Hard times hurt many in SA

Published Aug 31, 2016

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SOUTH African consumers who are battling to make ends meet have a dismal savings rate and are increasingly turning to family and friends for financial support and loans in tough economic times.

These were among the research findings presented at the Institute of Retirement Funds Africa’s annual conference, which drew to Durban more than 1 000 retirement planners, pension fund trustees and financial sector experts from across the country over the past two days.

The event is the biggest conference relating to pensions on the continent.

Michelle Acton, principal consultant of Old Mutual Corporate, presented five key findings of the company’s Savings and Investments Monitor 2016, which surveyed working members of 1 000 households living in metropolitan areas of the country, to understand their behaviours and attitudes towards savings and investments.

The findings included households’ worsening overall financial positions, increased dependency on family support, changing spending patterns, an increase in the use of personal loans and the need to break the cycle of not saving for retirement.

“Over the past year, there was a deterioration in the financial state of households. Thirty-eight percent of households said they were in a worse financial position this year than they were last year.

“Two in three families felt they were in a higher level of serious financial stress and 49 percent of households said they were saving less than they were last year. Overall, we are seeing a negative savings rate,” Acton said.

More than half of the families interviewed (57 percent) reported they’d had a situation at least once in the past year where their expenses had exceeded their income, and the top four cutbacks in spending on non-essentials were on holidays, eating out, entertainment and alcoholic beverages.

Households said they were also cutting back on “essentials”, which they listed as DStv, assistance payments to family members, electricity and water consumption (and switching to prepaid) and armed response services.

Acton said more than 40 percent of households were not saving in a pension, provident or retirement fund, and an attitude of depending on children during retirement had increased to 45 percent, which was problematic when considering their children’s financial positions.

“There is a reduction in the belief that the government will look after us in retirement, but when you interview families and ask them if they are expected to support a parent in the future, 58 percent said yes, so there is a huge amount of dependency across all income groups,” she said.

Households’ confidence in the economy had plummeted among respondents, from 55 percent to 31 percent.

Acton said 26 percent of households were part of the “sandwich generation”, supporting both elderly parents and children.

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