Nine in Ten South Africans Aren’t on Track to Retire Comfortably
Just 10% of members in retirement funds run by South Africa’s biggest standalone administrator are on track to replace three-quarters of their final pensionable salary when they stop working. That’s according to Alexander Forbes’s Member Insights report, and it highlights an acute savings shortfall in the continent’s largest economy.
The headline numbers
The figure is an improvement on the 6% recorded in 2021, and the average projected replacement ratio for contributing members has risen from 40% to 46% over five years. But as Vickie Lange, head of solutions enhancement at Alexander Forbes, put it, nine out of ten contributing members are still not on track to replace at least 75% of their final pensionable salary, so there is considerable work to be done.
The survey covered more than 1.1 million active contributing member records across more than 310 retirement funds and 2,300 employers. It looked at how preserving savings, contributing enough, saving for long enough and managing short-term financial pressure affect retirement income.
Why South Africans are falling short
Years of weak economic growth, high joblessness and rising living costs have squeezed household finances:
- Slow growth. The IMF expects the economy to grow just 1.1% this year, below the global average of 3.1% and the sub-Saharan average of 4.5%.
- High unemployment. More than a third of the workforce, about 8.5 million people, is unemployed.
- Early withdrawals. Financial strain has pushed workers to tap their retirement savings under the system introduced in September 2024, which allows early access to a portion of savings. Alexander Forbes has paid out about R17 billion under that arrangement.
What it takes to retire well
According to the report, reaching a 75% replacement ratio requires setting aside 15% of your salary for 40 years. The reality falls short in two ways:
- Contributions are too low. The average contribution rate is only 11.2%.
- People retire early. Although members can retire at 65, most are choosing to leave as early as 61.
Retirement age makes a big difference. Lange said the expected replacement ratio is 45% with a normal retirement age of 60, but jumps to 68% if members stay on five years longer, to age 65.
How South Africa compares
OECD data shows the average South African can expect to earn only 17% of their working salary in retirement, compared with 96% in Brazil and 84% in Turkey.
What you can do
- Check your contribution rate. If you’re below 15%, see whether you can increase it, even gradually.
- Preserve your savings. Avoid cashing out when changing jobs, and think carefully before using early-withdrawal access.
- Consider working a little longer. Five extra years can lift your replacement ratio substantially.
- Start early. The 40-year assumption shows how much time matters.
- Speak to a financial adviser or your fund’s benefit consultant about your own projection.
The bottom line
Progress is real, with the share of members on track up from 6% to 10%, but the gap is large. Higher contributions, preserving savings and retiring later are the levers within most people’s reach, and the sooner you pull them, the better.
Source: Alexander Forbes Member Insights report, as reported by Bloomberg .
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