Even though Covid-19 has disrupted South Africa's retirement industry as government interventions to deal with the economic fallout of Covid-19 gave companies and their employees a rare chance to reduce or suspend their retirement contributions, our pension system remains stable.
According to the Mercer CFA Global Pension Index, which measures adequacy, sustainability and integrity of pension systems among some of the world's biggest economies, scored South Africa higher than countries like Austria, Italy, Indonesia and South Korea.
Mercer, which is a strategic partner to South Africa's biggest retirement administrator, Alexander Forbes, said retirement income was always going to be a casualty under Covid-19 as record low interest rates, job losses and rising government debt, which will reduce resources available for social protection in future, added a new cocktail of problems to pension systems mostly in need of reform even before the pandemic.
"The economic recession caused by the global health crisis has led to reduced pension contributions, lower investment returns and higher government debt in most countries. Inevitably, this will impact future pensions, meaning some people will have to work longer while others will have to settle for a lower standard of living in retirement," said Dr David Knox, senior partner at Mercer and lead author of the study.
Nevertheless, of the 39 retirement systems assessed around the world - which cover almost two-thirds of the world's population - South Africa's pension system ranked 27th and was categorised among those with some good features but also major risks and shortcomings that needed to be addressed.
Where the problem lies is in the "adequacy" of retirement savings and income incomes in the country, as well as the sustainability of the system, given that millions of elderly people in South Africa rely on social grants. But both these areas of concern showed minor improvement from 2019.
Mercer's report suggested that South Africa should increase the level of support given to the poor elderly, increase contributions made to retirement funds by the working population, but also introduce mandatory savings for workers and preservation requirements when people change jobs.
"In terms of sustainability, it recommends increasing the coverage for employees in occupational pension schemes, thereby increasing the level of contributions and assets as well as introducing a minimum level of mandatory contributions into a retirement savings fund."