It is in your own best interests and those of the country that you save more and spend less, Deputy Minister of Finance Nhlanhla Nene says.
Delivering the keynote address at the Institute of Retirement Funds’ annual convention in Durban this week, Nene says the low level of saving and the high level of spending on consumer items have reached “alarming and near-catastrophic” proportions.
With a negative rate of household saving, South Africans are condemning themselves to “being a society living on handouts and on the fringes of survival. And there is more to life than just surviving,” Nene says.
This is why the government is pressing ahead urgently to make the preservation of retirement savings compulsory, he says.
The mandatory preservation of retirement savings “is not government proposing to, or trying to take, your money. To the contrary, this is government trying to help people who currently can work and earn an income to save and preserve their retirement savings.”
It is estimated that only six percent of South Africans can afford to retire, because most people cash in their retirement savings when they change jobs or get divorced, Nene says.
“We need to save at least 15 percent of our gross income towards retirement. This has to be for an average of between 30 and 35 years of our working lives.
“The lack of preservation of retirement savings is costing not only individuals but the entire country, since these are long-term savings which can and should be used to bolster our gross savings rate and help with inclusive growth and development. There are no better sources of long-term savings than retirement savings,” Nene says.
The major risk to saving and the economy is how we spend money, he says.
“The level of final consumption expenditure by households was R1.5 trillion in 2009 and R1.6 trillion in 2010. This expenditure by households represents 60 percent of the gross domestic product. And when you dig through the numbers, they reveal something interesting: out of the total 23 spending items, clothing and footwear has ranked the fourth-highest expenditure item by households since 1990.
“It is clear that our attitudes and priorities need to change. We need to give up excessive instant gratification and try to focus on our long-term well-being as individuals and as a nation,” he says.