitled “Our long walk to Economic Freedom-lessons from 100 000 years of human history” by Professor Johan Fourie.

Please take care during these turbulent, yet historic times.