While structural change in the retirement system takes time to unfold, and often years to deliver visible results, the need for coordinated and sustained action has never been more urgent. Ensuring the sustainability of South Africa’s retirement system – as a social safety net and a financial pillar of the economy – demands a unified response from all stakeholders: government, regulators, employers, industry leaders, and public and private institutions.

“Even for members with access to retirement funds, outcomes will remain inadequate without multi-stakeholder collaboration driving further systemic reform and large-scale change that improves member positions,” says Keri-Lee Edmond, Head of Business Intelligence in the Customer Team at Old Mutual Corporate.

Old Mutual Corporate’s 2025 quantitative research, conducted by Edmond and based on actual member data from umbrella fund arrangements, confirms that there is still evidence to support National Treasury’s long-suffering statistic that only 6% of members are on track for a secure retirement – an estimate made decades ago and evidenced year on year. 

“It can be profoundly disheartening to watch the same statistic resurface year after year, unchanged – a constant reminder of how slowly progress comes in the retirement landscape,” says Edmond. “Most members still accumulate savings at a pace that’s just too slow to secure enough financial security and freedom, consistently falling short of the 70 to 75% replacement ratio considered the gold standard in South Africa. Despite years of industry effort, regulatory reform, and public awareness, the dial has barely moved.”

From insight to impact: how the numbers help us move forward

What changes have the power to finally improve that 6% statistic? The Two-Pot system is mathematically certain to have a significant impact on member outcomes over time – at the very least, improving savings by up to two to three times. Preservation is already showing small but positively measurable movement within the first year of implementation. The maths implies that, in 30 to 40 years, if all else remains the same, that statistic could be trending upwards of 20% of South Africans being on track for a secure retirement. This is powerful for one area of action in the larger system.

The significant impact of retirement reform suggests that this is an area worth pursuing. Retirement strategies that have worked for global countries – including mandatory and minimum contributions, auto-enrolment, auto-escalation, and consolidation – all remain promising options for the South African landscape, if these can be tailored for our unique nuances and societal functions.

According to Edmond, there are two key areas of action, or levers, that are in the control of the employer and employee, that would drive the most meaningful change in improving member outcomes: time in the fund and contribution rates.

These levers are important because they interact in a way that has a multiplied effect. Contributions + time = magic. “Sufficient time in the fund and appropriate contribution levels are the magic numbers for retirement, and the earlier they align, the greater the impact,” explains Edmond. “Without enough contributions, more time alone will not close the gap; without enough time, high contributions may still fall short. Both must be addressed concurrently to shift outcomes at scale.

1. Lever one: Time in the fund

“Increasing the time that money is invested in the fund – by preserving retirement savings when changing jobs and extending working life – meaningfully improves adequacy through three reinforcing effects: continued contributions, longer compounding on larger assets, and a shorter drawdown period,” says Edmond. As illustrated in the graphs below, extending retirement age from 60 to 65 reduces the required savings multiple by nearly one times a member’s annual salary, which is significant in absolute asset accumulation terms.

Increasing the retirement age is one of the most efficient levers for improving sustainability in systems where increasing contributions may be limited, says Edmond. “The impact of additional working years is disproportionately large compared to other adjustments, making it an efficient strategy in contexts where increasing contributions may be financially constrained.”

Old Mutual Corporate’s data reflects a growing trend of more employers steadily shifting towards a retirement age of 65 – a movement shaped by demographic realities, financial pressures, and the pursuit of long-term retirement adequacy. However, some businesses justify, or even encourage, maintaining an earlier retirement age, through the lens of employee transformation and workforce renewal. This is likely as a result of the concern that retaining older workers may limit opportunities for youth employment – a particularly salient issue in South Africa, where youth unemployment remains elevated.

Edmond acknowledges this directly: “With South Africa’s high youth unemployment, it is understandable that employers worry about reduced job openings for younger workers”. However, a growing body of research – including work by the World Bank and the Organisation for Economic Co-operation and Development (OECD) – shows that increased employment among older adults tends to coincide with stable or even rising youth employment. “Multi-generational participation often accelerates innovation, productivity, and the development of complementary skills,” she explains. 

“It’s also important to understand that our low savings levels and high dependency ratios on limited incomes exist across age groups, genders and incomes. Employment options at all levels and ages are required to improve the economic stability of the country,” Edmond adds. 

She cautions that sector-specific challenges must be acknowledged. “In physically demanding industries like mining, manufacturing and construction, older employees may face higher health risks and safety concerns. Evidence shows that while functional strength can remain stable, declining stamina or endurance means that some tasks may require adaptation.

”The argument that an extended working age increases youth unemployment can therefore be countered by global evidence within a local context, which indicates that a mentor-mentee relationship system enables transfer of knowledge, reduced years of drawdown for older members, increased employment of youth, and a more stable financial economy for all generations.

“Intentional and thoughtful design of employment models can mitigate many of the downsides,” says Edmond. “The evidence underscores the importance of flexible work arrangements, gradual transitions to retirement, and redesigned roles that match employees’ capacities and aspirations. These approaches allow employers to maintain productivity while assisting employees to transition into the next chapter of their choice with additional financial support.” 

According to Edmond, we are all a part of this intricate ecosystem. “South African employers have a responsibility to build good infrastructure, not only for the long-term financial security of their employees, but to contribute to the future of our economy,” she says. 

Ultimately, extending working life for employees should be viewed not only through the lens of cost containment, but as part of a broader responsibility to design strong and reliable national systems. “This is reinforced by why employees belong to funds in the first place: for protection from poverty, to provide income support for life after traditional employment, and to reduce pressure on our social protection system. Balancing affordability, responsible flexibility, and fairness is the mark of a mature retirement framework that meets the needs of both employers and employees over time,” Edmond says.

In addition to increasing the retirement age, preserving retirement savings when changing jobs is an important way to increase time in the fund. According to Edmond, nearly all members with balances below R150 000 withdraw their savings when changing jobs, effectively resetting their progress. While the Two-Pot system will significantly improve preservation over time, it’s crucial to recognise that vested monies remain accessible and at risk of withdrawal.

“Preservation isn’t just a policy issue; it’s a behavioural and practical decision within each member’s control,” says Edmond. “When people change jobs, they have the power to preserve their savings and transfer benefits to their new employer’s fund or a preservation fund. It’s critical that this portability is designed by funds and decision makers to be straightforward and beneficial to members, but it will also depend on the active decisions made by those employees at crucial career and life moments.”

Employers and trustees can help by making preservation the easiest choice. Systems, communication, and default processes must support members in retaining their savings. In a world where inertia shapes behaviour, making preservation the path of least resistance is one of the most effective interventions available

The data demonstrates that higher contribution rates are the single most powerful driver of outcome divergence over a working lifetime,” says Edmond. She explains that members in the highest contribution categories accumulate more than double the assets of moderate contributors, and several times more than low contributors (see graph below).

“The magnitude of how much you are saving matters,” says Edmond. “Many employees remain in the lowest permissible contribution categories – often not by informed choice, but by a lack of engagement with the system. This underscores the critical importance of minimum contributions, defaults, and using automation to assist members with the emotion of increasing their contributions.”

The gap in outcomes becomes increasingly pronounced from mid- career onwards, as higher-contributing members begin to benefit from the exponential effects of compound interest, investment returns, and sustained capital accumulation. These patterns point to a structural challenge – and to a powerful opportunity. The evidence strongly supports early intervention through well-calibrated default contribution rates, targeted communication strategies, or even policy frameworks that encourage incremental increases over time. When aligned with long-term fund design, contribution rates become a high-impact lever for improving member outcomes at scale, driving both individual financial security and system-wide sustainability.

What trends and patterns are we seeing?

Looking at savings behaviours and outcomes, Edmond highlights a few key statistics and insights from Old Mutual Corporate’s extensive data investigations in 2025:

• Short tenure and leakage: The majority of members spend fewer than ten years in any employer fund, with more than half consistently changing jobs in three years or less, says Edmond. This short tenure leads to frequent cash withdrawals (leakage), undermining compounding and continuity.
• Under-saving: Contribution rates remain far too low relative to what is needed to achieve a decent replacement ratio to continue desired standards of living. More than 70% of total contribution rates are below 15%. Even sustained participation doesn’t close the gap without higher contributions.
• Ineffective preservation: Members cash out smaller balances (less than R150 000) almost universally. With less time spent in jobs and funds, the balances available when leaving employers are lower and, therefore, very likely to be withdrawn. This is a behavioural insight observed across income bands, ages, genders, and levels of financial education. The Two-Pot system will improve preservation.
• Fund design and defaults: Low default contribution categories and lack of supportive employer practices in many sectors further limit adequacy. A statistically significant number of employees remain in defaults, due to fear, apathy, lack of knowledge, or perceived social norms. Where these defaults are inefficiently designed, it is negatively impacting large groups of members in the long run.
• Behavioural and financial literacy gaps: The quantitative trends reflect that members lack the behaviour, resources, tools and incentives to make better choices about contribution escalation, preservation, and annuitisation. Many members exercising active changes are making poor choices. However, the data does demonstrate that digitisation improves scale and will potentially allow us to increase reach in more underserved communities – engaging, educating and helping significantly more members close these gaps.

How can we increase contributions?

Edmond highlights the following key considerations when it comes to shifting the dial on contribution rates.

• Gradual escalation is more sustainable than sudden increases: “As shown in our 2025 analysis, contribution rates have the most transformative impact when they are built progressively rather than imposed overnight. Increasing contributions around salary-increase time, in small increments or by automatic escalation (where contributions are automatically increased, also by small increments, each year), helps members adapt without feeling immediate financial strain. Over time, these incremental steps compound into a much stronger retirement outcome.”
• Defaults matter because most people stay where they start: “Our data research highlights that many employees remain in the default contribution category due to fear, inertia, or a lack of clear guidance. By setting higher default contribution levels from the start, employers can empower their people to build stronger financial futures, without the stress of constant decision-making. It removes the burden of tough choices and replaces it with quiet progress, helping employees save more, effortlessly, year after year.
• Framing contributions as part of total reward could also improve buy-in: “Many employees often begrudgingly view these monthly contributions as reduced take- home pay that could otherwise be used for current consumption. However, pension assets tend to be one of the largest forms of savings for most South African workers. When contributions are positioned as deferred income or long-term security rather than a deduction, members are more likely to view them positively. Clear, empathetic communication can shift perception from sacrifice to investment for personal growth and progress.”
• Employer contributions remain a critical lever: “Our 2025 statistics and insights showed that sectors with higher employer contributions, such as mining and financial services, are demonstrating significantly better outcomes. For many workers under pressure, employer generosity and good fund design are the most practical ways to close the gap. Encouragingly, some employers are demonstrating that it is possible to balance business sustainability with a commitment to employee wellbeing.”
• Policy can play a role in protecting long-term interests: “The Two-Pot system is an example of reform designed to address immediate liquidity needs while safeguarding a portion of savings for retirement. Over time, this balance can help households manage short-term costs without eroding their future financial security. As private and public sector, we need to put more policies like this in place that serve our members, and South Africa, for the greater good.”
• Behavioural support and education are essential: “Data shows that members often underestimate how much they need to save. Regular, accessible education and transparent tools can empower people to make informed trade-offs. When people understand the consequences of contribution choices, they are more likely to commit to gradual increases, even in a challenging economic environment. Behavioural nudges and journey designs are also critical as they have shown to have effects on member behaviours, i.e. how easy or difficult it is to withdraw or preserve money when leaving employers.”

The power of employers

The implications are clear: employers play a pivotal role not only in providing access to retirement funds, but in shaping whether or not those funds will lead to meaningful outcomes. The variation in employer behaviour highlights a pressing need for better standards. Without regulation or industry benchmarks to guide minimum contribution levels or default design, disparities will persist – and so will unequal outcomes.

“Encouragingly, some employers are setting an example, showing that it is possible to balance employment costs with a genuine commitment to long-term employee wellbeing and our country’s economic stability,” says Edmond. “High employer contributions, paired with well-considered defaults, can dramatically improve the likelihood of positive and valuable member outcomes. These employers deserve recognition, not just for fulfilling a payroll function, but for upholding a social promise.”

The heatmap of retirement outcomes above corroborates this interesting insight with a visible pattern of improving outcomes emerging in the financial services and mining industries. This has largely been due to positive fund design changes from larger employers, improving the outcomes of members across their life journey, and paints a powerful picture for the employer role in securing their employees’ financial futures.

The sum of our collective parts

“The story told by our data is actually not one of despair; it’s one of possibility, precision, and potential for progress,” says Edmond. “Retirement adequacy is built brick by brick, step by step, through consistent contributions and time. It is not patchwork, it is architecture. It is not a sprint, it is a marathon.”

While it takes time to demonstrate the full impact of systemic change, the extensive Old Mutual Corporate data research in 2025 reveals promising green shoots. Combinations of small tweaks – whether in contribution defaults or retirement age – can produce outsized impact for members. And the earlier we act, the better the result.

“Our modelling shows that a one-year increase in NRA plus a 1% increase in contribution rate can yield a 10 to 12% improvement in replacement ratio. These levers don’t add; they multiply,” says Edmond. One lever at a time may shift the dial, but used together, preservation, contribution escalation, extended working years, and appropriate annuitisation become a system of transformation.

Employers hold both the power and a responsibility to shift retirement outcomes for working South Africans. They also hold one of the greatest untapped levers in the retirement system: the ability to design futures, one default at a time. “We cannot build a better future by solving only for today,” Edmond says. “Retirement reform is about the courage to design 40 years ahead, for our generation and generations to come.”

*This article originally appeared in the 2025 Old Mutual Mindspace Thought Leaders Forum special issue. To read more and subscribe, click here.