JOHANNESBURG - Employees aged between 30 and 40 years make up the bulk of people withdrawing their savings benefits from retirement funds to pay off debt.
This was revealed in a survey by Price Waterhouse Coopers (PWC), which surveyed 52 retirement funds and the key factors driving change in the sector.
While the overall number of retirement fund members who accessed their savings through the Two-Pot Retirement system in the second cycle was less than 10 percent, about 42 percent of those were in their 30 and 40s.
“This indicated that mid-career individuals, who may be facing financial pressures or changing life circumstances, are more likely to make use of the savings withdrawal option,” PWC’s Carryn Drummond said.
“Some funds don’t monitor the reasons for the withdrawal, but what we did see if that for most of them it is for debt settlement. Its members who are paying for school fees and buying properties.”
However, Drummond warned that early withdrawals can significantly reduce long-term retirement capital.
“Effective communication is essential to prevent long-term, irreversible damage to financial security.”
The survey also revealed that cybersecurity threats and attacks have resulted in an increasing need for cybersecurity coverage. This is an insurance policy which helps manage the impact of cyberattacks on the operations of an entity.
The survey reveals that 87 percent of the participants indicated that the fund’s fidelity cover includes cyber security and data protection. Forty-seven percent indicated that the cover is uncapped, while 40 percent indicated that the cover is capped. Where the cover is capped, the cap amount ranges from R100,000 to a maximum of R500-million.