5Apr, 2016

Pension increases unlikely to beat inflation

By: | Tags: | Comments: 0 | April 5th, 2016

Take home pay continues to increase, but pension increases are slowing, with retirees facing below-inflation increases because investment returns are sluggish.

According to the latest Bankserv/Africa Private Pension Index (BPPI), the average nominal annual increase in private pensions was 7.8 percent in February – to R5 992 per month –compared with 9.1 percent increase in take-home pay.

Mike Schussler, chief economist at Economists.co.za, says it is unlikely that pension increases will continue to beat inflation, because equity market returns are barely out-performing inflation and interest rates are just above inflation. The Index shows that the average pension is equal to about 45 percent of the average take home pay. This, Schussler says, is a clear indication that pensioners are in dire straits. “Getting older is difficult and in most cases means getting poorer.”

He says the fastest growing age group in South Africa is people over the age of 65, and it is growing at 3.2 percent a year, compared with overall population growth of 1.7 percent.

[Source: The Independent on Saturday Personal Finance supplement, 2 April, 2016]