Absa (ASA), South Africa's largest retail bank by customer numbers, has welcomed the labour department's plans to promote retirement savings among vulnerable workers.
Johan Gouws, Executive Director at Absa Investments, says the move will allow more South Africans to take control of their financial and create a suitable savings vehicle for low salary workers.
Labour Minister Mildred Oliphant recently announced that her department is looking at ways to promote retirement savings among farming and domestic workers. An investigation is currently underway to determine the feasibility of such a savings vehicle. Gouws believes this plan is a step in the right direction and will aid in addressing South Africa's poor record for saving.
"The latest statistics indicate that South African households have an almost zero percent savings rate. In some cases this is due to financial illiteracy as well as an inability to save due to the increased cost of living. This has also left the country exposed and dependant on international investment flows in order to balance the financial books of government," said Gouws.
Gouws however remains confident that government's initiative is feasible, but would require various elements to support it.
"There needs to be a drive to improve financial literacy, and to improve the accessibility of the savings solution to the target population. It would also help to offer a low cost solution to improve on savings," added Gouws.
He also suggested providing employers with appropriate incentives to make additional contributions to aid workers as well as supporting workers with easy access to information regarding their savings.
The biggest obstacle however is for workers to overcome the hurdle of having sufficient money at the end of the month to start saving. Gouws suggests drawing up a budget in order to start saving for the future.
"Start with a personal objective about your financial future and draw up a very basic schedule of your income and expenses to find surplus money to save. Investing in one's own financial future should be high on people's priority list from as early as possible during the income generating years," Gouws concluded.
Article continues on page two: Old Mutual says retirement reform proposals bode well for savings