We’ve said it before, and sadly, we’ll keep saying it: South Africa’s retirement picture is far from reassuring. The numbers may be familiar, but the urgency hasn’t faded — and the need for clear, credible solutions has never been greater.
Retirement security must be overhauled. Without meaningful reform, millions will continue to face financial vulnerability in later life. At an Old Mutual Thought Leadership Forum, Paul Watson, Advisory Board Member at Allianz Retire+ in Australia, offered valuable insights drawn from Australia’s multi-decade experience with universal coverage.
Watson emphasised the importance of planning for retirement early and consistently. He also highlighted the critical role employers play in supporting their employees’ financial well-being — not only through contributions, but also through education and access to tools that encourage long-term saving.
Referencing frameworks from the World Bank and the OECD, he highlighted three foundational pillars of effective retirement income systems:
- A universal safety net, typically taxpayer funded, that provides basic income for older citizens who haven’t saved and who could face poverty
- A mandatory savings system, ensuring consistent contributions throughout working life.
- A voluntary savings layer, which usually covers private wealth and assets that can be deployed towards retirement.
Lessons from Abroad, Ignored at home
Australia has all three pillars in play: an old age pension commencing age 67, its superannuation pillar (both employer-supported and private contributions which are tax-encouraged or incentivised) and thirdly, a personal savings pillar of which home ownership is a very central part and which cannot be impacted by inheritance tax or capital gains tax.
South Africa has elements of each — but none are operating at full strength. The universal safety net, while essential, is under pressure. Mandatory savings apply only to formal sector workers, leaving significant coverage gaps. And voluntary savings remain out of reach for many South Africans facing daily financial strain.
At the core of the Australian superannuation system is the superannuation guarantee which is based on the power of country’s tax laws. Simply put: “If an employer doesn’t pay contributions as it’s meant to, the government will whack the employer with quite punitive tax penalties and other measures.”
This provided Australia with a road map that was reviewed along the way. Ultimately, from an adequacy perspective, it paved the way for Australia to increase its contribution rate to 12% by 1 July 2025, reinforcing its long-term sustainability.
Superannuation should be made as universal
Watson emphasized that superannuation should be made as universal as possible, not only to support individuals but to strengthen long-term capital formation. He noted its particular value for younger populations, who benefit most from early contributions and compound growth.
With systems like Superstream and institutions such as the House of Australian Retirement helping to streamline processes – it’s expected that Australia will be down to about 20 to 30 funds by the end of the decade – the broader impact is clear: superannuation isn’t just a financial tool, it’s a national asset with the power to shape economic resilience and social equity.
After thirty-five years of superannuation, Australia now holds the second-largest pool of national savings in the world, surpassed only by the United States. This deep reservoir of capital contributes significantly to the national economy, providing a stable, long-term source of domestic funding. Pension funds can invest in infrastructure, innovation, and business development, while also reducing reliance on foreign capital. In addition, the savings pool helps strengthen Australia’s financial markets and enhances their resilience in the face of economic volatility.
Turning Policy into Practice
Watson highlighted the potential of South Africa’s two-pot retirement savings system. It aims to balance long-term savings with timely access to funds. The system encourages disciplined saving while recognizing that people may need access to their money at critical moments.
However, financial literacy and active participation remain key challenges. In Australia, for example, 43% of individuals reportedly don’t have even $1,000 in their savings account – a sobering reminder that reform alone isn’t enough. South Africa must now turn policy into practice, ensuring that implementation drives meaningful engagement and financial resilience.”
The future we choose
Watson left South Africa with a few pointed messages:
- Preserving superannuation for retirement is essential.
- Retirement systems can be designed to serve both individual needs and national economic goals.
- South Africa has made meaningful progress but the road ahead requires discipline, participation, and long-term vision.
- With a young population and the potential to build patient capital, the country is well positioned to strengthen its retirement outcomes – but only if reform is matched by implementation.
