For more than two decades, South Africa’s retirement industry has been trying to solve the same problem: too few people retire with enough savings to maintain their standard of living.
Despite countless interventions, stronger governance, improved product design and, most recently, the introduction of the two-pot retirement system, the reality remains sobering. Only around 6% of South Africans are on track to retire comfortably. That statistic has become so familiar that many of us have almost stopped questioning it.
Perhaps the problem is not that we are failing to solve the retirement challenge. Perhaps it is that we are asking the wrong question.
Traditionally, the industry has focused on savings behaviour. How do we get people to contribute more, preserve their savings for longer and invest appropriately? These remain critically important questions. However, they overlook a more fundamental issue:
what determines whether people are able to save in the first place?
Recent analysis of employee, salary, health and financial wellbeing data which has been drawn from Group Risk insights, Discovery Health Medical Scheme claims information and Discovery staff’s own absenteeism and promotion data, highlights a reality that many South Africans experience every day. For most households, retirement outcomes are shaped long before retirement planning begins. They are shaped by income growth, personal financial habits, debt levels, health behaviours and broader financial resilience.
The challenge is becoming more complex.
While salaries have generally increased over time, many employees feel financially worse off than they did a decade ago. Rising costs for essentials such as education, healthcare and housing have eroded much of the perceived benefit of wage growth. The pressure becomes particularly acute during employees’ forties and fifties, precisely the stage of life when retirement contributions should ideally accelerate.
At the same time, South Africans are entering formal employment later than previous generations. This means fewer years of earning, fewer years of contribution growth and less time for compound investment returns to work their magic.
These structural realities help explain why retirement adequacy remains stubbornly low, despite the industry’s best efforts.
Yet amidst these challenges, some encouraging patterns emerge.
One of the most striking findings from our analysis is that behaviours often matter more than circumstances. Employees who exercise regularly are substantially more likely to be promoted and tend to take fewer sick days than those who do not exercise at all. While exercise is often viewed purely through a health lens, it may also influence career progression, earnings growth and, ultimately, retirement outcomes.
We observed a similar relationship when examining financial behaviour.
Employees who actively manage their finances, maintain healthy savings habits and demonstrate greater financial discipline consistently achieve better long-term outcomes, regardless of income level. In some cases, lower-income earners with strong financial habits were significantly less likely to access retirement savings under the two-pot system than higher-income earners with weaker financial behaviours.
The implication is important. While income matters, financial behaviour matters too, and it may be one of the few factors that individuals can meaningfully influence.
Perhaps nowhere is this more evident than in the growing debt crisis.
Debt has become one of the biggest obstacles to improved retirement outcomes. Nearly half of South Africans report that debt prevents them from saving more for retirement. For many households, debt repayments consume money that would otherwise be available for long-term savings.
From a purely financial perspective, it is difficult to build wealth when expensive short-term debt is growing faster than investment returns.
This creates a dilemma for retirement funds and employers. Asking financially stressed employees to save more is often unrealistic if they are struggling to meet their immediate obligations.
The retirement industry therefore faces an opportunity to broaden its thinking.
If we want to improve retirement outcomes, we need to focus not only on retirement products but also on the underlying drivers of financial wellbeing. That includes financial education, debt management, healthier financial habits and interventions that help employees become more financially resilient throughout their working lives.
Retirement saving remains essential. Preservation remains essential. Long-term investing remains essential.
But retirement outcomes are not created at age 65. They are created every day through thousands of decisions about health, debt, spending, saving and financial behaviour.
The future of retirement may depend less on encouraging people to save more and more on helping them create the conditions that make saving possible.
If we want meaningfully better retirement outcomes over the next decade, we need to stop viewing retirement as a destination and start viewing it as the cumulative result of everyday financial wellbeing.
That is the conversation our industry should now be having.
