South African individual retirement savings: An analysis of the social factors

Abstract

This study's primary aim is to determine whether members of a South African tertiary institution's retirement fund are en route to have sufficient retirement savings. Secondly, the results are analysed between different social factors namely: age, gender, race, education level, marital status, and cost of employment. Survey data and information received directly from the retirement fund were used as inputs in a customised model. This method was unique to this study, that is, it was able to consider broader circumstances other than the member's retirement savings within the fund only. Among the sample of 753 respondents, one‐third of respondents will have insufficient retirement savings and <10% will have enough. Single, younger and male respondents are most likely to have sufficient retirement savings and this is suggested to be as a result of advantageous annuity rates upon retirement. Black/African respondents were least likely to have sufficient retirement savings. Notwithstanding the racial population divide following apartheid, societal and cultural explanations speak to a culture of increased spending coupled with high financial dependency relationships. Thus, the findings provide rich information which necessitates policies which address leakage from retirement savings, appropriate defaults, and the availability of innovative and affordable savings vehicles.

The relevance of anger, anxiety, gender and race in investment decisions

“…These findings suggest similar risk aversion differences amongst participants of different race, as was found with gender. It also confirms findings by Willows (2019b) who looked at the investment choices for retirement funds among a sample of South Africans and noted an increased preference for higher risk (higher return) retirement products by White South Africans.…”

“…Financial literacy is acquired over time; thus, this might have been a disadvantage to Black participants. Willows (2019a), when assessing actual and self-assessed financial literacy, also noted that White participants tend to rate their own perceived level of financial knowledge on a higher scale than African participants. This might explain the preference of White South Africans to select more aggressive investments (Willows 2019b) and the racial differences noted in the measurement of trait anxiety.…”

“…Pertaining to the gender differences noted; women are more risk averse than men (Gambetti and Giusberti 2019; Willows and West 2015) and gender differences in financial knowledge scores are seen in research performed around the world (Lusardi and Mitchell 2011;Willows 2019b;Xu and Zia 2012). Like the findings with race, Willows (2019a) noted that men tend to rate their own perceived level of financial knowledge on a higher scale than women.…”

“…The incorporation of gender and race as explanatory variables is unique to this study and in these preliminary results already shows differences in the prevalence of trait anxiety. Research has illustrated both gender and race to influence financial knowledge and risk aversion (Willows 2019a;Willows and West 2015), which are notable indicators of financial behaviour and decision-making (Atkinson and Messy 2012).…”

“…Sudhir et al (2015) encourage research that is country-specific to exploit unique characteristics of a specific emerging market, rather than diverse crosscountry insights. The incorporation of gender and race as explanatory variables is also important, as research has illustrated both gender and race to influence financial knowledge (Willows 2019a), which is a notable indicator of financial behaviour and decision-making (Atkinson and Messy 2012).…”