Debts forcing South Africans to dip into pensions

Unforeseen expenditures are forcing employed South Africans’ decision to dip into their retirement fund.
Unpacking Momentum Corporate’s latest research on the country’s workforce, public sector head Nomha Kumalo explained on Thursday that four out of five employed South Africans were unable to meet the financial need of unforeseen events.
“That is scary and the breaking point is the unforeseen financial need of R10,000. People plan for one day but then reality hits and four out of five South Africans are not able to respond to that,” she said.
Kumalo said the company’s quarterly research found that employees were resigning purely to access their retirement fund when an unforeseen event occurred. “You think you should know better because you will be using your retirement fund one day and it’s irresponsible to use it now, but the reality is that unforeseen life events do occur.”
According to Momentum’s Financial Vulnerability Index consumers remained as financially vulnerable this year as they were in 2017.
Kumalo explained that debt repayments, unforeseen expenses and financial illiteracy were among the factors that influenced the vulnerability.
Sixty-two percent of consumers are unable to meet their monthly debt repayments.
“Quarter on quarter, we see debt repayments as the biggest vulnerability,” Kumalo said.
Kumalo urged employers and the financial industry to transform to consider day-to-day expenses when promoting long-term savings.
“What is coming up strongly is that cash is king. It’s becoming difficult to show the value of contributing to a long-term vehicle like a pension fund.”
The number of dependents had doubled in SA.
“For every employed South African there are five dependents behind that income. So it really makes the juggling act quite difficult to balance at all.”