By Evan Pickworth, BDLive – 14 May 2014

MEASURES such as extending retirement age or limiting incentives to retire early should be urgently considered as longevity is the key risk affecting the financial security of retirees, a Sanlam survey has found.

Experts said on Tuesday at a media briefing ahead of the launch of the Sanlam benchmark survey on May 29 that a delay in retirement of six years could double retirement pots in South Africa. A 10-year delay could triple the amount.

The experts said life expectancy globally is up 20 years since 1950.

While the average life expectancy in SA is 50, due to the effect of infant mortality and HIV/AIDS, an actuary from Sanlam Employee Benefits, Viresh Maharaj, said on Tuesday it would be 70 were it not for HIV/AIDS. He said medical advances were expected to reduce this effect.

David Gluckman, head of research for Sanlam Employee Benefits, said while the old-age grant in South Africa started at 60, each company determined the age when people retired — and the trend has been to

reduce rather than increase this age.

Some retirement options in South Africa give people the ability to access funds as early as 55. According to the Sanlam experts, "very few" companies in South Africa are moving their retirement age up to 70 — though some are — with the average age of retirement in South Africa about 60-63.

Mr Gluckman said more flexible planning, like allowing extra contributions to an existing pre-retirement pool if a retiree earned income after being put on retirement, should be considered.

Mr Maharaj called on industry to lobby the government and educate and influence employers to address longevity risks. "We cannot sit back and do nothing," he said.

The research highlighted an added burden for South Africa’s "sandwich generation" — those needing to support children or adult dependants while retired. The survey, which covered 100 employer funds, including 10 union funds plus 512 telephone interviews with active members of retirement funds, found 60% of retirees have adult dependants and 23% have child dependants.

Danie van Zyl, head of guaranteed investments at Sanlam Employee Benefits Investments, said the survey found 29% of retirees could retain their standard of living in retirement — last year’s survey found only 13% could "retire comfortably".

All the regulatory changes being phased in by the Treasury seem to be striking a chord, as the survey found 45% of funds were working towards a stated pension target — from just 35% in 2011.

But only 40% of funds had environmental, social and governance policies. "They are still coming to grips with how to define it and so most of these are focusing on improved governance at the moment," said Mr van Zyl. More than half of funds plan to offer default annuity options with in two years, as the new rules roll out.

But a clear struggle between retirement savings and living expenses remains a concern.

"Members are struggling and this has been increasing in the past few years," said Mr van Zyl.