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WHAT’S INSIDE YOUR NOVEMBER ISSUE: RETIREMENT FUNDS From the state of two-pot to the timing of retirement withdrawals, we investigate the issues driving the South African retirement landscape. Cover story + 9-12
MEDICAL AID DECISIONS FOR 2026 As medical schemes announce rate and benefit changes for 2026, clients are looking for more than affordability – they want cover that aligns with their values, lifestyle and priorities. Pg12-15
VENTURE CAPITAL While it gives investors access to high-growth potential opportunities, venture capital also comes with its own unique risks. We take a closer look at the pros and cons. Pg16-17
OFFSHORE INVESTING Navigating the regulatory requirements, tax implications and currency volatility associated with offshore investing demands careful, well-informed advice. Pg20-25
INCOME PROTECTION INSURANCE Income protection remains one of the most underappreciated yet essential elements of a sound financial plan. Advisers need to be fully informing clients on the value of this cover.
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Pg27-29
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How longevity and wellness are reshaping retirement planning By Sandy Welch
Editor, MoneyMarketing
R
etirement in South Africa is at a crossroads. While the industry continues to grow, a sobering reality remains: the vast majority of South Africans are not financially prepared for life after work. “Various surveys from major industry players indicate that as many as 90 to 95% of people don’t have adequate retirement funding,” says Kenny Rabson, CEO of Discovery Invest. “It’s quite binary because there are those who are well-off with sufficient assets, and then a very large portion of the population who simply aren’t on track.” Rabson explains that the local retirement industry operates across two major pillars: the institutional space, where employers manage pension and provident funds for their staff, and the retail space, where financial advisers help individuals invest through retirement annuities and preservation funds. “Both are huge industries,” he says, “but across the board, we’re seeing that individuals are carrying more of the risk for their own retirement outcomes.” How the landscape has changed That shift from defined benefit to defined contribution schemes, where individuals decide how much to contribute and how to invest, has fundamentally changed the retirement landscape. “With defined contribution, the risk sits squarely on the shoulders of the employee,” Rabson notes. “You’re choosing how much to save and where to invest, and just hoping that by retirement, the fund is of reasonable size. The man in the street is carrying all the risk.” Adding to this dynamic are significant legislative developments, most notably the introduction of the two-pot system. “It has pros and cons,” Rabson acknowledges. “On the one hand, it gives people who are in real financial distress the ability to access funds. On the other, it risks people dipping into savings unnecessarily and damaging their long-term outcomes. But overall, it encourages more preservation and that’s positive for the industry over time.” Other regulatory shifts, such as the recent changes to Regulation 28, are also reshaping how retirement funds are managed. “Reg 28 defines what assets can be held in a retirement portfolio,” says Rabson. “Managers now have more freedom, so for example, they can allocate up to 45% offshore. This means we’ll
Kenny Rabson, CEO of Discovery Invest
start seeing greater variability in returns between funds, as managers take different views on currency, asset class and geography.” This, he believes, is a step in the right direction. “It’s positive that asset managers have the freedom to apply their best thinking,” he says. “And I think pressure will continue to build to evolve Reg 28 even further. Private markets, for instance, are becoming a much bigger part of the global investment landscape. If you’re only looking at listed equities, you’re playing in a shrinking part of the market.” At the same time, tax considerations continue to influence how South Africans save. The annual cap of R350 000 on deductible contributions, Rabson notes, has had unintended consequences. “For high-income earners, it’s a real disincentive,” he explains. “They’re asking, ‘Why lock up my money if I’m not getting the tax deduction?’ So, we’re seeing more voluntary, discretionary investments being made outside of retirement funds.” A change in behaviour is essential The combination of legislative reform, shifting investment dynamics and persistent savings gaps makes one thing clear – South Africa’s retirement system is in flux. And while there are positive structural shifts underway, Rabson cautions that the biggest challenge remains behavioural. “The earlier you start saving, the better the outcome,” he says. “But for many young people, that’s difficult because they have debt, family responsibilities and short-term aspirations. Yet the cost of waiting is enormous. Start late, and the percentage of your income you need to save skyrockets.” Rabson believes that education and behavioural change remain the most pressing challenges in South Africa’s retirement landscape. “People need to understand the burden of retirement,” he says. “You must start early, save the right amount and resist the temptation to cash out your savings when you change jobs. That’s where financial advisers play a critical role. They can help people stay disciplined and make decisions that protect their long-term financial security.” Economic pressures, however, often get in the way. High interest rates, inflation and stagnant wage growth are making it harder for South Africans to save. “It’s very correlated,” Rabson notes. “When interest rates are high and people are under pressure, they tend to stop their voluntary investments. Continued on next page