Original Research

Mitigating the South African retirement-income shortfall crisis

Adriaan E. Pask, Johan Marx
Journal of Economic and Financial Sciences | Vol 11, No 1 | a176 | DOI: https://doi.org/10.4102/jef.v11i1.176 | © 2018 Adriaan E. Pask, Johan Marx | This work is licensed under CC Attribution 4.0
Submitted: 31 January 2018 | Published: 09 August 2018

About the author(s)

Adriaan E. Pask, PSG Wealth Ltd, South Africa
Johan Marx, Department of Finance, Risk Management and Banking, University of South Africa, South Africa

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Orientation: National Treasury acknowledges that 90% of all South African retirees will not have adequate financial resources in order to sustain themselves.

Research purpose: This study aimed to address the retirement income shortfall by assessing possible changes to prudential retirement fund regulations.

Motivation: Asset allocation plays a pivotal role in achieving the required rate of return of any portfolio. However, the restrictions on asset allocation imposed by article 28 of the Pension Funds Act of 1956 limits pension funds’ ability to achieve adequate returns.

Research approach: A survey was conducted among chief investment officers (CIO) of the top 25 South African investment management companies.

Main findings: The study proposes changes to the Income Tax Act, the Collective Investment Scheme Control Act and Regulation 28 of the Pension Funds Act.

Managerial implications: The proposed framework should result in fewer pensioners becoming dependent on the state for their pension and empower pensioners to have greater amounts of post-retirement savings.

Contribution: The contribution of this article is the proposed changes to the regulatory framework, which could – ceteris paribus: (1) Enable SA retirement fund investors to contribute to the retirement wealth pool in an unconstrained manner. (2) Enable SA retirement fund assets to increase investment returns by as much as 1.21% per annum. (3) Increase the average SA GRRs from the current projected 10.0% to 10.7% by 2045. (4) Increase the efficacy of the existing tax incentives. (5) Reduce spending requirements for grants in the national budget.


retirement-income-shortfall; prudential regulation; pension funds; investments; poverty


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