Pension increases keep beating inflation
Pensioner cohort grows along with their influence on the economy
BankservAfrica data on pensions continues to show that pension increases are outpacing inflation, with growth of 3.8% after inflation is taken into account. Both the average and the typical pensions increased by 9.2% last month according to the BPPI. The average pension stood at R5 873, and the typical pension was R3 904 for the month of August 2015.
“Pension assets are no longer growing at over 9% though, so there will come a time when 9% plus increases will no longer be possible. But there is no clear indication of when that might occur,” says Mike Schüssler, Chief Economist at Economists dotcoza.
In 2013, the Financial Services Board (FSB) reported that close to 810 000 people were receiving private pensions. Of these, over 655 000 (or 81% of the South African pensioner group) are captured with the BankservAfrica Private Pension Index (BPPI).
“This unique data set allows South Africa to get an understanding of the people who receive a private pension,” said Dr Caroline Belrose, Head of Fraud and Data Analytics at BankservAfrica.
The fastest growing age group in South Africa are those over 65 years old. The latest population estimates project that this pensioner group grew by 3.3% over the last 12 months, compared with the overall population, which only grew by 1.7%.
“The population over 65 years old has been growing by at least 3% for 12 years, and this part of the population is becoming increasingly important as they make up a large portion of the economy. Only around 5% of this group still work, the rest is on pension. Overall this section of the population tends to be more inclined to vote and to try to influence their communities for the better, making them quite influential,” says Schüssler.
The average private pension paid into a bank account stands at 44.8% of the average salary – keeping pensioners near the 45% of salaries mark.
Fifty one percent of pensioners received less than R4 000 in their bank accounts in August 2015, but the growth in pensions has seen those who get paid between R10 000 and R 25 000 grow by 53% since January 2013.
“Interestingly the highest growth in numbers in August 2015 has been those who received pensions between R25 000 and R50 000 – this was up 59% from January 2013. The numbers are still small but we have seen this category grow from roughly 4 600 pensioners to about 7 400 pensioners in those 20 months,” says Belrose.
BDSI shows disposable salaries increase to be more than inflation
“Despite income tax increases and higher medical insurance payments, disposable salaries are still beating consumer inflation. And as one would expect, salary increases are contributing to higher retail sales figures, which is still growing at over 3%,” says Schüssler.
The average disposable salary paid via BankservAfrica was R13 108 – a total of 8.6% higher than a year ago, meaning salaries again beat inflation by 3.3% in August 2015. The median or typical salary paid into bank accounts was R9 674, which was 8.9% higher than 2014.
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.