- Solving for all goals at the same time requires 80% of income.
- Integrated lifecycle savings solution requires 43% of income at a point in time.
In our example here, simply by maintaining a disciplined savings programme that provided employees with access to lower-cost financial services, a 23-year-old male with a starting salary of R72 000 a year was able to:
- achieve a 50% replacement ratio on his retirement savings
- build and maintain an emergency savings fund of three months’ salary
- provide a full education (from age six up to tertiary) for his two children (born when he was 25 and 27)
- and fund and pay off a starter house with a real value of R250 000 within 20 years
Had the same employee tried to access these basic financial services without the benefit of the employer’s buying power, the total would have consumed more than 80% of his income. More importantly, by helping the individual address the funding demands of their economic journeys, we have probably done more to shore up the foundations that absolutely need to underpin any retirement model. This will be the demand for the future of Africa. When we begin to understand the implications of these outcomes, it certainly suggests that we need to re-engage with regulators on what outcomes are the most critical issues in a compulsory savings model.