One thing can end South Africa’s retirement crisis 

Increasing the retirement age can significantly improve outcomes for savers by extending their contribution period and time for investments to compound.

This relatively small change can result in millions more South Africans being able to retire comfortably as life expectancies become longer and expenditure in retirement increases. 

Currently, around only 9% of South Africans are on track to retire comfortably due to inadequate savings and longer-than-expected life expectancies. 

Due to medical advances, individuals are living longer than ever, which not only results in an extended period of retirement but also makes it more costly as healthcare expenditure rises as one ages. 

Old Mutual Corporate has argued that raising the retirement age is a relatively simple way to resolve this issue for South Africans. 

The 2025 Old Mutual Corporate OnTrack data showed that small, targeted changes in retirement fund design can have an outsized impact on employees’ long-term financial security.

With South Africans living longer than ever, the question of what it means to be “old” is changing, as should the way we think about retirement. 

Extending the normal retirement age is emerging as the single most powerful lever employers can use to close the retirement savings adequacy gap, Blessing Utete, Managing Executive at Old Mutual Corporate Consultants, said. 

“Adding just five more working years can lift retirement income by lengthening the contribution period, compounding investment growth for longer,” Utete said. 

“This also reduces the number of years over which savings are drawn down, all without increasing member contribution rates.”

It was this lever that Valterra Platinum, formerly Anglo American Platinum, applied to improve the retirement outcomes of its employees. 

The company raised the normal retirement age for its corporate staff from 60 to 65, giving over 1,300 members additional years of contributions and investment returns. 

Backed by targeted communication and annual retirement reports that encouraged voluntary contributions, the change translated directly into improved projected replacement ratios, Utete said. 

Might not be enough

In cases outside of big corporates, such changes may not be enough, as many South Africans simply do not earn enough money to save adequately for retirement. 

Other South Africans, who do earn decent salaries, do not put enough aside to retire on time or with enough money to stop working. 

This results in many having to work longer than they initially expected, rely on family for support, or turn to the state to boost their income in retirement. 

Old Mutual Wealth chief investment strategist Izak Odendaal explained that in South Africa, the burden to save for retirement is mostly placed on the individual. 

Over the last few decades, most local retirement funds have made the transition to defined contribution funds and as such the burden of adequate retirement provision falls largely on individuals. 

An exception is the Government Employee Pension Fund (GEPF), the largest in the country, which is a defined benefit fund. In other words, if it ever runs out of money, taxpayers will have to bail it out. 

Fortunately, despite a few governance wobbles at the state-owned asset manager, the PIC, the GEPF is more than fully funded with R2.3 trillion in assets.

To put it slightly differently, South Africans should worry about whether they are individually saving enough for retirement, rather than whether the country’s overall pension system is sustainable or poses a fiscal risk, Odendaal said.  

The country has a large, sophisticated and well-regulated financial system that is a key strength, though its reach is unevenly distributed. 

Most people don’t have enough retirement savings since they never earn enough, but many who do earn decent salaries don’t put enough aside.

Slight improvements have been made in recent years to improve the returns of retirement funds by enabling them to increase their exposure to foreign equities. 

Despite this, it is unlikely that membership of an occupational pension fund will provide sufficient income in retirement for most people. Therefore, other savings vehicles will remain important.

Odendaal’s advice for South Africans is simple – the best time to start saving is yesterday, and the right amount to save is more than you think.

Odendaal explained that a big problem in the past was a lack of preserving retirement savings when people switched jobs. 

The two-pot system addresses this, as two-thirds of retirement savings must now be preserved, with one-third available to be withdrawn for emergency use. 

While most of the focus has been on the withdrawals, the compulsory preservation aspect of two-pot is a significant reform that should ultimately improve individuals’ retirement outcomes. 

Though unlikely in the short term, the next step is mandatory participation, where every full-time worker must contribute to a retirement fund.