South Africans could be eating into their pensions too fast - economist

Data reflected in the latest BankservAfrica Private Pension Index, released this week, could indicate that South Africans getting private pensions are using the funds at a faster rate than they should, economist Mike Schüssler told Fin24.

His concern is that, with local equity indices not resulting in much growth, and lower real interest rates, some pensioners must be eating into their pensions faster than is needed.


"I am worried people might be using their pensions quicker than they should and that might bite them later," said Schüssler. "But at least the South African private pensioner is able to pay themselves an increase above inflation in the short term."

The BPPI increased by 2.9% in July, which brings an end to a streak of private pension increases of above 5%.


Real private pension payments – therefore taking inflation into account – has now increased at a rate higher than salaries for 11 consecutive months.


Moreover, July 2019 was the 29th consecutive month of real positive increases for average private pensions.

According to Schüssler, it has been an amazing achievement that over the last five years there have been only two or three months where private pension increases were below inflation.


Real pensions averaged R7 114 in July 2019. Without taking inflation into account, the average pensioner banked R7 995 in July 2019 on a seasonally adjusted basis.


This was lower than the June 2019 average but remains close to the R 8 000 level.


In the view of Schüssler, all indications suggest this will become the norm in the coming months – at least in nominal terms.