By Jean Lombard, 22 November 2018
South Africa does not have a strong savings culture. Our recent Sanlam Benchmark Survey revealed that people are saving too little, with the average savings rate in South Africa reaching 7% of income. This falls substantially below the recommended minimum, which is 15%1.
2018 was a difficult year with low economic growth, volatile investment markets and substantial increases in living costs due to, amongst other things, higher fuel prices and a weak currency. In this context, many South Africans’ discretionary income is under pressure, making it even more challenging to save for the future.
At times like these, your commitment to saving and doing so consistently, even if it’s only a small amount at first can be severely tested. It’s important to invest your money in the right place, by choosing a plan that is well-aligned with your savings goals and your unique risk profile.
You don’t need large amounts of money to invest in your future. Sanlam’s products are designed to make it easy and attractive for people to start saving for retirement and other life goals with a small amount, such as a few hundred rand per month.
Once you’re saving, it’s important to stay the course so you can realise the full potential of compound interest. This is the interest you earn on your interest – and it is therefore an advantage that grows greater over time. The longer you’re invested, the more you benefit from the power of compound interest and this is when you really begin to grow your wealth.
There are bonuses that get added to our newer generation products that reward clients for staying the course with their savings. The Cumulus Echo Retirement Plan, for example, will reward you with an “Echo Bonus” at retirement for starting early and staying the course. The longer you save, the higher the Echo bonus you receive.
We’re committed to making the cost of investing as low as possible over the longer term, enabling clients to get more value from their savings. Sanlam offers a wide array of investment funds with very competitive fees. Our product development team also develops tailor-made and unique solutions not available elsewhere in the market. The SATRIX Dynamic Balanced Fund is such an example. Very few funds in the industry are as cost effective as this fund at a total investment cost of only 0.2% per annum.
For those investors who want to minimise the impact of market fluctuations on their retirement savings, a range of our legacy plans have an underlying investment in Smoothed Bonus Funds. With these vehicles, you benefit from a smoothing mechanism that preserves your returns when the markets are performing well and tops up your returns when the markets are flat. This provides more peace of mind during challenging years like this one.
Market volatility is unnerving, but it’s important to remember that ups and downs do happen and can be managed, especially when you’re investing over a longer time horizon with the right partner. As a business, Sanlam celebrated 100 years of experience and stability during 2018 – and we’re confident that we’ll stay this course for another 100 years.
1 https://businesstech.co.za/news/finance/244689/south-africans-start-saving-for-retirement-five-years-too-late/
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