The Retirement Funding Industry in South Africa 2022

Introduction

South Africa’s retirement industry, with assets in excess of R4.6tn, has one of the highest assets to GDP ratios in the world. However, only 7 to 10 million individuals have retirement savings products, out of an employed labour force of about 15 million.

The retirement funding industry is going through major changes with a new two-pot retirement savings system where all pension, provident and retirement funds will have to allocate contributions to a retirement pot (two thirds) and a savings pot (one third). A retirement survey showed an increasing number of South Africans are unsure if they can afford to retire.

Opportunities

Development of online retirement planning platforms and mobile technologies.

Increased retirement fund membership, which remains at a low level. Two-pot system will present a balance between ensuring preservation of retirement savings and allowing some withdrawals through a savings vehicle.

Outlook

South Africa’s new two-pot system has been welcomed by the industry as it will lead to increased preservation of retirement savings, which will ultimately lead to better retirement outcomes. Industry sources say the outlook is promising as the industry has scale and the skills to provide cost efficient and secure vehicles for saving for retirement. However, the volatile market environment, weakened GDP outlook, and pressures on household finances are affecting consumer savings.

Report Coverage

This report on retirement funding in South Africa includes information on the state and size of the industry, its major players and various corporate actions and developments, as well as regulatory and other developments that affect the sector.

There are profiles of 26 companies including all the notable pension funding players such as Sanlam, Ninety One, Old Mutual, Coronation, Allan Gray and the state-owned Public Investment CorporationStrengths

The industry is well-established, stable, and financially sound.

The regulatory environment is well governed.

Threats

Domestic and global economic pressures.

Fraud, misconduct, and mismanagement. The rising cost of living makes it difficult for investors to balance their short-term income needs with longer-term savings. Volatile markets.

Weaknesses

High barriers to entry. Low financial literacy. South Africans generally lack a savings and investment culture. There is a lack of meaningful pre-retirement advice and overall communication could be improved. Under-saving for retirement remains a significant challenge in South Africa.