It’s time to rethink retirement in South Africa

WHEN should we stop working? It is a question that many South Africans encounter at some point, yet the answer is increasingly complex and deeply personal.

Let us first clarify what the law states regarding retirement age in South Africa. There is no universal retirement age mandated by South African law. In the private sector, the retirement age is determined by employment contracts, company policies, or pension fund rules. If these terms are not specified, section 187(2)(b) of the Labour Relations Act stipulates that it is only legally fair to dismiss an employee on the grounds of age if they have reached the "normal or agreed retirement age" for their specific role.

In the public sector, the governing legislation is the Public Service Act of 1994, which establishes the normal retirement age at 60. It also permits early retirement starting at age 55. These provisions have remained unchanged.

Traditionally, retirement has been linked to a specific age, often 60 or 65, when individuals typically leave formal employment. This model may have been more appropriate for previous generations when life expectancy was shorter, pension systems were more generous, and extended family support networks were stronger.

However, times have changed. Many South Africans now struggle to afford retirement at this age due to various modern challenges, including social, economic, and personal circumstances. The question should not be “How old is too old to work?”

Instead, we should ask: Is the individual still capable, passionate, and productive?

If the answer is yes, there is little reason to arbitrarily limit their ability to earn, contribute, and find meaning through work.

Recently, the Standard Bank Group announced a change to its executive retirement age, increasing the normal retirement age for executives from 60 to 63 years. This adjustment is part of the group’s ongoing commitment to attracting, retaining, and nurturing top-tier talent. There is a clear trend in the corporate environment towards extending the productive working life, as people are remaining healthy, energetic, and engaged for much longer.

While some individuals may choose to continue working, many do so out of necessity. In South Africa, the prospect of a comfortable retirement is discouraging. Many citizens are not financially prepared to retire.

Recent research indicates that fewer than 10% of South Africans can retire comfortably. For everyone else, state pensions - though essential - are often insufficient to cover basic needs, let alone unexpected medical expenses or the rising cost of living. The reasons for this situation are diverse. Low earnings, limited access to employer-sponsored pension funds, inconsistent employment histories, and a lack of financial literacy have left a generation vulnerable.

Even those who save diligently have watched their savings diminish due to inflation and economic instability. Consequently, many older South Africans continue to work simply because they have no alternative. So, what can be done? It is crucial to understand that starting retirement planning early can lead to better outcomes. Even small amounts saved consistently over time can grow significantly.

Encouraging young individuals to start saving and investing for retirement as soon as they begin working helps them appreciate the importance of managing their finances effectively. However, not everyone has the chance to start saving early. For those nearing retirement with limited savings, taking practical steps such as careful budgeting, eliminating unnecessary expenses, and seeking guidance from accredited financial advisors can help them effectively manage and extend their available resources.

Employers play a crucial role in supporting their employees' financial well-being throughout their careers. They should offer retirement planning workshops, encourage contributions to pension plans and annuities, and provide flexible options for older workers who wish to reduce their hours rather than retire completely.

A phased retirement model can facilitate knowledge transfer while easing the transition from full-time work. We need to challenge the stigma around working later in life. Many retirees seeking to re-enter the workforce - whether for financial reasons or personal fulfilment - often get overlooked. Yet, they bring valuable experience and maturity, essential for mentorship and leadership roles. Retirement should be viewed as a transition into a new phase, such as consulting or community involvement.

It should remain a choice rather than a result of economic necessity or age discrimination. Retirement is no longer a single event; it is a gradual process and a journey that requires careful planning, support, and respect. If society can move beyond rigid assumptions and start viewing retirement through the lenses of capability and dignity, we can create a system that genuinely works for all South Africans.

Jennifer Reddy is the CEO of Morar Incorporated. 

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