Frequently Asked Questions

Here are some questions and answers pertaining to the Old Mutual Savings Monitor research.

• What exactly is the Old Mutual Savings Monitor?

  The Old Mutual Savings Monitor surveys the savings behaviour of South Africans.

• Why has Old Mutual done this research?

  This research was done to help Old Mutual understand savings behaviour in the country and to empower fellow South Africans with information. Knowing more about the savings behaviour of South Africans allows us to provide value adding financial solutions for our clients. Old Mutual wants to encourage a culture of savings in South Africa.

• How is the research done?

  In July 2009 Old Mutual concluded an intensive research exercise to define the savings culture of South Africans. The research was conducted using a sample of 1000 working, metropolitan households, and the results were used to create a unique statistical insight into the current savings situation in South Africa.

  The research is updated every six months and the latest findings were released to the market in November 2011.

• What makes this research different to all the other savings surveys out there?

  Although there are many research surveys in the market about savings, the Old Mutual Savings Monitor is unique in that it speaks in a consumer friendly way. By providing meaningful insights about South Africans’ savings behaviour, it allows individuals compare their own savings behaviour with their peers and empowers them to take control of their financial future.

• How can the Old Mutual Savings Monitor help me?

  The Old Mutual Savings Monitor will be updated every six months and will help you understand what you need to do now to prepare for a better future going forward.

  Future developments on the Old Mutual Savings Monitor will enable you to interact with the research and allow you to draw up your own personal Savings dashboards/charts, so that you can clearly see where your hard earned money is going and how you can start a plan that helps you achieve all your personal goals.

  The key findings of the research will be shared in easy to understand stories about how people are saving and spending their money. These stories and updates will be provided on this website.

• Where can I find the research?

  You can view the results on our Research Results page. Our Research department is also on hand to answer your queries and the relevant contact details are available on the Contact Details page.

• So what is the answer to the question as to how much you need to save?

  Here are a few guides as to what you should consider:

  • People on defined benefit pension funds cannot assume they will get inflation beating pension increases during retirement. To guard against below inflation increases, people must have additional retirement provisioning.
  • People on defined contribution pension funds: Make sure your capital buildup is sufficient to finance a decent pension flow when you retire. This requires full knowledge of the performance of the fund as high real investment returns are required to ensure a sufficient capital build up. Most people have no clue whether the build up is sufficient or how much they need.
  • South Africans save about 15% of their gross incomes at the moment. Saving so little will require very high real investment returns to be able to retire comfortably and stay financially comfortable (especially for defined contribution fund members, but also for defined benefit fund members). Because high real returns are by no means guaranteed over the coming years (given difficult global & local circumstances), savings flows should be much higher than 15%.

  So, the answer clearly depends on a host of issues and the answer will be different from person to person. What we do know is that the bulk of South Africans save way too little and they will only discover it when it is too late – i.e. when money becomes an issue a few years into retirement.

  Try one of our Savings Calculators to see if you are on the right savings track.

• Why is there such a heavy focus on savings lately in South Africa?

  One of the important challenges we face in South Africa is the lack of a savings culture.

  Currently only 4% of our population – or 1,8 million individuals - have positioned themselves to retire financially sound. The other 96 % are more likely to become a burden on the state when they reach retirement.

  And there have been some concerning statistics released recently about people getting into debt trouble. There are currently more people retiring without enough funds to support them. Many South Africans rely too heavily on state pension and this dependence is growing. This trend has a significant impact on the Government spending.

  Household savings as a percentage of GDP have also declined sharply over the last 15 years. We need to do something to improve our countries savings culture now, and that’s why Old Mutual has done this research.

• What does the level of savings in South Africa look like currently?

  A recent report by Old Mutual on Household Savings in South Africa highlighted again the current challenge presented to the country by overall levels of savings in the economy.

  Between 1995 and 2007, the gross savings rate (measured as the percentage of household revenue that is not spent) declined from almost 4.5% to less than 2%.

  Taking into account the rate of growth in household revenue over this period that represents a real decline of 3.4% annually – highlighting that although household revenues grew strongly, spending grew even more strongly.

  With higher interest rates and fuel prices in 2008 consumer spending slowed down as disposable income decreased. This ensured even less opportunity to save as consumers battled to settle outstanding debt.

  The picture in 2009 is different. Interest rate cuts, lower fuel prices mean more disposable income. Consumers should be encouraged to save. If revenue and spending continue to grow at historic average rates, the gross savings of South Africans will actually be negative within the next 10 years.

  This method of measuring gross savings does not measure actual flows to savings vehicles – but it does indicate what portion of current revenues is not being spent on current consumption. It provides a useful picture of the trend in South African household savings.

  The Old Mutual Savings Monitor can give you accurate data on the current spending habits of South Africans to help you see where you fit in the big picture.

• Why is there a growing concern regarding the level of savings in South Africa?

  The decline in household saving is a concern, as today’s levels of savings have a critical impact on future economic growth.

  • Real growth in the long-term gross national income depends on South Africa’s ability to produce.
  • Saving can provide capital for investment in productivity, technology or production capacity, which in turn can drive economic growth.
  • The greater propensity to spend is regarded as a structural deficiency, which is preventing us from increasing our capacity to produce.
  • South Africa has become increasingly dependent on lending from the foreign sector to finance the shortfall between savings and capital formation.

  South Africa's low rate of saving is worrying for several reasons.

  • If households don’t save enough it will leave them vulnerable to rising prices and unpredicted income changes.
  • It affects individual’s ability to pay deposits for large assets like houses, etc and therefore affects overall wealth accumulation.
  • The countries worry is that low levels of individual saving add to the burden on the government to provide retirement assistance.

  South Africans have a tendency to “borrow to spend” – and this is one of the suggested reasons for the lack of a savings culture.

• Why are the South African household savings levels so low?

  We have low disposable income growth, low economic/employment growth and rising tax burdens and a low propensity to save. High inflation is creating a mindset of buying now before prices rise and individual South Africans are not saving and the trend appears to be getting worse each year.

  The fundamental reason for this lies in consumer behaviour. This is where the Old Mutual Savings Monitor hopes to raise people’s awareness of their own “savings behaviour” and help them improve their own savings habits and behaviour.

• Why must I save?

  Saving is the best way to get what you want and need with security and peace of mind.

• Why must I budget?

  Budgeting is the best way to finding out what you can afford based on how much you have. Differentiating between your needs and wants is the first step to saving.

• How can saving more help the country?

  Saving for your retirement and other future needs will not only leave you better off but the more South Africans save, the greater the pool of investment capital we create. The more investment capital available, the more potential there is for the economy to grow by creating jobs, for example.

  Savings support our countries economic growth and improve capital accumulation. This kind of savings investment tends to raise productivity and global competitiveness. A higher savings rate can help smooth the business cycle so that when difficult times arise, companies can have a buffer to rely on.

• Surely if I buy now its better than waiting for later when things are more expensive?

  When you save, your returns from your savings can offset inflation. So buying now could mean sacrificing the returns you could have earned above inflation. It's a question of balance: by buying now you can avoid the negative effects of inflation, but you may miss out on the opportunity of an even larger gain from saving. This includes the benefit of compound interest, i.e. saving earlier and earning interest on the interest already earned.

• When should we start saving?

  It's never too late to start saving or too early! The sooner the better is the rule. Help your children learn the value of savings by setting up savings programmes for them from an early age, piggy banks and match their savings to help them understand why savings is important. Financial education is the key to a healthy future. Instil that in your children from an early age.

• In South Africa some people use Stokvels to save. What are stokvels?

  Stokvels are community savings clubs. They sometimes also play the role of social clubs and burial societies. Stokvels also create savings for members through their increased buying and bargaining power. Government has realized that it has to support and encourage informal community-based savings. Consequently legislation has been introduced that deals specifically with stokvels.

  Most stokvels work as rotating savings clubs. Members contribute a specified monthly sum to the club, with each of them getting to keep all the contributions when their turn in the rotation arrives. Some stokvels work as funeral clubs and only pay out a specified amount, on the death of a registered beneficiary. They are a good tool for saving, and provide a stimulating social environment as well.

• Who can help me find the best way to save?

  There are many financial advisers and brokers and institutions in South Africa. They can help you work out the most beneficial financial plan for your future. Old Mutual financial advisers are always at hand to help you make the right decision to ensure a safe and secure financial for yourself and your family.

  Old Mutual's Financial Education website will also provide you with some very useful information on saving and budgeting.