04 Sep The capacity, willingness & opportunity to save for retirement
According to the South African Treasury, only 6 out of every 100 South Africans will be able to retire comfortably. Further, a BusinessTech poll illustrates that about 35% of middle-class South Africans are not saving at all for retirement.
Salt EB’s Business Development Head Wimpie Vermaak examines Hershey’s Capacity-Willingness-Opportunity model and believes that small and mid-sized businesses can help their employers to retire successfully and at worst, reduce the chances of subsistence living in their retirement.
“Starting with ‘capacity’, very few people have the depth of knowledge required to construct and manage a retirement plan themselves. Typically, you’ll need to save about 10% of your income from the age of twenty-five to give the 15-20 times multiplier of your last annual revenue in order to earn a reasonable retirement income. There is little time for error, so you need to be saving and investing in reputable funds with proven track records”.
The ‘willingness’ factor comes mostly from understanding the cost of not saving adequately for retirement. With this comes a sense of the debilitating impact that inflation can cause during one’s retirement years. The ‘willingness’ factor can be addressed by employers educating their employers and encouraging them to prioritise their retirements plans sooner rather than later.
Umbrella Funds can help to provide the ‘opportunity’ in the workplace. An umbrella fund makes retirement funds more accessible to smaller employers as it pools the contributions of various employers and members in one fund. This pool provides cost savings and delivers true value to the umbrella fund members (i.e. participating employers). An umbrella fund also means that employers do not need to manage a function which is not core to everyday operations.
“Post COVID and the economic stress of our times, employee wellness programmes are being offered by employers to address areas such as mental health, healthy lifestyles, and over-indebtedness among others. Financial planning is a module of some programmes, but it needs a deeper and more holistic approach to make a meaningful difference to retirement planning through improving ‘willingness’ and ‘capacity’ while promoting ‘opportunity’.”
Business Development Head