30% of retirement fund members reduced debt despite COVID-19 crisis - Sanlam survey

Amid the challenging financial landscape brought on by the COVID-19 pandemic, a surprising trend has emerged in South Africa as 30% of retirement fund members managed to reduce their debt, according to the 41st Sanlam Benchmark Survey released today. Darryl Moodley, Head of Tailored Investments at Sanlam Corporate, joined CNBC Africa to discuss the findings and shed light on the implications for consumers' investment decisions moving forward. The ability of individuals to de-leverage and decrease their debt burden during the pandemic can be attributed to various factors. The shift to remote work eliminated commuting expenses, while restrictions on entertainment options led to increased savings as disposable income was redirected towards debt repayment. The survey highlighted a significant reduction in income for 73% of employed individuals, leading to a more frugal lifestyle for 58% of respondents. Despite the positive trend of debt reduction, concerns loom over the implications of the national treasury's upcoming two-pot system for retirement funds set to be implemented in March 2023. While this system allows access to a portion of retirement savings for emergencies, it also raises fears of individuals depleting their long-term retirement funds prematurely. Only 44% of survey respondents were aware of the changes, with 56% expressing disagreement with the new system. Moodley emphasized the urgency for individuals to strike a balance between meeting immediate financial needs and securing a stable financial future. With unemployment rates soaring, many South Africans are forced to dip into their retirement savings when faced with job loss or financial hardship, jeopardizing their long-term financial security. The challenge lies in encouraging consistent contributions towards retirement savings while ensuring financial stability in the present. The survey also highlighted a growing focus on healthcare and holistic employee benefits among respondents. The pandemic has underscored the importance of prioritizing physical and mental health, leading to increased demand for services such as medical consultations, nutrition, and psychology support. As individuals navigate the financial uncertainties of the current economic climate, the emphasis on comprehensive employee benefits reflects a shift towards prioritizing overall well-being. While consumers demonstrate a newfound financial savviness by reducing debt amid the pandemic, the looming concerns over retirement fund sustainability call for a delicate balance between short-term financial stability and long-term financial planning. As South Africans navigate the challenges of a volatile economy and evolving legislative changes, the importance of informed investment decisions and prudent financial management remains paramount.