By: Hayley Parry
Retirement is about the fact that you have worked your entire life, and now deserve to down tools and enjoy the fruits of your labour right? Wrong! Research shows that 56% of employees are not confident in their ability to retire and while they have worked for most part of their lives already, with 51% of employers contributing to employee retirement, 42% of these same employers have offered no advice around said retirement!
Let that sink in… you are told to save for retirement, given a retirement contribution but at no point in time are you told when to contribute more, why this is important or – at the very least – how best to manage your retirement savings and why this should be untouched until you retire. In fact, for many, a retirement contribution is just something that comes off a payslip as a necessary evil.
In fact, there is a massive education gap in the workplace and while it is an individual’s responsibility to skill up and ultimately save for retirement, employers have a very real place in this education and have the power to make a significant difference to South Africa’s retired workforce – and ironically the knock-on effect of a positive retirement today will drastically impact the future generation of workers too. You see – tomorrow’s employees are impacted by today’s retirees, where the financial burden continues to manifest if not combated now!
When looking at the potential impacts of the recently announced two-pot retirement legislation, this lack of education by employers has become ever more evident and this, is at a time when financial guidance is crucial to avoid this crippling of people’s retirement ability.
Recent research undertaken by Worth indicates that 42% of employers or HR teams have not provided any support, information or education around this incoming legislation. Of those that have, a third of employees still don’t feel confident in making a decision regarding whether or not they can or should withdraw some of their retirement funding after September 1.
In fact, the research shows that more than half of employees need more information on the two-pot retirement system and how it works, what it’s going to cost them now in terms of tax and fees, and in future in terms of the impact on their ability to retire. But more critically, respondents have indicated that they need more guidance on reducing financial stress as well as alternatives to accessing emergency funds so that they don’t have to withdraw – which is evident of the dire financial pressure that they are under.
It is now that employers should look for solutions to help guide their employees in their financial journeys and be accountability partners in helping them become financially independent. They should be looking for partners that help them provide this education for their employees as the consequences of not doing it are far-reaching where global research shows that 1 in 4 employees have said that financial stress impacts their productivity, with employees spending 8 hours a week during working hours worrying about their finances. So, while financial independence may seem like a personal problem, it is largely a business one too!
We have seen with this recent legislation coming in that consumers are not only burdened by debt and the cost of living – with 95% of people that are/considering withdrawing from retirement doing so to cover this. Therefore, it is crucial that we look at how as employers we can support not only changes in legislation, but employees’ daily lives, with the right financial education and help create real behavioural change if we hope to see a shift in South African’s ability to retire.
As employers we should be encouraging South Africans to sit tight, stay lean, and try to get by without dipping into any retirement money, savings, and the like while at the same time, encouraging employers to start driving home stronger education around these critical aspects – to help employees make the right decision and secure their retirement and financial future as a whole.
* Parry is a money coach and head of education at Worth.
PERSONAL FINANCE