Press release: For immediate release
Date: Wednesday, 27 January 2016
Real increases for the median in 2015
The BDSI and BPPI overview for 2015 shows it was a good year for most formal income earners
For both salaried individuals and pension earners, 2015 was a relatively good year. Despite the economy slowing somewhat, income from formal sources generally beat inflation. The overall BankservAfrica Disposable Salary Index (BDSI) for 2015 reveals some interesting aspects about formal sector employees in South Africa, and the salaries they get, while the BankservAfrica Private Pension Index (BPPI) has shown even better growth than take-home salaries, but off a far lower base.
“On average the BankservAfrica banking payment system in South Africa processed 3 070 000 formal salary payments and 650 000 pension accounts per month in 2015. We believe that these visible formal sector earnings represent over a third of employees and about 80% of pensioners for this data set,” says Dr Caroline Belrose, Head of Fraud and Data Analytics at BankservAfrica. “The average take-home salary was R12 715 per month for the year, except in December, which is always a higher salary month due to bonuses being paid. December’s average was R13 733.”
“Average take-home salaries increased by 6.7% in 2015, down from the 8.8% increase in 2014. Average salaries in real terms were 2% higher in 2015 than 2014. This means that salaries beat the average inflation rate of 4.6% quite comfortably, albeit at a slower pace than in 2014,” Belrose explains.
Despite real personal income tax hikes and low employment growth in the formal sector, employees in this sector are still receiving salary increases after tax and deductions. “Interestingly 2015 was the year that pensions performed best. While South African company profits are under pressure, pensioners received substantial increases that outperformed salary increases,” says Mike Schüssler, Chief Economist at Economists dotcoza.
Bankable pensions average only 46% of disposable salaries in 2015, with the average pension increasing by 9.1% over 2014. In 2015 real average pensions increased by 4.3% for the year, with the average pension being R5 840, and the actual average pension in December being R6 116.
Dispelling some myths about the South African middle class losing out, the pensions of median person fared much better than the average in 2015. For the second year in a row median bankable pensions increased by double figures, up by 10.3% in 2015 when compared to a year ago, and for the second consecutive year. This means they beat the average inflation rate by 5.4%. The median pension paid into a bank account was R3 909 for 2015.
BankservAfrica did note that increases in pensions slowed towards the end of the year and therefore infers that 2016 may not be as positive for pension income growth, as market turmoil is likely to impact on the ability of trustees to increase pensions.
“The median salary, while still lower than the average salary, was R9 374 in 2015, 7.1% higher than in 2014,” says Belrose.
The last two years have seen above-inflation increases in money that goes into both employee and pensioner accounts. This has helped keep retail sales alive, which have increased in real terms for 17 consecutive months.
It therefore seems that a few more positive growth months in retail and restaurant sales can be expected. However, higher interest rates and other economic concerns will probably mean that both retail and durable goods sales will not have positive growth in the latter half of 2016.
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 via the BankservAfrica payment system is extremely good.
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.