Salary growth declines, pensions continue to increase
Salary growth declines slightly but still outpaces inflation, while pensions continue to increase strongly in nominal and real terms.
The latest BankservAfrica Disposable Salary Index (BDSI) indicates that average salary growth has declined slightly to 6.6% in September, as the large back pay of civil servant salary increases abated. The average disposable salary was about R120 lower than August, reaching R12 989 for September 2015.
“There are other factors playing a role in the reduced disposable income that we see in the latest figures, including taxes that would now be higher after the government back payments have been taken into account,” says Mike Schüssler, Chief Economist at Economists dotcoza. “Medical insurance and other deductions often also increase when salaries go up, but can be delayed by a month or two. This then decreases take-home pay a few months after the actual increases have taken effect.”
“Salaries are still up nearly by 2% in real terms as inflation remained steady at 4.6% in September,” explains Dr Caroline Belrose, Head of Fraud and Data Analytics at BankservAfrica. “While employment may be under pressure, salaries being paid via the central South African Payment System show that increases are still relatively good, given the poor economic conditions in the country.
” The typical salary increased 8% over the last year and the data shows that salary increases were higher in the middle of the salary spectrum. This was up by 3.2% in real terms. The median or typical salary is inching closer to R10 000 per month, but is currently at R9 718.
“Salaries are very likely to show slower growth over the next few months as, apart from the December bonuses, most of the salary increases are now paid. It is still expected that the typical disposable salary paid via BankservAfrica will be more than R10 000 by early 2016. Therefore, we foresee retail sales continuing to be the highest growing part of the economy for another month or two,” says Schüssler.
Private pensions also enjoyed growth last month, increasing by an average of 10.1%, while the typical private pension increased by 10%. This means that average private pension growth has outpaced average disposable salary growth for 10 months in a row. The median private pension has done the same over typical disposable salary growth for nine months running.
“However, average private pensions remain at only 45.8% of the disposable salary and average at R5 946 per month, and the typical pensioner only gets 40.6% of the typical disposable salary. The median pensioner received R3 946, which is R2 000 less than the average. We expect the R4 000 level to be breached in the next month or two,” concludes Belrose.
Contact Wendy Fourie for more information: WendyF@bankservafrica.com or 011 497 4119.
Notes to the editor:
The BDSI data is smoothed on a three month moving average basis and adjusted for both weekly payments and pension payments. The average pension payments are only about 60% of those of people in employ, so the BDSI focuses on the employed and their salary payouts. We therefore adjusted the monthly numbers to take this into account. The average disposable salary is adjusted on a constant basis for these two factors. December is a very high payout month and somewhat distorts monthly averages, but we believe that the year-on-year trends remain intact.
Similar to the BankservAfrica Disposable Salary Index (BDSI), the Private Pension Index is an income gauge of money paid into bank accounts from pension schemes. While we do not know the exact number of people, we do know the exact number of beneficiary accounts and this shows that there are about 633 000 monthly payments (for 2014 on average) going through the BankservAfrica system, which have been identified as pension payments.
This number does change slightly from month to month but out of the known universe of 810 000 private pension payments, it appears that the BankservAfrica payments system captures over 80% of the pension payment accounts. This indicates that the sample size of private pensions is extremely good via the BankservAfrica payment system.
We do not consider payments over R100 000 in size as these would typically be lump sum pay-outs of the amount that people can take out of their pension. These could also be pay-outs of the remaining pension in an account to family of a deceased. This remaining amount can often average well over R350 000 for each payment and as with the BDSI these payments do tend to distort the averages at certain times of the year. For 2014 these exclusions reduced the number of accounts considered from 633 000 to 628 000.
Payment analysis is conducted from the second of each month to the first of the following month inclusive as payment dates can vary when a month ends on a Sunday. A three month moving average is then calculated for trend analysis.
BankservAfrica is a payment-enabling organisation operating between the various South African banks with a very secure messaging environment in place. Economists dotcoza is an economic consultancy that helped develop the BPPI.