More are spending tomorrow's money today

Struggling South Africans are cashing in retirement policies and pensions to keep pace with their debts.

The news comes on the eve of what is expected to be a tough budget on Wednesday, when widely predicted tax increases may reduce disposable income even further.

Anna Rosenberg, senior policy adviser at the Association for Savings and Investment South Africa, said: "Long-term insurance statistics indicate that consumers are grasping at straws for financial survival, with many policyholders unfortunately resorting to surrendering their savings policies to access much-needed cash.

"Benefits paid as a result of individual savings policy surrenders increased by 18% in the 12 months from the end of June 2015 to 30 June 2016."

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Labour lawyer Michael Bagraim said people from MDs to cleaners were choosing voluntary retrenchment and even resigning from secure jobs to get access to money to pay off debts.

"Every retrenchment I've seen in the last three months, there have been more voluntary candidates than numbers needed," he said.

"It has almost become an avalanche compared to a few years ago when people were clinging to their jobs with their fingernails."

Carel van Aardt, of the Unisa Bureau of Market Research, said many people were tapping long-term investments as a coping strategy.

"The strategy of cashing in policies has definitely been picking up speed, especially in the past three years," he said.

Bagraim warned that people cashing in retirement funds early would create a time bomb. After getting payouts, they were walking the streets to find jobs that did not exist.

"I saw one fellow swimming in debt. If he resigned he could collect his pension of about R350,000 and get a severance package.

"Rather than lose his car and house, and pull their child out of a private school, he took voluntary retrenchment to pay off his debts. But he has not found another job."

Every income group is reeling from debt, economists say, even though there has been a modest drop in debt per household thanks to stricter lending criteria and shrinking disposable income.

The richer band of South Africans had a high level of debt, said an economist, speaking off the record about research that will be released in a month.

block_quotes_start Rather than lose his car and house, and pull their child out of a private school, he took voluntary retrenchment to pay off his debts

Labour adviser Werner Buys said he had dealt with workers who intentionally got fired to get access to their pension.

"Sometimes they will say to the employer 'Ek wil my geld hê[I want my money]' but the employer won't give them retrenchment. Then they intentionally stay away from work and commit offences to get dismissed," he said.

The retrenchment cycle last year was unremarkable - unlike in 2014, when many government employees such as teachers and nurses took early retirement to access their pensions, Buys said.

But this year had got off to a sombre start: "I have just walked out of retrenchment negotiations and I'm going to retrenchment talks at another company this afternoon.

"This is the first time ever I'm doing retrenchments so early in the year. Usually they start around the time of wage talks."

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Van Aardt said common coping strategies included reducing savings, cutting out luxuries such as pay TV or gym membership, renting instead of buying property and moving to a smaller home.

The South African Insurance Association said struggling consumers were also cutting back on cover. Nico Esterhuizen, the association's general manager of insurance risks, said only 35% of motorists on the road were insured.

The pace of debt in households is slowing slightly because people are not incurring more debt.

But salary increases have not kept pace with inflation and households are hurting from medical aid increases and elevated interest rates.

Momentum economist Johann van Tonder said there had been a significant drop in retail spending towards the end of last year.

Durable goods sales in the third quarter of 2016 were down 7.8% compared with a year before, according to the South African Reserve Bank, and new car sales had dropped sharply.

FNB economist John Loos said that if food prices dropped with the alleviation of the drought, households could be better off.

But a ratings downgrade and depreciation of the rand could lead to interest rate hikes, putting households under severe pressure. —  Additional Reporting by Suthenitra Govender

sub_head_start Financial woes take mental toll sub_head_end

Financial stress can have a damaging effect on your mental health.

"Any financial stress can cause problems at work, home, relationships, marriage and so on," said Cassey Chambers, operations director at the South African Depression and Anxiety Group.

Part of the problem is that "there is a lot of shame and stigma attached to both debt and mental ill-health - many keep it hidden until it becomes a major problem", she said.

"It is important that they speak to someone. There is help - it is never too late."

Studies have shown a link between financial stress and suicide.

British scientists found that an extra 1,000 deaths and up to 40,000 more suicide attempts between 2008 and 2010 might have been caused by the recession of 2008.

Another study found that those who committed suicide over money did so because they had lost their savings, had been driven by financial troubles to first kill other family members, or were being investigated for fraud. —  Reporting by Tanya Farber

keetonc@sundaytimes.co.za