South African women ‘earn’ less than men, even in retirement

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South African women can’t seem to get a break as the effects of the gender pay gap threaten to follow them into retirement.

A study by Alexander Forbes based on membership analysis and released on Tuesday showed that women are likely to earn about 10% less income from their retirement funds than men.

Reasons for the gender gap include the consequences of decades of inequality and career breaks in raising a family, according to the report. “It is also the result of the decline in contributions made to pension funds by women, in general, as well as the fact that after retirement, women on average live longer than men.”

Having a longer life span, on average, means that women’s retirement income decreases because it has to be spread over a longer period.

Replacement rate

The survey analyzed nearly a million members of the insurer’s pension fund and found that in 2020 the replacement rate of working women was 26.56%, while that of their male counterparts was 35.3%. The ratio for women is even about 5% lower than the overall average of 31.47%, the company said in a presentation.

Read: Gender pay equity set back one generation per pandemic, WEF says

The country’s largest (private) pension fund administrator has forecasted the average replacement rate to drop to 40%, which is still well below the ideal rate of 75%.

“According to Member Insights, only about 6% of pension fund members can expect retirement income above 75% of their pensionable wages,” the company found.

While the gender pay gap for the poorest 10% has “equalized” over the years, it remains relatively high in major sectors.

On average, women earn 83 cents for every rand earned by their male counterparts.

This gap is widening in certain sectors such as agriculture and business services, where women earn 81 cents and 77 cents, respectively.

“If we look at the top 10% of salaries, the gender pay gap is 7%, which means that for every R1 earned by a male member, the female member earns 93 cents,” says Ntsheki Molefe, regional pension manager at Alexander Forbes. .

Reform to improve conservation

The Covid-19 pandemic has seen a growing appetite among South Africans to cash in their retirement savings to make ends meet. However, the company advises against people withdrawing their savings before maturity.

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The proposed national social security fund is not the solution

Instead, Alexander Forbes supported the “two-pronged pension reforms” proposed by the National Treasury as an alternative that will protect long-term preservation and meet immediate financial needs.

The group’s projections show that future generations – who stand to benefit from the proposed policy reform – could see their retirement outcomes at least double.

“People’s savings [could] be between two and two and a half times better over a 35-40 year period because of that – even if they had to take their bucket in the short term, ”says John Anderson, chief investment officer, Alexander Forbes products and empowerment.

Anderson added that their modeling of the two-bay system revealed that if people preserved their long-term and short-term investments over a 40-year period, they would receive the desired replacement rate of 75% in retirement.

Impact on millennials

The group’s research also found that early millennials under the age of 24 suffered greater financial stress from the pandemic, leading to significant job losses and leaving young people more at risk of defaulting. on their loans.

“The analysis found that at least 14.11% of loans taken out by the first millennia were in default, followed by the last millennia at 4.79%, Gen X at 2.27% and baby boomers at only 0.94%, ”the company said.

“This [unemployment] is going to continue to be a huge challenge in the industry because it’s those years when people are contributing to their retirement that makes a huge difference, ”said Anderson.

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