More than half of those who took part in the latest annual Sanlam benchmark survey are opposed to the Treasury’s proposal to give individuals limited access to their retirement savings before retirement via the so-called two-pot system.
The proposal seeks to strike the right balance in helping members save for retirement while being flexible enough to accommodate them when they have fallen on hard times.
This is just one of many findings in the 2022 survey, which polled 83 principal officers of stand-alone funds, 100 participating employers in umbrella funds, 15 asset consultants, 15 healthcare consultants, six top umbrella fund sponsors and 500 online consumers.
A stand-alone fund is a retirement fund set up for employees by their employer while an umbrella fund is made up of multiple participating employers.
“Those in the [retirement] industry do not believe that implementing the two-pot system by March 2023 is realistic, as it involves ‘an enormous amount of work’,” Sanlam said in the release on Tuesday.
Just more than half of the members who took the poll were aware of the two-pot system but 56% said they did not agree with it, with 29% saying if the law were changed they would “definitely not” access their retirement funds early, with 20% saying they “probably” would not.
The Treasury proposal includes one accessible pot comprising one-third of contributions from which withdrawals could be made before retirement and a two-thirds preservation pot that would be kept intact until retirement.
Reduced income
The 41st edition of the Sanlam benchmark survey comes while consumers are battling rising fuel and food costs due to historically high oil prices, a situation that has been worsened by Russia’s invasion of Ukraine.
The researchers also found that 55% of retirement fund members have experienced reduced household income due to Covid-19, which has claimed as many as 2-million jobs over the past two years in SA.
“One of the most harrowing takeaways is the impact that the Covid-19 pandemic had financially on many SA householders,” Sanlam Corporate CEO Kanyisa Mkhize said.
In the research, they highlight that income reduced in more than 55% of SA households and more than 16% were affected by retrenchments. Nearly 10% were forced to take unpaid leave or sabbaticals. In 7% there were deaths with loss of income.
It was found in the survey that 58% had started living frugally and cut out all luxury items, and 18.5% had accessed some sort of long-term investment. On the plus side, 30% had reduced their debt levels during the pandemic.
Other key findings of the survey show that the take-up of flexible risk benefits increased significantly with 38% of stand-alone funds (2021: 29%) and 29% of umbrella funds (2021: 16%) offering flexibility in their package to employees. This is likely to be in response to Covid-19.
With infrastructure identified as vital to SA’s economic recovery, investment therein from the retirement sector has increased, with umbrella funds increasing their asset allocation from 4.7% to 15.5%. Stand-alone funds are up to 10.6% from 6.6%.
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