South Africa middle class not losing out on pensions: index

Last year was a relatively good year for both salary and pension earners, according to the latest BankservAfrica Disposable Salary Index (BDSI) and the BankservAfrica Private Pension Index (BPPI) released on Wednesday.

They show that, despite the economy slowing somewhat, income from formal sources generally beat inflation. On average the BankservAfrica banking payment system in South Africa processed 3,070,000 formal salary payments and 650 000 pension accounts per month in 2015. the BPPI has shown even better growth than take-home salaries, but off a far lower base.

“Interestingly 2015 was the year that pensions performed best. While South African company profits are under pressure, pensioners received substantial increases that outperformed salary increases,” said Mike Schüssler, chief economist at Economists dotcoza.

Bankable pensions average only 46% of disposable salaries in 2015, with the average pension increasing by 9.1% over 2014. In 2015 real average pensions increased by 4.3% for the year, with the average pension being R5 840, and the actual average pension in December being R6 116.

Dispelling some myths about the South African middle class losing out, the pensions of median persons fared much better than the average in 2015, according to Schüssler.

For the second year in a row median bankable pensions increased by double figures, up by 10.3% in 2015 when compared to a year ago, and for the second consecutive year. This means they beat the average inflation rate by 5.4%. The median pension paid into a bank account was R3 909 for 2015.

BankservAfrica noted that increases in pensions slowed towards the end of the year and therefore infers that 2016 may not be as positive for pension income growth, as market turmoil is likely to impact on the ability of trustees to increase pensions.

The median salary, while still lower than the average salary, was R9 374 in 2015, 7.1% higher than in 2014.

According to Dr Caroline Belrose, head of fraud and data analytics at BankservAfrica, the visible formal sector earnings represent over a third of employees and about 80% of pensioners for this data set.

The average take-home salary was R12 715 per month for the year, except in December, which is always a higher salary month due to bonuses being paid. December’s average was R13 733. Average take-home salaries increased by 6.7% in 2015, down from the 8.8% increase in 2014. Average salaries in real terms were 2% higher in 2015 than 2014.

"This means salaries beat the average inflation rate of 4.6% quite comfortably, although at a slower pace than in 2014,” explained Belrose.

Despite personal income tax hikes and low employment growth in the formal sector, employees in this sector are still receiving salary increases after tax and deductions.

"The last two years have seen above-inflation increases in money that goes into both employee and pensioner accounts. This has helped keep retail sales alive, which have increased in real terms for 17 consecutive months," said Schüssler.

"It, therefore, seems that a few more positive growth months in retail and restaurant sales can be expected. However, higher interest rates and other economic concerns will probably mean that both retail and durable goods sales will not have positive growth in the latter half of 2016."

Source: Fin24