Private pensions index shows increased need for govt assistance

Cape Town - While the number of private pensioners grows, the total pensionable population in SA is growing faster, resulting in an increased need for government’s social assistance, according to economist Mike Schüssler.

Commenting on the latest BankservAfrica Private Pensions Index (BPPI) released by BankservAfrica and Economists.co.za on Tuesday, he said: "As the retirement population of 60 years is growing at a rate of 3.4% a year, it may be that not enough people have saved for their pensions. 

"Although 43% gets less than R4 000 per month, it is below the threshold for being eligible to receive state grants."

In February 2018, the typical private pension pay-out was R4 870 per month, according to the BPPI.

The report found that the value of the average private pension pay-outs increased by 50.1% between January 2013 and February 2018 in nominal terms. In real terms, the five-year average value of private payments increased by 15.2%.

"It is not only the growth of pensions that is important to the economy, but the fact that average take-home pay showed practically no growth above the rate of inflation in the five-year period," the report states.

According to Shergeran Naidoo, head of stakeholder engagement at BankservAfrica, the BPPI is the first time-series on private pensions as paid into bank accounts in the world.

The system currently accounts for 900 000 people receiving private pensions, of which BankservAfrica captures 680 000 or 75%.

The index provides a monthly view of private pensions’ performance and trends in SA.

READ: The VAT increase and your pension savings  According to BankservAfrica’s data, in January 2013 59.1% of all private pension pay-outs were less than R4 000 per month. About 30% of pensioners received between R4 000 and R10 000, while just under 10% were paid between R10 000 and R25 000.

Out of all pensions received, 0.8% were between R25 000 and R50 000 while 0.3% received over R50 000 in their bank accounts for the month, according to Schüssler. In contrast, by February 2018 the share of private pensioners receiving less than R4 000 dropped to 43% while 34.1% received between R4 000 and R10 000, according to Naidoo.

The biggest increase was the share of private pensions receiving between R10 000 and R25 000. This doubled to 20.6% in 2017 from less than 10% in January 2013.

The same occurred for those receiving R25 000 to R50 000, which went from 0.8% share of private pensions to 2.1%, with those receiving more than R50 000 per month increasing slightly to 0.4% from 0.3%. “The growth in both average and median pensions is probably due to higher than inflation interest rates as equities did not fare quite as well,” said Schüssler.

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