‘Only 10% Will Retire Comfortably’: South Africa’s Ageing Population Faces Crushing Financial Pressure

Only 10% of South Africans believe they’ll be able to retire comfortably at age 60and many older citizens are increasingly reliant on credit to survive.

That’s the sobering finding from Eighty20 director Andrew Fulton , who said South Africa’s ageing population is facing growing financial pressure in retirement.

Two Segments

Eighty20 divides older South Africans into two distinct segments:

“Comfortable retirees” about two million relatively affluent retirees who had access to stable employment and the opportunity to save during their working lives.

“These are the people who had good jobs during apartheid, were able to save for their retirements, and actually the second most affluent of our segments,” Fulton said.

“Humble elders” about four million South Africans who are financially fragile and often depend on family or the state for support.

“They really are that lost apartheid generation. They weren’t able to earn or save or invest, and now they’re retiring dependent on the family and the state with SASSA grants or family.”

The Credit Crisis

Despite their financial vulnerability, humble elders are turning to credit.

In the fourth quarter alone, they took out about 610,000 loans mainly through retail credit and personal loans.

“They don’t qualify for credit cards, so they’re using those two credit vehicles in order to cover their household expenses.”

The more affluent retirees also borrowed: about 230,000 new loans during the same period. Around 30,000 still have mortgages, making up roughly 13% of all home loans in the country.

Even this group is beginning to feel the strain.

“They’ve scaled back on their secured credit since last year, probably due to repayment pressures and disposable income shrinking because of inflation and other costs.”

Defaults Rising

While default rates across the general population have declined steadily since 2023, the trend is moving in the opposite direction for those aged 65 and older.

“We saw a sustained rise in the number of defaulters, which is accelerating rather than stabilising,” Fulton said.

This makes older consumers unique among Eighty20’s eight consumer segments.

The Retirement Outlook

Fulton pointed to research showing that very few South Africans believe they will be able to retire comfortably.

“If you read the research on retirement, it is quite frightening and sobering. FNB finds that only 10% of South Africans believe they’ll be able to retire comfortably at age 60.”

He warned that some people are worsening their long-term prospects by tapping into retirement savings early.

“With the two-pot system, what we’re seeing is that a lot of people are making that future situation even worse to pay for today’s needs and expenses, and they’re not replacing that.”

The Healthcare Risk

Rising costs, particularly healthcare, are another major risk. Medical expenses typically increase at roughly double the rate of inflation.

“If you didn’t plan properly during your career, that can come back to bite you.”

The Bottom Line

Two million comfortable retirees. Four million humble elders. Six hundred ten thousand loans in one quarter. Rising defaults. Depleted savings.

South Africa’s retirement crisis is hereand for millions of older citizens, the pressure is only going to get worse.

{Source: BusinessTech}

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