New retirement report suggests a more permanent mind shift from flexibility to certainty

By Deane Moore, Just SA CEO

Deane Moore

Retirement income specialist Just SA announced the results of its 2022 independent retirement tracking study, which suggests a more permanent mind shift in what pensioners want from their retirement income. 

Having an income in retirement that continues for life has remained the top priority across four consecutive surveys conducted since 2018. At the same time, the flexibility to decide how much income to draw has dropped three positions in importance since the last results in 2020. This suggests that the pandemic and other macro issues such as accelerating inflation have served as catalysts to change the mindset of pensioners to one that is geared towards certainty. 

When so many factors are uncertain and unpredictable, it’s natural to seek out security. This might explain why the preference for certainty that we saw established during the Covid crisis, seems to have become a more permanent shift, as the world moves through another set of crises.

At retirement, a pensioner’s salary stops, but their expenses continue, and they look to replace that salary with a reliable income. “Once that need for security is addressed, then they tend to value flexibility. 

When analysing the full results of the 2022 study, which was conducted via online and telephonic interviews with over 380 pre-retirees and retirees between the ages of 50 and 85, three predominant retirement themes emerged: financial certainty, financial endurance and financial planning. 

Retirees live in an age of uncertainty 

Just SA’s survey reveals a lingering financial effect of the pandemic, coupled with fears of rising inflation, and an increasing need to dip into retirement savings. South Africans over 50 are no more confident in 2022 that they have enough retirement savings, with only 2 in 5 believing that their income will cover monthly expenses should they live to 100. 

The message of increasing longevity is not getting through 

Worryingly, when asked who they would turn to should their retirement money run out in future, 57% expect to call on their children or grandchildren, with 42% looking to siblings or other family members. And while external research shows that people need around 20x annual income for a sustainable retirement, the average respondent admits to having saved only 10x, with many having not even saved 2x. Unsurprisingly, then, the overwhelming majority (70%) also acknowledge that they will need to change their lifestyle if investment markets fall by more than 10%.  

Retirement planning is still seen as very important 

Similar to 2020, when the study was last done, an overwhelming majority (80%) feel it is important to set retirement objectives, yet ironically, only 52% are planning ahead, which is down 20% compared to 72% in 2020. Only 3 in 10 use or intend to use a financial adviser to help them determine a suitable roadmap ahead. Shockingly – considering the age group of the respondents – as much as a third have not done any retirement calculations at all, citing not knowing how (28%) or not having enough money to plan (26%) as their main reasons why. 

The overall findings of the 2022 tracking study concerning for a variety of reasons. Not only does Just Retirement Insights 2022 reveal a continued lack of confidence among retirees about their financial future, but also a disconnect between their expectations and the reality of retirement.

If we could share one clear message to South African pensioners, it would be that it is possible to secure an income for life so that you never feel you are a burden on your children. Life annuities provide guaranteed income for life to cover essential expenses and any remaining assets can be invested to draw on when needed.

Visit the official COVID-19 government website to stay informed: sacoronavirus.co.za