Abstract
Inadequate retirement savings, low preservation of retirement benefits, and insufficient retirement income are global issues that governments in various countries, such as Australia, Chile, and Zambia, are addressing through retirement reforms. Pre-retirement withdrawals upon termination of employment are the primary contributing factor that significantly impacts the retirement security of fund members in South Africa, reducing their ability to retire comfortably. As a result, retirement fund members with insufficient retirement benefits and those without retirement provisions seek financial assistance from the state pension grant after retirement. To improve retirement preservation, the South African government implemented another retirement reform that changed the retirement structure of saving and preserving retirement benefits. This reform is still under scrutiny to determine whether it is equitable and fair for retirement fund members across different income groups. There is currently no comprehensive research on the new retirement reform due to its early stages of development. The essence of this study is to determine the extent of the retirement reform for low-income earners, and the factors that influence their perceptions, as they are considered key stakeholders in the retirement sector. To address this problem, the study outlines four research objectives:
1. To determine the awareness of low-income retirement fund members regarding the new two-component retirement system.
2. To determine the level of understanding of low-income retirement fund members regarding the new two-component retirement system.
3. To describe the perceptions of low-income retirement fund members considering the new two-component retirement system.
4. To identify demographic factors that influence the awareness and understanding of low-income retirement fund members in view of the new two-component retirement system.
This study was conducted to determine the awareness, understanding, and overall perception of low-income retirement fund members regarding the two-component retirement system that has been implemented. The study employed a quantitative research method and utilised a self-administered questionnaire to collect data from low-income retirement fund members. The convenience and snowball non-probability sampling methods were used to collect primary data
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from 153 low-income retirement fund members employed in the Gauteng province. The data collected were analysed through descriptive and inferential statistics.
This study's key findings demonstrated that low-income retirement fund members are extensively aware of the new retirement reform. However, they do not understand how the new system is structured in terms of contributions, withdrawals, and tax implications. Based on these findings, the study recommended well-developed educational programmes, along with ongoing information sessions, presentations, and workshops, to improve understanding among this group. Additionally, the study advised policymakers to consider the financial status and literacy levels of low-income retirement fund members when implementing significant retirement reforms to South Africa’s retirement structure.
Although inadequate retirement savings and low preservation of retirement benefits have been issues in the South African retirement structure, other elements contribute to rational and irrational withdrawals of retirement benefits upon termination of employment. The study provides a constructive analysis of how low-income retirement fund members perceived and understood the two-component retirement system, and how their level of understanding influence their decision-making. The study’s main contribution is to provide policymakers, retirement fund administrators, and employers with insight into the awareness and understanding of low-income earners regarding the two-component retirement system. The study also provides insight into how the level of understanding can be enhanced for low-income earners to make well-informed financial decisions that will improve retirement savings and preservation of retirement benefits in the current retirement system.