MEMBER INSIGHTS™ 2021
Gaining insights from the numbers Member Insights™ focuses on the key stakeholder in the retirement journey – the member saving for retirement.
ALEXANDER FORBES | MEMBER INSIGHTSTM
Content 1. Why Member Insights™?
3
2. Who are the members?
4
3. Contributions
18
4. Expenses deducted for risk benefits and administration costs
22
5. Investment returns and the portfolios that the member is invested in
25
6. How the member’s salary has progressed
27
7. How much is lost to non-preservation along the member’s savings journey
31
8. How much of the retirement savings is used to generate an income
36
9. How much pension each rand of savings can buy at retirement
41
10. Conclusion
42
11. Assumptions
42
12. Sector analysis
43
Disclaimer Alexander Forbes has relied on the accuracy and completeness of information made available when compiling this report. The accuracy of the facts or information supplied has not been independently verified except where expressly stated. Broad checks have been applied in determining the appropriateness of the data and the reasonability of the results. This analysis has been conducted on unaudited member data and any changes to the data made subsequent to the finalisation of this report may have an impact on the results disclosed in this report. This information is not advice nor is it intended as a personal recommendation, guidance or a proposal on the suitability of any financial product or course of action as defined in the Financial Advisory and Intermediary Services (FAIS) Act. While care has been taken to present correct information, Alexander Forbes and its directors, officers and employees take no responsibility for any actions taken based on this information, all of which require advice. The information in this report belongs to Alexander Forbes. You may not copy, distribute or modify any part of this document without the express written permission of Alexander Forbes. Alexander Forbes Financial Services (Pty) Ltd is a licensed financial services provider (FSP 1177 and registration number 1969/018487/07).
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ALEXANDER FORBES | MEMBER INSIGHTSTM
1. Why Member Insights™? How do funds measure themselves and see if they are a success?
Millions of South African employees rely on the money saved in their employers’ retirement fund to earn an income in retirement. For many people, this is their only formal savings for retirement. Recent research released by the Aspen Institute also confirms that people are 15 times more likely to save via workplace schemes. Unfortunately, too often, this money is still not enough to sustain them in retirement.
Member Insights™ provides funds with industry and sector benchmarks, and desired outcomes to compare their outcomes, such as replacement ratios. It’s also made available so that trustees and retirement fund custodians can use the research insights to inform their decision-making about:
There are several factors that, when combined, affect the income a member gets in retirement from a defined contribution fund. These are:
■ the level of contributions being made to funds ■ group insurance benefits available to members ■ investment options available to members
■ the overall level of contributions made to the fund ■ expenses deducted for risk benefits and administration costs ■ investment returns after fees ■ the portfolios the member is invested in ■ how the member’s salary has progressed ■ how much is lost along the member’s saving journey due to the member not preserving ■ how much of the retirement savings is used to generate an income ■ how much pension each rand of savings can buy at retirement
It is also used to encourage members to preserve their savings when they change jobs, to improve members’ pension outcomes. The information in Member Insights™ is divided into economic sectors to help employers and trustees benchmark their benefit offering against employers in their sector. Importantly, the information can also inform members of the amount they should be saving to reach a reasonable benefit in retirement.
Member Insights™ analyses membership activities and relates the behaviour back to the above factors. The effect of these factors on the expected income in retirement can be analysed and remedial action taken. Each of these factors need to be given attention for the fund to be a success: where members are reaching a financially secure retirement.
Lastly, the information shows the link between member circumstances, general financial wellness and the ultimate decisions that are made in relation to retirement funding. This is important so that employers and trustees address the key underlying issues to ultimately improve outcomes for their employees and the members of their retirement funds.
This year’s analysis unpacks some trends, following some of the events relating to the Covid-19 pandemic. We also introduce new statistics to the industry for the first time, allowing better profiling of the membership database, and linkages between peoples’ overall financial positions and their decisions regarding their retirement funding. In addition, we look at important indicators concerning gender equality, and the wage gap between higher and lower earners. These are all critical issues in the context of South Africa, to ensure better overall outcomes for people.
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ALEXANDER FORBES | MEMBER INSIGHTSTM
2. Who are the members? The analysis was first introduced in 2006. Since then, the sample size has grown from 320 000 members belonging to 460 employer clients in 2006, to close to a million members belonging to just over 2 400 employer clients as of 31 December 2020.
This year, additional non-retirement data relating to the individual members has been linked, to enrich the insights further. For the first time in the industry, data relating to education, marital status and credit status is included.
Member Insights™ uses data from all the South African retirement funds that Alexander Forbes administers. This means that Member Insights™ has the biggest membership and employer groupings data sample of all the retirement fund surveys available in South Africa.
Summary of demographics of members
Average age 40 years
49%
51%
Female members
Male members
Family and lifestage Divorced
3%
Living with partner
Widow
7%
Eastern Cape
16%
Western Cape
6%
North West
16%
KwaZulu-Natal
8%
Mpumalanga
5%
Limpopo
2%
Northern Cape
5%
Free State
R19 327 44%
Single
Gauteng
Average income: Average household income: 11%
Married
35%
R28 635
Average financial and credit exposure
40% 3%
Credit active 95%
Microloan 25%
Credit card 33%
XDS Presage credit rating score 7601
Mortgage 24% Vehicle loan 23%
0.89
children in household
3.64
people in household
1.8
household earners
Proportion of loans in default 27%
!
Unsecured 44%
Total Debt to Annual Income ratio 77%
Store account 66%
Under debt review 5%
Digital maturity (percentage of member usage)
73%
70%
own a home
60%
44%
50% 40%
own a car
66% 51%
53%
57% 39%
37%
30% 20%
16%
10% 0% 1 Source: XDS
4
Online Email Facebook App Twitter Whatsapp Youtube banking
14% Don’t access internet
ALEXANDER FORBES | MEMBER INSIGHTSTM
2.1 Timeline of events during 2020 May
March January World Health Organization declares Covid-19 a global emergency. Repo rate cut by 25 bps.
February South Africa’s first case of Covid-19
100 days since the country went into lockdown and SA records the highest number of confirmed cases in one day: 13 674. Repo rate cut by 25 bps.
April
President Ramaphosa declares a national state of disaster and institutes level 5 lockdown as the country records the first Covid-19 death. Moody’s credit rating downgrade. Repo rate cut by 100 bps.
President Ramaphosa announces a R500 billion support package for the economy. S&P’s credit rating downgrade. Repo rate cut by 100 bps.
Restrictions Country moves to lowered to alert alert level 1 of the level 2 and the national lockdown national state of disaster extended by September one month.
Minister of Health Zweli Mkhize announces that he tested positive for Covid-19.
October July
South Africa enters stage 4 of its national lockdown and a special R350 billion coronavirus social grant opens for applications. Repo rate cut by 50 bps.
Relaxation of international travel, shop trading hours restricted and the R350 billion unemployment support continues.
June First Covid-19 vaccine trial starts.
Scientists discover a new variant of the coronavirus and South Africa enters the second wave. The number of confirmed Covid-19 cases reaches 1 million.
November
August
December
2.2 Economic sectors This analysis shows the breakdown and movement of fund members in each economic sector. This provides trustees, employers and management committees a comparative benchmark to identify issues the fund may face because of conditions within a particular sector grouping. Number of funds per sector Construction sector Energy sector Fishing, forestry and agriculture sector Manufacturing sector Mining sector Personal services sector Professional and business services sector Public services sector Retail, wholesale and hospitality sector Transport and telecommunications sector Unclassified* 0
100
200
300
400
500
600
700
Number of funds 2020
2019
* Where unclassified is referred to in this publication, it refers to members who are not allocated to a sector as these funds/employers fall into more than one sector classification or none of the sectors listed apply to them.
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ALEXANDER FORBES | MEMBER INSIGHTSTM
unemployment increasing by more than 10% year on year. Not surprisingly, construction, manufacturing and mining sectors within the fund membership followed the same trend and had the most significant changes in 2020.
There isn’t a single person or sector in our country that the Covid-19 pandemic hasn’t affected in some way. As of December 2020, Statistics SA confirmed that employment decreased by 1.4 million for 2020. Construction, manufacturing, mining and agriculture were the hardest hit during 2020, with
2019
2020
% Change
Construction
6%
2%
-4%
Energy
3%
4%
1%
Fishing, forestry and agriculture
2%
2%
0%
Manufacturing
14%
13%
-1%
Mining
6%
3%
-3%
Personal services
16%
18%
2%
Professional and business services
16%
18%
2%
Public services
5%
6%
1%
Retail, wholesale and hospitality
23%
24%
1%
Transport and telecommunication
6%
5%
-1%
Unclassified
4%
3%
-1%
Sector
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ALEXANDER FORBES | MEMBER INSIGHTSTM
There was a significant increase in the number of retrenchments following the beginning of the Covid-19 pandemic and hard lockdown in April 2020. The data shows that retrenchments peaked between Q3 and Q4 in 2020 on the back of a lag effect from the start of lockdown. Younger members were the hardest hit by retrenchments during 2020, with male members impacted more than female members.
Quarter 1 | 2020
Quarter 2 | 2020
3 128
3 047
Number of retrenchments by quarter
Number of retrenchments by quarter
Proportion of number of retrenchments by gender
Proportion of number of retrenchments by gender
0%
41%
0%
59%
100%
0%
100%
0%
Quarter 3 | 2020
100%
38%
100%
62%
Quarter 4 | 2020
11 811
12 173
Proportion of number of retrenchments by gender
Proportion of number of retrenchments by gender
Number of retrenchments by quarter
0%
Number of retrenchments by quarter
38%
0%
62%
100%
0%
100%
0%
100%
42%
100%
58%
Proportion of number of retrenchments by age 20% 15% 10% 5% 0%
17-25
25-30
30-35
35-40
40-45
45-50
50-55
55-60
60-65
65+
Following this, South Africa’s unemployment reached an all-time high. Over the long term, it is important for this to be addressed to ensure a reduction in inequality in the country, improve the sustainability of the economy and to reduce the risks of social unrest. Overall, we have estimated that South Africa needs real economic growth of 4% per annum to reduce unemployment over the next number of decades. 7
ALEXANDER FORBES | MEMBER INSIGHTSTM
2.3 Generation gap – Millennials hardest hit by Covid-19 A generation gap refers to the divide separating the beliefs and behaviours of two different generations. More specifically, a generation gap can describe the differences in thoughts, behaviour and tastes exhibited by younger generations versus older ones. Each generation potentially has technological
Early Millennials:
Late Millennials:
Supporting family members
Starting a family
influences, workplace attitudes, financial attitudes and ways of life. In designing solutions for groups of people, it is important to take these aspects into account to ensure that whatever is put in place is relevant, and has the highest likelihood of improving decision-making and outcomes.
Baby Boomers:
Generation X: Reviewing retirement
Rising health costs
Paying off student loans
Managing debt
Interest in accumulating assets
Worried about being a burden
Age 18–35
Age 36–45
Age 46–55
Age 56–99
The age profile of the members in the Member Insights™ analysis has remained stable for the past few years. The age of the members ranges from 17 to 73 years old, so we have Early Millennials, Late Millennials, Generation X and Baby Boomers in the fund membership.
Employee generational breakdown by gender Early Millennials Late Millennials
0%
20%
0%
22%
Employee generational breakdown by income 50% 50%
0%
15%
50%
0%
14%
50%
50% 2.0%
40%
9.2%
30%
11.5%
8.8%
20% 19.4%
Generation X
0%
Baby boomers
0%
0%
0%
11% 9% 5% 4%
50% 50%
10%
3.5% 6.5%
8.1%
5.4%
8.2%
0%
Early Millennials
Late Millennials
4.4%
Generation X
1.5% 3.2% 2.3% 1.8%
Baby boomers
50% 50%
The median age is 37 years (Late Millennials) and 42% of members are below the age of 35 (Early Millennials). The Early Millennials membership tends to have lower salaries, higher turnover and high average projected replacement ratios because most members still have most of their years of employment ahead of them (with these projections assuming that they would preserve in future). Almost 20% of Early Millennials are earning below R10 000 per month. 2 Source: OECD 3 Source: STATSSA
4.1%
< 10 000
10 000 – 20 000
20 000 – 40 000
> 40 000
Younger people often occupy lower-level positions and have less work experience, making them more prone to losing their jobs when businesses face financial challenges. Numerous studies of Covid-19’s impact on employment and household income, shows that the youth have been the hardest hit2. Recent statistics have also confirmed that unemployment is highest amongst the younger age groups3.
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ALEXANDER FORBES | MEMBER INSIGHTSTM
Proportion of members by quarter split by age groups 1.00 0.95
Proportion
The graph on the right shows how the proportions of members by age groups have changed during 2020. This gives a more distinct view of how different age groups have been affected over time. For example, for the group aged 15 – 24 years, there were 30% less members in that age group in December 2020 compared to December 2019. We can see that the Early Millennials and the Baby Boomers have been more severely impacted over the last year. While the Late Millennials and Generation X groups have remained relatively stable. This can also be seen in the unemployment rates graph where younger populations tend to have been affected by the fallout from the pandemic to a greater extent.
0.90 0.85 0.80 0.75 0.70 Q4 2018
15-24 25-34 35-44 45-54 55-64 Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Q2 2020
Q3 2020
Q4 2020
Quarters
Unemployment per age band4 15-24 15-24 25-34 25-34 35-44 35-44 45-54 45-54 55-64 55-64
Unemployment rate
60 50 40 30 20 10 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020
4 Source: QED
9
Q2 2020 Q3 2020 Q4 2020
ALEXANDER FORBES | MEMBER INSIGHTSTM
At least 6% of members are high risk, which indicates a high likelihood that these members will default or be unable to access credit, which results in financial stress. It is also likely that these members are least likely to save sufficiently to achieve a reasonable income in retirement. The increased financial stress also leads to increased stress, resulting in poorer health outcomes and reduced productivity at work. All these high-risk members are Early Millennials (see below).
Financial stress leads to poorer member outcomes as members are less likely to save enough and are more likely to cash in when changing jobs. The XDS Presage credit rating score5 indicates the credit risk associated with a member by taking into consideration the member’s credit history and loan repayment behaviour. The higher the score, the lower the risk of credit default. A score of 1 – 659 is high risk, 660 – 839 is medium risk and 840 – 1 000 is low risk.
6%
XDS Presage credit rating score by generation
76%
40% 35%
35% 30% 25%
XDS Presage credit rating score
23%
20% 13%
15% 10%
42%
6%
5% 0%
High risk
2%
7%
1%
Early Millennials
Medium risk
Another indication of financial stress is the proportion of loans in default (see below). Members with loans in default run the risk of legal action and debt review. On average, Early Millennials have just over 14% of their loans in default. This is substantially much higher than any of the other generations. The next highest are Late Millennials which is just under 5%. Currently, on average, there are 5% of members under formal debt review; this is almost double the South African population average6.
5%
Late Millennials
Generation X
5% 4% Baby Boomers
Low risk
Employers and trustees must provide appropriate support for members who are at higher risk. This is important to ensure better savings and improved long-term retirement income outcomes. It is also important to reduce workplace stress, and ultimately improve the healthcare of people and productivity at work.
Proportion of loans in default
Early Millennials:
Late Millennials:
Generation X:
Baby Boomers:
14.11%
4.79%
2.27%
0.94%
5 Source: XDS 6 Source: Eighty20
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ALEXANDER FORBES | MEMBER INSIGHTSTM
2.4 Gender gap Employers and retirement funds also need to ensure that they are taking sustainability considerations into account in how their retirement funds and the broader employee benefit offering is run. This is because sustainability issues affect the long-term prospects of businesses as well as the ultimate outcomes that retirement fund members will experience.
vigorous efforts, including legal frameworks, to counter deeply rooted gender-based discrimination that often results from patriarchal attitudes and related social norms (UN, 2019). As per the Quarter 4 2020 Labour Force Survey, there is almost an equal proportion of males and females in the South African labour force. The ratio of female members within the fund membership has increased substantially by 9% since 2012, from 39% to 48% in 2020.
The Sustainable Development Goals (SDGs)7 are a collection of 17 global goals designed to be a ‘blueprint for achieving a better and more sustainable future for all’. The SDGs were set up by the United Nations General Assembly and are intended to be achieved by the year 2030.
For 2020, the proportion of female members fell by 8% within the membership, whereas the reduction in male members was more significant at 11%. This change narrowed the gender gap for the membership, bringing it closer to an equal split.
The SDG’s Goal 5 seeks to achieve gender equality, and empower all women and girls. Achieving gender equality and the empowerment of women and girls will require more Proportion of total membership
2012
2018
39.31%
44.03%
55.97%
60.69%
2019
2020
46.04%
48.08%
51.92%
53.96%
Percentage change in membership by gender: -2% Female
-7%
Male Both
7 Source: SDGs.UN.ORG
11
December 2020
October 2020
August 2020
June 2020
April 2020
February 2020
December 2019
October 2019
August 2019
June 2019
April 2019
February 2019
December 2018
-12%
ALEXANDER FORBES | MEMBER INSIGHTSTM
2.4.1 Proportion of members by gender, per sector, education and occupation The table below shows the proportion of members by sector in 2019 and 2020, with the percentage change. The ratio of males and females by industry has not changed significantly, with the exception of the construction and energy sectors. The gender split per sector does vary quite a bit between sectors, with the personal services sector having the highest proportion
Sector
of female members at 64%. The construction sector showed the most significant decrease in female membership by 10%. However, this is now in line with the Quarter 4 2020 Labour Force Survey gender split of 86% males and 14% females in the construction sector8.
2019
2020
% Change
Construction
76%
24%
86%
14%
-10%
Energy
66%
34%
70%
30%
-5%
Fishing, forestry and agriculture
68%
32%
68%
32%
0%
Manufacturing
63%
37%
64%
36%
1%
Mining
81%
19%
79%
21%
2%
Personal services
36%
64%
36%
64%
0%
Professional and business services
47%
53%
48%
52%
-1%
Public services
58%
42%
58%
42%
0%
Retail, wholesale and hospitality
44%
56%
43%
57%
1%
Transport and telecommunication
66%
34%
64%
36%
2%
Unclassified
69%
31%
67%
33%
3%
8 Source: STATSSA
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ALEXANDER FORBES | MEMBER INSIGHTSTM
If one looks at the education levels of members, on average, female members are more highly qualified than their male counterparts.
Education levels of members
38%
Matriculated
35% 9%
Any other post-matric qualification (e.g Artisan college)
10% 28%
University
23% 9%
Post-graduate qualification
7%
However, as seen in the graph below, the gender gap continues within senior positions, with female members only at 7% while male members occupy 17% of the managerial roles. Levels of occupation by gender
41%
Entry level positions
53%
Entry level positions
52% Mid level
7% Senior
positions
positions
31% Mid level
17% Senior
positions
13
positions
ALEXANDER FORBES | MEMBER INSIGHTSTM
Life stages of membership by gender 45% 39%
40% 35% 30%
29%
25% 20%
19% 16% 13%
15%
15%
13%
12%
9%
10%
6%
4% 4%
5%
5%
4%
7%
6%
0% Mature singles
Mature couples
Mature family
Single parent family
Young couples
Young family
Young independent singles
At-home singles
Life stage definitions9
Singles
Couples
Families
At-home singles
Young couples
Young family
■ Up to 34 years old ■ Live with parents ■ Not married or not living with a significant other ■ Don’t have any dependent children in the household (own or other children) that the respondent is responsible for
Young independent singles ■ Up to 34 years old ■ Not living with parents ■ Not married or not living with a significant other ■ Don’t have any dependent children in the household (own or other children) that the respondent is responsible for
■ Up to 49 years old ■ Married or living with a significant other ■ No dependent children in the household
(own or other children) that the respondent is responsible for
Mature couples ■ 50+ years old ■ Married or living with a significant other ■ No dependent children in the household
■ Married or living with a significant other ■ With at least one dependent child under 13 years in the household (own or other children) that they are responsible for
Single parent family ■ Not married or living with a significant other ■ With dependent child in the household (own or other children) that they are responsible for
(own or other children) that the respondent is responsible for
Mature singles
Mature family
■ 35+ years old ■ Not living with parents ■ Not married or not living with a significant other ■ Don’t have any dependent children in the
■ Married or living with a significant other ■ With no dependent children under 13 years in
the household (own or other children) that they are responsible for, but with dependent children over the age of 13 years in the household
household (own or other children) that the respondent is responsible for
9 Source: Eighty20
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ALEXANDER FORBES | MEMBER INSIGHTSTM
If we look at the various life stages of males and females, 27% of women are more likely to be married, where almost half of those are newly married with a family. More interestingly, there is a significant proportion of female members who are likely to be single mothers (39%). In most cases, single parent families have a single source of income for the family and are more likely to experience higher rates of financial stress given their financial constraints. Numerous studies previously indicated that single mothers are likely to experience greater levels of financial stress than their married counterparts. While single mothers may be under more financial pressure, our results indicate that the decision-making and financial discipline of single mothers is generally better than other members.
Financial well-being is the ability of people to manage their finances without stress, to meet their financial commitments and needs comfortably, and with enough financial resilience to respond to short-term shocks, regardless of income levels. If we look at various indicators of financial stress, female members are, on average, at lower levels of credit risk than their male counterparts. The XDS Presage credit rating score considered an average risk for both males and females. With the females score being slightly higher, which implies a lower level of credit risk. On average, male members show less financial discipline, make decisions that reduce their financial well-being, have a higher proportion of loans in default and a higher debt to income ratio.
Female
Male
Total
XDS Presage credit rating score10
771
762
766
Proportion of loans in default
23%
27%
25%
Number of open loans
3.95
3.59
3.77
Overdue loans
48%
51%
49%
Debt to income ratio
74%
80%
77%
Unsecured credit
41%
49%
45%
Secured credit
51%
54%
52%
Financial credit indicators
If we look at debt to income across all members, on average almost 55% of female members have the ideal debt to income ratio (see below). They are spending between 20% and 40% of their monthly income on repaying debt, whereas male members are spending more than half of their income on debt.
It is therefore important to ensure that engagements and solutions are appropriately targeted and differentiated between males and females, given the differences highlighted in this section.
Ratio of monthly debt repayment to monthly income 60% 50% 40% 30% 20% 10% 0%
Total 0–20
20-40
40-60
60-80
80-100
10 Source: XDS
15
>100
ALEXANDER FORBES | MEMBER INSIGHTSTM
2.4.2 Gender, financial well-being, and the impact on contribution levels Single mothers are more likely to experience more financial constraints as they are supporting a family on a single income, which will impact their ability to save or to have higher levels of contribution. In the graph on the right, member contributions are negatively affected by the number of people in the member’s households—the more people in the household, the lower the member’s total contribution level. We can also see that female members (represented by the green dots) have a higher likelihood of having more people to support financially than male members (represented by the stone coloured dots).
Employers and trustees should look at financial stress indicators and not just retirement statistics in isolation. As employers and trustees should provide appropriate support for members who are at higher risk of financial stress, if financial decision-making can be improved, indebtedness will reduce, and ultimately savings will improve, and pension outcomes will improve.
3.75 3.50 3.25 3.00 2.75 2.50 2.25 2.00 0
Proportion of loans in default
5
10
15
20
25
30
35
40
45
50
Total contribution versus proportion of loans in default
0.6 0.5 0.4 0.3 0.2 0.1 0.0 0
5
10
15
20
25
30
35
40
45
50
Total contribution Total contribution versus microloan
0.6 0.5
Microloan
The proportion of loans in default is a clear indicator of members in financial distress. The graph in the centre shows a strong negative correlation between the proportion of loans in default and the member’s total contribution rate. The higher the level of proportions of loans in default, the higher the financial stress, so the lower the levels of member’s total contributions. Similarly, the level of microloans being used is another indicator of possible financial stress. In the graph on the right, we can see that the higher the usage of microloans, the lower the level of member total contributions.
Total contribution versus number of people in household
4.00
0.4 0.3 0.2 0.1 0.0 0
5
10
15
20
25
30
Total contribution
16
35
40
45
50
ALEXANDER FORBES | MEMBER INSIGHTSTM
2.5 Projected pensions 2.5.1 Projected replacement ratios The average projected replacement ratio is 40.51%. In 2012, the average replacement ratio was 41.6%. Only around 6% of the total membership can expect a replacement ratio above 75% of pensionable salary.
75%+. For many older members, low-projected replacement ratios are likely to result from insufficient contributions and not preserving when changing jobs. This again illustrates why it is important to have early interventions from the day a member joins a scheme, to ultimately ensure that the end retirement income is adequate.
Member Insights™ only considers money invested in the fund. The outcomes for members may be better if they have preserved their retirement savings over their life outside the fund. Low preservation rates, however, suggest that these savings are unlikely to be significant for most members.
A total of 65% of members aged between 20 and 30 are expected to have a replacement ratio below 60% of pensionable salary. Contribution rates towards retirement savings, average retirement age and pensionable salary set by funds or employers are not sufficient for members to achieve a replacement ratio of 75% or more at retirement. Where flexible contribution rates are offered, it may be that employees (particularly younger employees) choose lower contribution rates to increase their take-home pay.
The projection uses the actual fund credit and pensionable salary of members, and relies on a set of assumptions about future investment returns and inflation, as set out in section 11. 2.5.2 Projected replacement ratios by age The graph below displays the distribution of projected replacement ratios for fund members by age. Members aged 60 and above have the worst projected outcomes, and only 2.3% of those members have a projected replacement ratio of above
Distribution of member replacement ratio 100% 90% 80%
Proportion (%)
70% 60% 50% 40% 30% 20%
0%–30%
10% 0%
60%–75% 75%+ < 25
25–30
30–35
35–40
40–45
45–50
Age band
17
50–55
55–60
60–65
65+
ALEXANDER FORBES | MEMBER INSIGHTSTM
3. Contributions Covid-19 and the impact on contributions reinsurance benefits to ensure their employees were covered for any unforeseen events while on contribution holidays. Most employers who put relief measures in place reduced the level of retirement contributions, but continued to maintain death, disability and funeral premiums during the period, given the importance of these benefits and their need during the pandemic.
Employers with no reserves on hand to help cushion the impact of the pandemic on their businesses and employees had to resort to a range of measures to try and mitigate the effects of the pandemic. These measures included applying for the temporary employment relief scheme (TERS) benefits offered by the government, ceasing or reducing the payment of salaries, undergoing retrenchment exercises, and in some unfortunate cases, closure of their businesses.
Smaller businesses, and businesses in specific industries, were more significantly impacted by the pandemic than others.
Alexander Forbes assisted employers in applying for pension fund contribution holidays to alleviate the financial burden on employers. It was better to ensure that the employers survived as a going concern and could ensure job security for their employees. Where possible, Alexander Forbes encouraged employers to continue paying for employee
The table below reflects the percentage of employers or participants that applied for financial relief or contribution holidays. Most of these employers have subsequently resumed normal contributions. These statistics do not indicate where employers used other measures to mitigate the impact of Covid-19.
Umbrella
Standalone
Covid-19 relief, but returned to normal
19.6%
11.3%
Still in Covid-19 relief
2.4%
3.0%
The relief provided during the year was important to ensure that, as far as possible, jobs could be retained. It highlights the importance of ensuring that benefits are designed to be dynamic, given the current market conditions and other factors. Retirement funds should be managed by taking into account the economy, industry dynamics and the employer’s full benefits programme – and these aspects all need to be integrated.
18
ALEXANDER FORBES | MEMBER INSIGHTSTM
3.1 Total contributions as a percentage of salaries Auto-escalation of contributions over time could be a way to increase contribution rates without affecting employees’ take-home pay. A slight 0.25% increase each year since 2012 at salary increase time would have led to a 2% salary contribution rate increase by 2020, leading to an almost 10% improvement in expected retirement benefits for younger members. This has been implemented successfully in a number of funds, the result being a consistent increase in contributions over time, which ultimately leads to improved retirement outcomes.
The graph below shows the average total contribution (as a percentage of salaries) in 2012, 2018, 2019 and 2020. The total average contributions paid into the fund from members and employers increased from 13.51% in 2012, to 14.10 % in 2020. Importantly, these are the contributions at the end of each year, and for 2020 it was after the period during which employers needed short-term relief. This increase over the last nine years may be because of members being more aware of the importance of retirement savings, as well as efforts by retirement funds to increase awareness on the importance of saving and putting various default arrangements in place to encourage greater savings.
While the net contribution has increased over the period, we expect a significant drop in 2021 following the impact the Covid-19 pandemic has had on death, disability and funeral premium rates.
Since March 2016, up to 27.5% of the member’s income could have been contributed to pension, provident and retirement annuity funds (capped at R350 000 a year) with before-tax money, which supports placing additional money into the fund.
Overall, net contribution rates are still insufficient, in general, to achieve an ideal replacement ratio of 75% after 35 years of saving. Hence further effort is required to improve the overall savings rate to levels that would achieve the ideal replacement rate.
Contribution rate
Net contribution after risk and administration expense deductions
14.4%
14.2%
14.1%
14.2%
14.1%
12.8%
14.0%
12.6%
13.8%
12.4% 13.5%
13.6%
12.2%
13.4%
12.0%
13.2%
11.8%
13.0%
2012
2018
2019
12.9%
13.0%
11.6%
2020
12.3%
12.2%
12.1%
2012
2018
2019
2020
3.2 Member and employer contributions The graph below reveals the trends in average member and employer contributions in 2012, 2018, 2019 and 2020. The relative contributions between members and employers are similar to the previous analysis. Members now contribute 0.2% of their salary more than they did in the 2012 analysis, which may be because members are becoming more educated about the importance of retirement savings. Member and employer contributions 9.5%
10%
Percentage of member versus employer contributions 9.1%
9.2%
9.0%
9% 8%
64.8%
64.5%
63.5%
50% 5.0%
5.0%
5.0%
5.2%
40%
4%
30%
3% 2%
20%
34.6%
35.2%
35.5%
36.5%
10%
1% 0%
65.4%
60%
7% 6% 5%
70%
2012
2018
Member contribution rate
2019
2020
0%
Employer contribution rate
2012
2018
Member contribution rate
19
2019
2020
Employer contribution rate
ALEXANDER FORBES | MEMBER INSIGHTSTM
3.3 Allocation of contributions by sector in the energy sector has reduced significantly to 9.32% due to members electing lower contribution rates compared to 2019.
The total average contribution has increased in the last year. In the previous analysis, professional business services had the lowest total average contribution of 11.22%, which increased to 12.00%. The public services sector had the highest total average contribution of 23.00% in 2019 and 22.59% in 2020. The average
The total average contributions, as a percentage of salary, for each sector in 2015, 2018, 2019 and 2020 were:
Total average contribution
Total average contribution
Total average contribution
Total average contribution
Construction
13.69%
14.53%
14.68%
15.88%
Energy
13.85%
13.49%
14.12%
9.32%
Fishing, forestry and agriculture
16.50%
15.91%
15.19%
15.89%
Manufacturing
14.19%
14.59%
14.54%
14.75%
Mining
15.35%
15.03%
14.75%
15.21%
Personal services
13.94%
13.75%
14.01%
13.78%
Professional and business services
11.19%
11.49%
11.22%
12.00%
Public services
21.73%
23.03%
23.00%
22.59%
Retail, wholesale and hospitality
14.69%
14.47%
14.20%
13.93%
Transport and telecommunication
14.52%
14.46%
14.74%
14.46%
–
14.67%
15.01%
15.57%
Sector
Unclassified
2015
2018
2019
2020
3.4 Contributions – standalone and umbrella funds The table below reflects the average contribution in standalone and umbrella funds in 2019 and 2020. The average employer and member contributions are higher in standalone funds than in umbrella funds.
2019
2020
Average employer contribution rate
Average member contribution rate
Average employer contribution rate
Average member contribution rate
Standalone
9.22%
5.48%
9.04%
5.80%
Umbrella
9.03%
4.47%
9.00%
4.26%
Standalone average contributions versus umbrella funds contributions:
20
ALEXANDER FORBES | MEMBER INSIGHTSTM
3.5 Expected replacement ratio depending on the contribution rate Members who join at older ages and who have not preserved their retirement savings from previous funds can expect replacement ratios well below the 75% level. These members will have to increase their contributions towards retirement benefits, or continue to work and contribute after the normal retirement age (if allowed), to achieve higher replacement ratios.
The expected replacement ratio at retirement is shown below for a new member joining the fund at various ages, based on a contribution rate towards retirement savings of 9%, 11%, 13%, 15% and 17%. This projection relies on the assumptions set out in section 11. Many funds and employers target a replacement ratio of 75%. The graph shows that a new member aged 20, contributing 17% of their pensionable salary towards retirement savings and planning to retire at the age of 60, will not be able to reach this target. The member will have a projected replacement ratio of 65%.
The average contribution rates towards retirement savings seen in this Member Insights™ analysis is not sufficient for members to receive a replacement ratio of 75%. Older fund members who have not preserved their funds when changing jobs in the past will need to contribute more than 17% to achieve a replacement ratio of 75%.
The second graph shows that a new member aged 20, contributing 17% of pensionable salary towards retirement savings and planning to retire at the age of 65, is on track to reach a replacement ratio of around 90%.
Overall, net contribution rates in the industry are still insufficient, in general, to achieve an ideal replacement ratio of 75% after 35-40 years of saving (which is a typical period over which people are likely to be in the workplace). Hence further effort is required to improve the overall savings rate to levels that would achieve the ideal replacement rate.
A new member aged 25 who plans to retire at age 65 (remaining with the same employer during that time or preserving their retirement savings in full when changing jobs) will need to contribute 17% of pensionable salary towards retirement savings to achieve a replacement ratio of 75%.
Expected replacement ratio at retirement age 60 for different contribution rates 80% 70% 60% 50%
Contribution 9%
40%
Contribution 11%
30%
Contribution 13%
20%
Contribution 15%
10% 0%
Contribution 17% 20
25
30
35
40
45
50
55
Entry age
Expected replacement ratio at retirement age 65 for different contribution rates 100% 90% 80% 70% 60%
Contribution 9%
50% 40%
Contribution 11%
30%
Contribution 13%
20%
Contribution 15%
10% 0%
Contribution 17% 20
25
30
35
40 Entry age
21
45
50
55
ALEXANDER FORBES | MEMBER INSIGHTSTM
4. Expenses deducted for risk benefits and administration costs 4.1 Average expenses The net contribution allocated to retirement savings is more important than the gross contribution. The net contribution is affected by the deductions for insured death benefits, disability benefits, administration fees and other expenses. This table lists the average expenses as a percentage of salary for 2015, 2019 and 2020.
waves have resulted in increased mortality. We have also seen increased mortality as a result of people not receiving treatment because of the fear of contracting Covid-19 at a hospital. Also, the economic environment has resulted in increased disability premiums which has been exacerbated by the impact of lockdowns. Overall, we therefore anticipate significant increases to the death and disability premiums.
Although the Covid-19 pandemic had not yet impacted 2020 death and disability premium rates, we have since then seen significant increases as the effects of the second and third
2015
2019
2020
Administration and other expenses
1.0%
1.0%
1.2%
Disability benefit
0.9%
1.0%
1.0%
Death benefit
1.5%
1.3%
1.3%
4.2 Expenses by fund size The graph below shows the average expenses for small (0–500 members), medium (500–2 000 members) and large funds (2 000 and more members). Expenses for different fund sizes 1.6%
1.4%
1.4%
1.4% 1.2%
1.3%
1.2%
1.1%
1.0%
1.0% 0.9%
1.0%
0.9%
0.8% 0.6% Administration fee
0.4%
Death fee
0.2% 0.0%
Disability fee Small
Medium
Large
Note: Investment fees are excluded from the analysis.
22
ALEXANDER FORBES | MEMBER INSIGHTSTM
4.3 Expenses by sector This table summarises the expenses in each sector as a percentage of pensionable salary for 2019 and 2020.
Administration and other expenses
Insured death benefit
Insured disability benefit
Construction
1.1%
2.1%
0.9%
Energy
1.1%
1.4%
1.0%
Fishing, forestry and agriculture
1.5%
1.9%
0.8%
Manufacturing
1.1%
1.2%
1.0%
Mining
1.0%
1.3%
1.1%
Personal services
0.8%
1.3%
1.1%
Professional and business services
0.8%
1.0%
0.7%
Public services
1.5%
1.5%
1.1%
Retail, wholesale and hospitality
0.8%
1.2%
0.9%
Transport and telecommunication
1.0%
1.2%
0.9%
Unclassified
1.3%
1.2%
0.8%
Administration and other expenses
Insured death benefit
Insured disability benefit
Construction
1.0%
1.3%
0.6%
Energy
1.4%
1.5%
1.2%
Fishing, forestry and agriculture
1.5%
1.7%
0.9%
Manufacturing
1.3%
1.5%
1.1%
Mining
1.4%
1.7%
1.7%
Personal services
1.0%
1.3%
1.4%
Professional and business services
1.0%
1.1%
0.9%
Public services
1.7%
1.5%
0.9%
Retail, wholesale and hospitality
0.9%
1.0%
0.7%
Transport and telecommunication
1.3%
1.4%
1.2%
Unclassified
1.7%
1.3%
0.8%
Sectors | 2019
Sectors | 2020
23
ALEXANDER FORBES | MEMBER INSIGHTSTM
4.4 Risk benefits offered 4.4.1 Death benefits This graph shows the average death benefit insured through the fund as a multiple of salary. Most members are not entitled to receive any insured death benefit, and it may be that employer-owned policies outside the fund cover these members.
These results only include in-fund death benefits. Many employers may provide death benefits in separate standalone group schemes. A majority of the fund’s members are not entitled to receive any insured death benefit at all, other than their fund credit. Individuals can also take out life cover in their personal capacity. Such benefits are not included in this analysis.
Most fund members with an insured death benefit are insured for approximately two times their annual salary. The average insured lump-sum death benefit (where the fund provides such benefits) was 2.06 times salary, which is a slight increase from the 2019 analysis where it was 1.94 times salary. Proportion of members 50% 45%
46.6%
40% 35% 30% 25%
19.5%
20%
17.3%
15% 10%
9.4%
5.8%
5%
1.5%
0% 0.1
1.2
2.3
3.4
4.4.2 Average insured death benefit offered in each sector The insured death benefit as a multiple of salary varies between the different sectors.
4.5
5+
Given that individual member needs are different, and the general under-insurance, group risk schemes are an important area for employers and trustees to review. However, the Covid-19 pandemic is expected to result in significant increases in the costs of death benefits, at least over the short to medium term. This is therefore likely to result in less ability to improve benefits to reduce the levels of under-insurance.
We continue to see that, in general, there is still a tendency for benefits to be provided as fixed multiples of salary across all members as well as a significant level of under-insurance relative to the ideal level of cover (which would suggest higher multiples than what is currently in place). Average of death benefit as a multiple of salary Construction sector
1.9 0.5
Energy sector
1.3
Fishing, forestry and agriculture sector
2.5
Manufacturing sector 2.2
Mining sector 1.8
Personal services sector Professional and business services sector
0.8 2.4
Public services sector
3.3
Retail, wholesale and hospitality sector 2.1
Transport and telecommunication sector 1.7
Unclassified 0.0
0.5
1.0
1.5
2.0
Multiple of salary 24
2.5
3.0
3.5
ALEXANDER FORBES | MEMBER INSIGHTSTM
5. I nvestment returns and the portfolios that the member is invested in 5.1 Members not invested in the default investment model The proportion of members who were not invested in the default portfolio in the past eight years is shown in this graph below.
Many funds allow members to opt-out of the default investment model and choose their own investment portfolios from a range offered by the fund.
We have therefore seen a reduction in the proportion of members making their own investment choices. This is a reflection of default portfolios having been put in place following regulations by National Treasury.
The overall number of members who are not invested in the fund’s default has ranged from 24.44% in 2012, to 9.67% in 2020.
Proportion of members not in the fund's default portfolios 30%
Proportion (%)
25%
24.4% 22.2% 19.4%
20%
18.2% 15.9%
14.5%
15%
10.9%
10.1%
10%
9.7%
5% 0% 2012
2013
2014
2015
2016
2017
2018
2019
2020
Year
5.2 Switching In any particular year, very few members make active investment choices. Less than one per cent of the fund members surveyed made switches during the year ended 31 December 2020. From 1 January 2020 to 31 December 2020, 3 792 members made over 8 100 switch transactions. This is a slight increase from the number of switches in 2019. A total of 41.82% of members who switched portfolios made one switch, while 31.01% of members who switched portfolios made two switches— the number of members that made more than two switches doubled between 2019 and 2020.
Number of members
Proportion
1
1 586
41.8%
2
1 176
31.0%
3
393
10.4%
4
347
9.2%
5
96
2.5%
6+
194
5.1%
Number of switches
25
3 792
100%
ALEXANDER FORBES | MEMBER INSIGHTSTM
5.3 Distribution of all investments Overall, 54.58% of the members are invested in a high-risk portfolio and 28.7% are invested in a medium- to high-risk portfolio.
The compounding effect of a few percentage points return over a 40-year lifetime can result in as much as a 50% higher benefit at retirement.
This graph illustrates the distribution of investment risk by age, according to the risk ranking of a member’s investment portfolio.
Almost 87% of members between the age of 20 and 30 are invested in medium- to high-risk portfolios, which is sensible since they are 30 or more years away from retirement.
In 2020, most members under the age of 55 remained aggressively invested, but more than 10% chose a portfolio with no equity exposure. About 40% of members chose portfolios with less than 50% exposure to equities. Members with a long-term investment horizon need to invest in sufficient equities since these are expected to outperform bonds and cash over the long term, and are critical to a member’s retirement benefit.
Almost 30% of members above the age of 60 are invested in medium- to high-risk portfolios. This shows the preference members (especially those with higher fund credits) have for investing in living annuities when they retire and typically staying invested in a higher risk portfolio for longer.
Investment distribution across different age groups 100% 90% 80% 70% 60% 50% 40%
No risk / cash fund
30%
Low risk Low / medium risk
20%
Medium risk
10% 0%
Medium / high risk High risk 17–25
25–30
30–35
35–40
40–45
45–50
50–55
Age band
26
55–60
60–65
65+
ALEXANDER FORBES | MEMBER INSIGHTSTM
5.4 When members exercise their investment choice Investment portfolios are shown below by age when members exercise investment choice.
those with higher fund credits, which typically would result in a higher-risk portfolio for longer.
More members aged 55 and above are invested in high-risk assets than members aged 30 to 50. This could be a function of the preference for living annuities at retirement, especially by
We would also expect to see a decline in riskiness for members exercising their own choice with age, but that is not the case. The trend has remained constant between 2019 and 2020.
Investment portfolio distribution for member’s exercising their own choice 100% 90% 80% 70% 60% 50% 40%
No risk / cash fund
30%
Low risk Low / medium risk
20%
Medium risk
10% 0%
Medium / high risk High risk 17–25
25–30
30–35
35–40
40–45
45–50
50–55
55–60
60–65
65+
Age band
6. How the member’s salary has progressed Benefit and projection statements are based on pensionable salary, so it’s important when doing retirement planning to look at the member’s total salary to avoid any unexpected gaps.
Contributions are based on salary. They increase when the member’s salary increases, but it’s important to consider investment returns as well. These need to keep pace with salary growth to maintain the same replacement ratio; otherwise, past savings may not be sufficient to finance the increased pension income target based on the new living standard.
Salary growth includes a cost-of-living inflationary increase given by employers to their employees, which is closely linked to consumer price inflation (CPI).
Pensionable salary determines contributions to the fund and therefore retirement savings, as well as the risk benefits insured. Pensionable salary is usually a percentage of the member’s total income, decided by the employer’s practice or contract.
27
ALEXANDER FORBES | MEMBER INSIGHTSTM
6.1 Inflation rate This graph reflects the inflation rate in South Africa for the past 13 years. The figures below, from Statistics South Africa, were used as the inflation component of salary increases for the past 13 years. Inflation rate for the past 13 years 12%
11.0%
Return (p.a.)
10% 7.1%
8% 6%
4.3%
5.0%
5.6%
6.3%
6.1%
5.8%
4.6%
5.3%
4.6%
4.4%
4%
3.3%
2% 0%
2008
2009
2010
2011
2012
2014
2013
2015
2016
2017
2018
2019
2020
6.2 Salary increases Merit increases are typically given to people on promotions, or as higher than average salary increases with no promotion. We can calculate merit increases by considering the higher increase given to employees who are getting promoted and spreading this figure over the average duration or gap between the promotions.
Age band
The table below lists merit increases in pensionable salary above inflation across different age groups for eight years. Pensionable salary is a percentage of total income as defined in employment contracts and can vary greatly between employers. From age 55 onwards, the general trend decreases.
Real increase
Real increase
Real increase
Real increase
Real increase
Real increase
Real increase
Real increase
2011
2014
2015
2016
2017
2018
2019
2020
20–25
9.4
12.4
10.8
8.6
9.1
11.2
9.8
8.6
25–30
7.2
8.1
8.7
7.3
7.7
3.9
8.7
7.3
30–35
6.1
5.6
6.3
5.1
5.7
8.4
7.3
6.1
35–40
5.4
4.4
4.8
3.9
4.5
3.2
6.3
5.4
40–45
4.8
3.6
3.9
2.9
3.7
6.0
5.8
4.9
45–50
3.8
3.1
3.2
2.3
3.2
2.9
5.3
4.5
50–55
3.2
2.6
2.9
2.1
2.8
4.6
5.0
4.3
55–60
3.4
2.4
2.4
1.5
2.4
2.5
4.7
4.0
60–65
2.4
1.9
1.9
1.2
2.0
2.1
4.3
3.6
28
ALEXANDER FORBES | MEMBER INSIGHTSTM
6.3 Salary distribution Salary distribution by gender In 2010, more than 85% of females earned less than R240 000. The portion of males in the same category was 29% less than females. Total membership with a pensionable salary greater than R960 000 was less than 2%. There were five times as many males in this salary band than females.
embrace diversity, and equality in the workplace. The portion of women in the R960 000 and more salary band is seven times more than what it was in 2010. According to the King IV Report on Corporate Governance for South Africa, a company’s board of directors needs to be as diverse as possible. This gender diversity allows for a substantial change in the boardroom dynamics, with an optimal mix of skills, experience and expertise bringing a range of different insights and methods to achieve the businesses’ objectives effectively. However, the 2021 PwC report on remuneration trends shows that only 13% of South Africa’s executive directors are women, including chief executive officers and chief financial officers. In absolute numbers this equates to just 81 women.
In contrast, in 2020, the proportion of females earning less than R240 000 had decreased by 20% in the last eight years. The ratio of males and females earning less than R240 000 is almost the same. There is a significant increase in both males and females who earn more than R240 000. Approximately 8% of the members earned more than R960 000, which is three times more than eight years ago. There are more than twice as many males in this salary band than females.
According to the latest World Economic Forum’s Global Gender Gap Report, South Africa has improved their ranking by two positions to become the seventeenth most equal paying country out of the 149 countries included in the survey.
As mentioned above, the portion of women in higher-earning positions has increased over the period. This increase may result from females furthering their education, changes in the types of work given the advancement of technology, cost-of-living changes generally making it necessary for as many family members as possible to work, changes in the environment to encourage and
Salary distribution 35% 30% 25% 20% 15% 10% 5% 0%
R0– R24 000
R24 000– R60 000
R60 000– R120 000
R120 000– R240 000
R240 000– R480 000
R480 000– R960 000
R960 000+
2020 Female
10.2%
13.7%
17.2%
24.3%
22.0%
10.1%
2.4%
2020 Male
13.1%
12.6%
16.7%
22.3%
18.5%
12.2%
4.7%
2010 Female
3.4%
24.2%
28.5%
29.1%
12.2%
2.4%
0.3%
2010 Male
3.1%
28.2%
24.6%
21.8%
15.7%
5.4%
1.3%
Salary per annum
29
ALEXANDER FORBES | MEMBER INSIGHTSTM
Gender wage gap – female mean earnings relative to a male’s R1 earned Construction sector
R0.94 R0.90
Energy sector R0.81
Fishing, forestry and agriculture sector
R0.89
Manufacturing sector
R1.07
Mining sector R0.92
Personal services sector R0.77
Professional and business services sector
R0.95
Public services sector R0.81
Retail, wholesale and hospitality sector
R0.95
Transport and telecommunications sector
R1.05
Unclassified R0
R0.20
R0.40
R0.60
R0.80
R1.00
On average females earn R0.83 relative to every R1.00 earned by a male
This gender wage gap disappears when we look at the Bottom 10% of the lowest salaries. For every R1, a male member earns a female member also earns R1.
The gender wage gap calculation relates to the ratio of the average monthly salaries for females members to those of their male member counterparts, and it translates to a gender wage gap of 17 cents overall. So on average, for every R1 a male member earns, a female member earns 83c. If we look at the top 10% of the highest salaries, the gender wage gap is 7c, so for every R1, a male member earns the female member earns 93c.
If we look by sector, for the Professional and business services for every R1 a male member earns, a female member only earns 77c. However, in the mining sector, the average earnings of a female member are higher than every R1 a male member earns.
30
ALEXANDER FORBES | MEMBER INSIGHTSTM
7. How much is lost to non-preservation along the member’s savings journey Low preservation rates are one of the biggest reasons for replacement ratios being lower than the ideal target. To solve the problem of low preservation rates, regulations require default preservation rules that will automatically allow the retirement savings to be made paid up in the fund when a member leaves their employer and doesn’t make a payment election.
7.1 Exit rates 7.1.1 All exits In the year to 31 December 2020, approximately 162 000 members left the funds surveyed. Of these, 108 820 were resignations, retrenchments, or dismissals, 8081 were retirements and 2 649 were deaths. The remaining exits were transfers to their new employers’ funds. The average exit rates (including death and retirement) observed over the year ending 31 December 2020 are summarised as follows: Number of exits by exit types for the year 2020
Number of members
25 000 20 000 15 000 Resignation or dismissals
10 000
Retrenchments 5 000 0
Retirements Death 17–25
25–30
30–35
35–40
40–45
45–50
50–55
55–60
60–65
65+
Age band
7.1.2 Resignations or dismissals by age The average exit rates for the year ended 31 December 2020 are shown in the graph below. Exit rates have decreased in the number of resignations since 2018. The rate of exits also declines as members get older. Most exits are amongst members aged 20 to 30 years. There were similar findings in the previous analysis and general industry research. The impact of the pandemic can be seen in the increased number of retrenchments across all age groups. There was a noteworthy
increase in exits for members aged 65 and above, which could be due to employers opting to let older employees go to mitigate possible retrenchments. Even after age 55, approximately 4.1% of members resigned instead of retiring, which may have a significant tax implication for them. This may be because of pension fund members choosing to resign rather than retire in order to take their full benefit in cash.
Exits rates at different age groups
Exit rates
25% 20% 15% 10%
2020 Exit rate
5%
2019 Exit rate
0% 17–25
25–30
30–35
35–40
40–45
45–50
Age group
31
50–55
55–60
60–65
65+
ALEXANDER FORBES | MEMBER INSIGHTSTM
7.2 Preservation rates This section analyses the proportion of members who preserved their withdrawal benefits (excluding transfers) rather than taking the benefits in cash.
Preservation rates exclude members paid in terms of a section 14 transfer, since these members did not have the option to take their benefit in cash.
Preservation rates are calculated for those members who resigned, were retrenched or dismissed by their employer. Preservation rates are calculated on benefits paid.
The number of members preserving has decreased from 11.5% in 2012 to 9.6% in 2020. The proportion of assets preserved has also decreased from 50.6% in 2012 to 48.3% in 2020.
This means that members who left before 1 January 2021, but received their benefit afterwards, were not included in the calculation of the preservation rate.
Preservation rate (number of members)
11.5%
8.7%
2012
2018
8.8%
9.6%
2019
2020
Preservation rate (assets under management)
50.6% 2012
48.8% 2018
48.4%
48.3%
2019
2020
7.2.1 Preservation by age The graphs on this page and the next show the preservation rate of different age groups by the number of members and by the proportion of assets preserved.
This could be due to the effects of the pandemic, which is an average of 0.4% when compared to the previous analysis. Preservation rates for members who are 65 and above have increased by 1.8%.
The number of members preserving has increased for all age groups above 30. However, the amounts being preserved have reduced for all ages between 25 and 60.
Low preservation rates are one of the main reasons for replacement ratios being lower than the target replacement ratio, between 75% and 100% of pensionable salary.
Preservation rate by number of members 30% 25% 20% 15% 10% 5% 0%
2020 Preservation rates 2019 Preservation rates 18–25
25–30
30–35
35–40
40–45
45–50
50–55
Age band 32
55–60
60–65
65+
ALEXANDER FORBES | MEMBER INSIGHTSTM
Preservation rate by asset size 80% 70% 60% 50% 40% 30% 20% 2020 Exit rate
10% 0%
2019 Exit rate 18–25
25–30
30–35
35–40
40–45
45–50
50–55
55–60
60–65
65+
Age band
7.2.2 Preservation by asset size One of the most common reasons given by members for not preserving their benefits is that their fund credit is too low to warrant the trouble and expense of a preservation fund. A total of 58.2% of those who chose not to preserve any of their benefits had a benefit of between R0 and R25 000. The reality is that the amounts contributed in the early years of accumulation add the most to an individual’s benefit at retirement, given the impact of compound interest.
Proportion of members taking cash withdrawals at different benefit categories
58.2%
R250 000 – R660 000
R0–R250 000
However, the other 39.9% of non-preserving members had already accumulated a significant benefit but chose not to preserve. People should be made aware of the longer-term impact of not preserving, even relatively modest amounts, during the younger ages because of the power of compounding.
Benefit category
39.9%
1.1%
0.7%
R660 000 – R990 000
Tax rate
R0 – R25 000
0%
R25 000 – R660 000
18% of taxable income above R25 000
R660 000 – R990 000
R114 300+ 27% of taxable income above R660 000
R990 000+
R203 400+ 36% of taxable income above R990 000
7.2.3 Tax paid on benefit payments This table summarises the amount of tax payable when members withdraw their retirement savings before retirement.
33
R990 000 +
ALEXANDER FORBES | MEMBER INSIGHTSTM
7.2.4 Preservation by sector The energy sector had the highest preservation rate in 2020 with 25.12% of members preserving. The retail, wholesale and hospitality sector, which was amongst the hardest hit by Covid-19, had the lowest preservation rate with only 4.59% of members preserving. The energy sector had the highest proportion of fund members who had access to financial advice.
Sectors
Preservation rate
Construction
13.15%
Energy
25.12%
Fishing, forestry and agriculture
7.33%
Manufacturing
13.41%
Mining
8.47%
Personal services
9.51%
Professional and business services
13.37%
Public services
18.12%
Retail, wholesale and hospitality
4.59%
Transport and telecommunication
6.49%
34
ALEXANDER FORBES | MEMBER INSIGHTSTM
7.3 Two-bucket system impact Overall, the potential introduction of the ‘two-bucket’ system by National Treasury is expected to be positive in terms of addressing the lack of preservation, particularly among younger members. In this system, people will have some access to their savings for short-term relief, but a set minimum will need to be preserved at all times. Accumulated value of R100 at 15% per annum, in today's money terms 2 000
Accumulated value in rands
1 800 1 600 1 400 1 200 1 000 Two-bucket system expected
800 600
Current system
400
Full preservation
200 0 1
5
10
15
20
25
30
35
40
Two-bucket system (minimum)
Years
At the same time, it is important for employers and funds to continue with interventions aimed at improving preservation, including:
Default in-fund preservation arrangements which allow members to leave their retirement savings in the fund when the member: ■ leaves the employer ■ does not elect how the benefit should be paid
1
■ before their benefits are taken in cash or transferred ■ at least three months before a members’ normal retirement date
2 Ensuring programmes are in place to address the underlying issues that people face like reducing debt, managing monthly and unforeseen expenses, and increasing their savings rate. Financial wellness programmes are therefore critical given their knock-on effect on savings behaviour and long-term retirement outcomes. This should include a review of the financial stress levels of employees and members, the related behaviours and their impact on both the employer as well as the overall savings rates.
Improved administration and digital engagements aimed at improving member decision-making.
3
35
Retirement benefit counselling, which must be made available to members:
4
ALEXANDER FORBES | MEMBER INSIGHTSTM
8. How much of the retirement savings is used to generate an income 8.1 Retirement age The average age of retirees in the 2020 Member Insights™ was 61.86 years. However, the average normal retirement age of the members was 63.81, which is an increase from 60.09 in 2012 – reflecting the fact that a number of employers have increased their normal retirement ages over time. The actual retirement age has increased by 1.77 years since 2012, which may be because most members reaching age 60 are not yet ready to retire as a result of their insufficient retirement savings – it is also likely a result of employers increasing the retirement age rules.
A global comparison of retirement ages and youth unemployment rates12 shows that there is no relationship between the two.
On average, members are retiring around two years earlier than their normal retirement age. Evidence suggests that people who work until later are least likely to die early11. People who retire earlier often report that they are in poorer health and view their job loss in a similar way to people who have been retrenched. However, continuing to work after retirement age can severely damage the health of those in physically demanding jobs. For this reason, it’s important to note that certain jobs do not lend themselves to late retirement.
Extra time in employment could potentially be the saving grace, not only for the employee who now has extra time to save from income while in employment, but the entire family unit that relies on the ongoing monthly income and may potentially be dependent on the income in retirement.
When the employer is considering the retirement age, different retirement ages could be considered for different groups of workers. Other elements of the benefits package would also need to be changed to make sure that each group receives an appropriate package.
8.2 Retirement age in each sector Actual and normal retirement ages are shown below across the sectors.
Higher actual retirement ages coupled with increasing life expectancies, due to advances in medicine, and the increasing cost of retirement provide a strong motivation for employers to consider increasing their normal retirement age. When considering whether to increase normal retirement ages, the following points become important:
Almost 62% of the members work in sectors where jobs are physically demanding. Since December 2012 the actual retirement age has always been lower than the normal retirement age in these sectors. Across all industries, members are retiring far earlier than their fund’s stipulated normal retirement age. The greatest difference is in the fishing, forestry and agriculture sector, where the average normal retirement age is 64.39 but members tend to retire at the age of 61.41, three years earlier on average.
Depending on the industry, particularly where people skills are required, people can add value well beyond age 60, 65 and even beyond age 70. Extending the retirement age retains the knowledge and experience in the business. Actual versus normal retirement age in each sector 2020 Construction
63.35
61.18
Energy Fishing, forestry and agriculture Economic sector
64.39
61.41
64.32
61.86
Manufacturing
63.99
62.19
Mining
63.39
61.83
Personal services
64.44
62.42
Professional and business services
63.54
61.90
Public services
63.90
61.35
Retail, wholesale and hospitality
62.87
61.05
Transport and telecommunication
63.31
61.79 58
59
60
61
Age
62
Average actual retirement age Normal retirement age
63
64
65
11 and 12 Bellaby, P. 2006. Can they carry on working? Later retirement, health and social inequality in an aging population. International Journal of Health Sciences, Volume 36, Issue 1, pp. 1–23.
36
ALEXANDER FORBES | MEMBER INSIGHTSTM
8.3 Replacement ratio and pensionable service Members with long service (30 years or more) can expect higher benefits at retirement. A total of 53% of members with 35 years’ service or more achieved a replacement ratio of 60% or more. However, a number of retirees with long service achieved low replacement ratios, which means that the fund design may not be appropriate or that those people did not preserve when they changed jobs in the past. Length of pensionable service versus actual replacement ratio category in 2020 100% 90% 80%
Proportion of members
70% 60% 50% 40%
Replacement ratio 0–20%
30%
20%–40%
20%
40%–60%
10% 0%
60%–80% 80%–100% 0–5
5–10
10-15 15–20 20–25 25–30 Number of years of pensionable service
37
30–35
35+
ALEXANDER FORBES | MEMBER INSIGHTSTM
8.4 Actual replacement ratios
The low replacement ratio outcomes may be because of:
The 2020 Member Insights™ analysis shows that the average replacement ratio at retirement is 31.47%, assuming the member bought a with-profit annuity at retirement. This is a slight decrease in the average replacement ratio seen in the 2012 analysis of 31.70% and an improvement from the 2019 analysis of 28.81%. Although this analysis excludes retirement savings outside the retirement fund, the low level of preservation means that it is unlikely that many members have significant other investments for their retirement.
■ low contribution rates ■ lack of preservation
Actual replacement ratio achieved at retirement in 2020 6.02%
5.82%
12.33%
This graph reflects the estimated retirement benefits (the replacement ratio) received by members who retired in the past two and half years.
Replacement ratio 0–20%
24.58%
20%–40%
Approximately 51.26% of retirees in the analysis achieved a replacement ratio less than 20%. This is higher than the findings of the 2019 analysis where 49.74% of retirees achieved a replacement ratio less than 20%. There is a significant increase of 1.98% of retirees achieving a replacement ratio above 80% as compared to the 2019 analysis.
40%–60% 60%–80% 51.26%
80%+
8.5 Retirement benefits by sector The following graphs show the estimated replacement ratio received by members in each industry at retirement. Replacement ratio achieved in each sector 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Construction sector
Energy sector
Fishing, forestry and agriculture sector
Manufacturing sector
Mining sector
80%
1.9%
18.9%
2.1%
4.9%
4.8%
60–80%
1.9%
12.2%
5.2%
6.7%
3.5%
40–60%
6.2%
20.4%
11.9%
14.9%
9.0%
20–40%
20.5%
22.9%
25.3%
25.6%
24.9%
0–20%
69.4%
25.6%
55.7%
48.0%
57.8%
38
ALEXANDER FORBES | MEMBER INSIGHTSTM
8.5 Retirement benefits by sector (continued) The following graphs show the estimated replacement ratio received by members in each industry at retirement. Replacement ratio achieved in each sector 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Personal services
Professional and business sector
Public services sector
80%
3.9%
7.1%
7.9%
4.0%
5.3%
60–80%
5.5%
6.3%
6.1%
6.5%
4.7%
40–60%
11.8%
9.8%
12.2%
10.9%
13.7%
20–40%
26.5%
22.0%
16.9%
25.8%
29.7%
0–20%
52.3%
54.9%
56.9%
52.8%
46.6%
Most members retire with a replacement ratio of less than 20%. This is the highest in the construction sector (69.4% of members) and lowest in the energy sector (25.6 % of members). This may be as a result of low contribution rates. In the construction sector, the contributions are the lowest. In the public services sector, the contributions are the highest. On average, 80% of members from the construction sector do not preserve their retirement savings when they change jobs.
Retail, wholesale and Transport and hospitality sector telecommunications sector
The replacement ratio breakdown of retirees for 2020 was as follows:
Replacement ratio 0-20%
49.51%
52.94%
20-40%
22.99%
26.83%
Approximately 18.9% of members in the energy sector retire with a replacement ratio of 80% and higher.
40-60%
13.59%
10.87%
The replacement ratio, which is the expected income as a proportion of final salary, for retirees in 2020 was 26.56% for females and 35.10% for males.
60-80%
6.58%
5.60%
80% +
7.33%
3.76%
35.30%
26.56%
Overall
31.47%
The reasons for the gender gap indicated above includes the consequences of decades of inequality, and breaks in careers to raise a family, amongst others. It is also a result of lower contributions being made to retirement funds by females, in general, as well as the fact that after retirement females live longer than males on average. At age 60, the expected average age of death for women is 84 and for men it is 79.
39
ALEXANDER FORBES | MEMBER INSIGHTSTM
8.6 Increasing retirement age The impact of retiring at various ages is illustrated below for a new member aged 25 years and contributing at 12.9% of salary.
Many retirees with long service still achieve a low replacement ratio at retirement. This suggests that the fund design may not be appropriate to achieve the desired outcomes.
Deciding to retire at the age of 65 rather than the age of 55 can almost double a member’s replacement ratio.
Having a fund credit nine times or more your pensionable salary at retirement increases the chances of a member reaching the 75% replacement ratio mark.
Based on the information we know about retirees; they are only achieving a replacement ratio at retirement of 26.70%. Retiring four years earlier means a reduction of approximately 10% in one’s replacement income post retirement. This is significant given the already low average replacement ratio. Expected replacement ratio at various retirement ages 60% 50% 40% 30%
30.2%
32.2%
34.3%
38.9%
36.5%
41.4%
44.1%
46.9%
50.0%
53.2%
56.7%
20% 10% 0%
55
56
57
58
59
60
61
62
63
64
65
Net retirement age
8.7 The multiple of salary saved affects the replacement ratio
756 894 members were used for the 2019 analysis, of which 360 778 are females and 396 116 are males. Members with a minimum annual pensionable salary of R40 000 were used. Members with a fund credit that is more than 25 times their annual pensionable salary were excluded.
25
Fund credit as multiple of salary
This graph shows fund credit at retirement as a multiple of salary, with the replacement ratio achieved. Retirees who had a fund credit of more than nine times their annual pensionable salary managed to achieve a replacement ratio of 60% or more. Members who retired with a fund credit less than four times their annual pensionable salary retired with a replacement ratio of less than 20%.
Multiple of salary at different replacement ratio categories
20 Replacement ratio 0% to 20% 20% to 40% 40% to 60% 60% to 80% 80% +
15
10
5
0 0% to 20% 20% to 40% 40% to 60% 60% to 80% Replacement ratio category
40
80% +
ALEXANDER FORBES | MEMBER INSIGHTSTM
9. How much pension each rand of savings can buy at retirement Fund credit as multiple of salary
Fund credit as a multiple of salary at different ages 14 12 10 8 6 4
Actual multiple of salary
2 0
Required multiple of salary
25
29
33
37
41
45
49
53
57
61
65
Age
Shortfall
The graph shows the required fund credit as a multiple of salary to achieve a replacement ratio of 75% at retirement, and the actual average fund credit as a multiple of salary that members currently have at each age.
The graph shows the average shortfall in rands (R) between the required fund credit as a multiple of salary and the actual average fund credit as a multiple of salary, at each age.
The required fund credit as a multiple of salary to achieve a replacement ratio of 75% at retirement is 11.35, and the actual average fund credit as a multiple of salary at age 65 is 3.57.
Average shortfall (in rands)
Average shortfall (Rands) 6 000 000 5 500 000 5 000 000 4 500 000 4 000 000 3 500 000 3 000 000 2 500 000 2 000 000 1 500 000 1 000 000 500 000 0
25
30
35
40
45
50
55
60
66
Average shortfall (Rands)
Age
The average shortfall across the analysed members is R833 179. The graph shows the total shortfall in rands (R) between the required fund credit as a multiple of salary and the actual average fund credit as a multiple of salary for different age groups.
Total shortfall (in billions)
Total shortfall (Rands) by age group 120 100 80 60 40 20 0
25–30
30–35
35–40
40–45
45–50
50–55
55–60
60–65
Age band
The total shortfall across all the analysed members is R554 billion. This compares to their current accumulated savings of R281 billion. 41
ALEXANDER FORBES | MEMBER INSIGHTSTM
10. Conclusion 7. F und-provided solutions, including in-fund and out-of-fund solutions such as the Alexander Forbes Retirement Income Solution, have been effective at improving preservation behaviour.
This Member Insights™ can be used together with a LifeGauge and financial well-being profiling analysis to provide employers and trustees with even more information and insights when reviewing the benefit design and engagement plans of their funds. This will assist them in setting appropriate objectives, monitoring the outcomes that members experience and improving on these outcomes.
8. Implement digital member engagement solutions aimed at improving decision making on exit and retirement. 9. E nsure that financial well-being programmes address issues related to financial stress and the related behaviours. This includes analysing financial stress and identifying interventions necessary to address the specific issues, which ultimately leads to reduced productivity at work and reduced savings in the retirement fund.
Funds, trustees and employers should ensure that the fund helps members address each of the issues affecting members’ pensions contained in this Member Insights™. Some suggestions for employers and funds: 1. Review the level of pensionable salary that members use, communicate it and educate the members on this issue.
10. R eview policies around gender equality to ensure that there are specific interventions to reduce the gender gap.
2. Encourage members to review their retirement savings to see if they are on track by enabling access to a financial adviser.
11. R eview members’ preferred engagement channels in the current environment, and ensure that communications are effective and reach people via these channels.
3. Allow members to make additional contributions to the fund. 4. Allow members to change the level of the risk benefits they have if they need to reduce expenses.
12. P ut in place interventions to improve data quality in relation to members’ contact details, to enable administrators to send fund communication more effectively to people.
5. Encourage preservation for exiting members and offer an in-fund preservation solution to assist them.
It’s equally important for members to participate in these issues and take responsibility for their own financial well-being.
6. Goals-based investment strategies, particularly those that are individualised, can add an element of certainty to the pension income outcome.
11. Assumptions In order to calculate an expected replacement ratio for a member, various factors affecting the replacement ratio must be modelled. The model has been based on the following assumptions:
Inflation
Preservation
No explicit assumption is made about future inflation. Instead, the projections are based on increases after inflation.
No allowance is made for losses if members did not preserve their retirement savings before retirement, except where we state explicitly.
Salary increases
Purchase of a pension at retirement
Salary increases are assumed to be 2% above inflation.
Male members are assumed to be four years older than their spouse. All members are assumed to use all their retirement fund savings to buy a with-profit annuity at retirement. The actual gender of the member is used. The annuity includes a 50% spouse’s pension and has a guarantee period of five years. A realistic set of assumptions (in line with the Alexander Forbes house view) is used to project replacement ratios.
Investment returns Unfavourable scenario: inflation +3% Expected scenario: inflation +4.5% Favourable scenario: inflation +6%
42
12. Sector analysis
Construction sector
Number of members
16 658 84
Number of funds
41.7
Average age Gender profile
14.4%
85.6%
Average pensionable salary
R259 874
Average fund credit
R296 900
Average normal retirement age
64
Average actual retirement age
61.2
Average exit percentage
10%
Average preservation rates
13%
Average replacement ratio
36%
Average total gross contributions (member and employer)
Average expenses:
Distribution of replacement ratio achieved by retirees in the sector:
Average insured group life benefit
15.7% Group life premium
2.1%
Administration fee
1.1%
Disability premium
0.9%
80% +
5.7%
60% - 75%
12.7%
30% - 60%
50.2%
0% - 30%
31.4%
1.89 times annual pensionable salary
Companies involved in the construction of residential and commercial buildings as well as infrastructure projects. 43
Energy sector
Number of members
29 684 46
Number of funds
42.0
Average age Gender profile Average pensionable salary Average fund credit
29.6%
70.4%
R477 364 R1 305 361
Average normal retirement age
64
Average actual retirement age
61.4
Average exit percentage
10%
Average preservation rates
25%
Average replacement ratio
49.2%
Average total gross contributions (member and employer)
9.15%
Average expenses:
Distribution of replacement ratio achieved by retirees in the sector:
Average insured group life benefit
Group life premium
1.5%
Administration fee
1.2%
Disability premium
1.4%
80% +
4.3%
60% - 75%
8.8%
30% - 60%
54.8%
0% - 30%
32.1%
0.51 times annual pensionable salary
Companies involved in the extraction, refinement and supply of oil and gas products throughout the country. Water services and energy utility companies have also been included. 44
Fishing, forestry and agriculture sector
Number of members
15 679 92
Number of funds
39.8
Average age Gender profile
32.1%
67.9%
Average pensionable salary
R186 132
Average fund credit
R217 702
Average normal retirement age
64
Average actual retirement age
61.9
Average exit percentage
10.3%
Average preservation rates
7%
Average replacement ratio
37.5%
Average total gross contributions (member and employer)
15.8%
Average expenses:
Distribution of replacement ratio achieved by retirees in the sector:
Average insured group life benefit
Group life premium
1.7%
Administration fee
0.9%
Disability premium
1.5%
80% +
6.0%
60% - 75%
13.0%
30% - 60%
53.5%
0% - 30%
27.4%
1.31 times annual pensionable salary
Companies involved in farming of crops, fishing and various stages of production and supply of paper products. Food producers in this sector are farmers involved in the earliest stage of food production. 45
Manufacturing sector
Number of members
92 250
Number of funds
612
Average age
41.1
Gender profile
36.3%
63.7%
Average pensionable salary
R341 366
Average fund credit
R461 277
Average normal retirement age
64
Average actual retirement age
62.2
Average exit percentage
10.3%
Average preservation rates
13%
Average replacement ratio
36.7%
Average total gross contributions (member and employer)
14.5%
Average expenses:
Distribution of replacement ratio achieved by retirees in the sector:
Average insured group life benefit
Group life premium
1.5%
Administration fee
1.1%
Disability premium
1.3%
80% +
4.4%
60% - 75%
14.0%
30% - 60%
48.2%
0% - 30%
33.5%
2.51 times annual pensionable salary
This includes various industries: chemical and plastics, electrical and components, technological products, food and beverages, metals, motor vehicles, pharmaceuticals and textiles. Companies that produce consumer durables and non-durables from raw materials and chemicals, and food and beverage producers involved in the intermediate stages of food production and distribution are also included. 46
Mining sector
Number of members
24 978
Number of funds
128
Average age
41.2
Gender profile
21.3%
78.7%
Average pensionable salary
R390 202
Average fund credit
R417 458
Average normal retirement age
63
Average actual retirement age
61.8
Average exit percentage
10.4%
Average preservation rates
8%
Average replacement ratio
35.4%
Average total gross contributions (member and employer)
Average expenses:
Distribution of replacement ratio achieved by retirees in the sector:
Average insured group life benefit
15% Group life premium
1.7%
Administration fee
1.7%
Disability premium
1.4%
80% +
2.7%
60% - 75%
11.3%
30% - 60%
50.8%
0% - 30%
35.2%
2.21 times annual pensionable salary
Companies involved in the extraction and supply of basic raw materials throughout the economy, including coal, steel and precious metals. Companies providing maintenance and technological services solely to mines have also been included. 47
Personal services sector
Number of members
134 529
Number of funds
310
Average age
41.6
Gender profile
64.3%
35.7%
Average pensionable salary
R289 049
Average fund credit
R367 393
Average normal retirement age
64
Average actual retirement age
62.4
Average exit percentage
10%
Average preservation rates
10%
Average replacement ratio
37.8%
Average total gross contributions (member and employer)
Average expenses:
Distribution of replacement ratio achieved by retirees in the sector:
Average insured group life benefit
14% Group life premium
1.3%
Administration fee
1.4%
Disability premium
1.0%
80% +
2.7%
60% - 75%
9.0%
30% - 60%
51.0%
0% - 30%
37.3%
1.86 times annual pensionable salary
This sector includes four industries: health, education, media and marketing, and security. This is a labour-intensive sector that involves supplying services to consumers. Producers of equipment and suppliers of services intended solely for use by the industries mentioned have also been included. 48
Professional and business services sector
Number of members
133 922 483
Number of funds Average age Gender profile
38.16 51.9%
48.1%
Average pensionable salary
R386 288
Average fund credit
R483 607
Average normal retirement age
64
Average actual retirement age
61.9
Average exit percentage
9.7%
Average preservation rates
13%
Average replacement ratio
40.8%
Average total gross contributions (member and employer)
11.6%
Average expenses:
Distribution of replacement ratio achieved by retirees in the sector:
Average insured group life benefit
Group life premium
1.1%
Administration fee
0.9%
Disability premium
1.0%
80% +
2.3%
60% - 75%
8.9%
30% - 60%
46.2%
0% - 30%
42.5%
0.76 times annual pensionable salary
This sector includes financial services providers (like banks and insurance companies), legal and accounting firms, engineering and recruitment consultancies and the real estate industry. 49
Public services sector
Number of members
42 021 38
Number of funds
43.6
Average age Gender profile
42.0%
58.0%
Average pensionable salary
R306 233
Average fund credit
R828 479
Average normal retirement age
63
Average actual retirement age
61.3 1%
Average exit percentage Average preservation rates
18%
Average replacement ratio
44.8%
Average total gross contributions (member and employer)
22.6%
Average expenses:
Distribution of replacement ratio achieved by retirees in the sector:
Average insured group life benefit
Group life premium
1.5%
Administration fee
0.9%
Disability premium
1.7%
80% +
25.6%
60% - 75%
24.3%
30% - 60%
37.6%
0% - 30%
12.5%
2.39 times annual pensionable salary
This sector includes various government municipalities, departments and government-funded industries, but not parastatals.
50
Retail, wholesale and hospitality sector
Number of members
177 688
Number of funds
218
Average age
35.9
Gender profile
56.8%
43.2%
Average pensionable salary
R142 867
Average fund credit
R170 457
Average normal retirement age
63
Average actual retirement age
61.1
Average exit percentage
12%
Average preservation rates
5%
Average replacement ratio
39.8%
Average total gross contributions (member and employer)
13.9%
Average expenses:
Distribution of replacement ratio achieved by retirees in the sector:
Average insured group life benefit
Group life premium
1.0%
Administration fee
0.7%
Disability premium
0.9%
80% +
3.9%
60% - 75%
10.5%
30% - 60%
44.0%
0% - 30%
41.6%
3.26 times annual pensionable salary
Companies include food, drug and clothing retailers and companies in the travel and leisure industries. This group also includes hotels and restaurants. 51
Transport and telecommunication sector
Number of members
37 038
Number of funds
123
Average age
40.8
Gender profile
36.0%
64.0%
Average pensionable salary
R336 401
Average fund credit
R379 755
Average normal retirement age
63
Average actual retirement age
61.8
Average exit percentage
17%
Average preservation rates
6%
Average replacement ratio
35.1%
Average total gross contributions (member and employer)
14.4%
Average expenses:
Distribution of replacement ratio achieved by retirees in the sector:
Average insured group life benefit
Group life premium
1.4%
Administration fee
1.2%
Disability premium
1.3%
80% +
1.5%
60% - 75%
9.6%
30% - 60%
59.3%
0% - 30%
29.6%
2.06 times annual pensionable salary
Telecommunications companies are providers of fixed-line and mobile phone services, while transport companies are involved in both commercial logistics and distribution of consumer goods and passenger transport. 52
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