Research reveals that household wealth has increased in the midst of a pandemic

With Human Rights Day this Sunday, we are once again confronted with the reality that despite the progress we have made as a nation since the tragic events of 1960, a huge economic disparity in our country still exists.

While tackling this issue requires a lot more bandwidth than a single email might allow for, recent research from Unisa and Momentum has highlighted the essential role that employment and access to an employer-sponsored retirement fund has in redressing these long-held imbalances, through the creation of generational wealth.

The proverbial elephant in the room, however, is that - as the name might suggest - to access an employer-sponsored retirement fund you need to be employed - and the pandemic has dealt a significant blow to this. South Africa is currently grappling with a record-high unemployment rate of 32.5%, on the back of rising liquidations, which increased by 14.2% year-on-year at the end of 2020.

Yet, even with this rising wave of unemployment, research has shown that household wealth actually increased in the midst of a pandemic - and this is largely thanks to these retirement funds.

The South African Household Wealth Index shows that despite severe economic contraction, the real value of South African households’ net wealth increased by the end of the fourth quarter 2020, ending R236.3 billion higher than the previous year. While partly attributed to the fact that some South African employees have access to high growth personal investments, access for most is usually provided through their employer-sponsored retirement fund - often their largest financial asset. Retirement fund membership is also the gateway that gives most employees access to the group insurance benefits essential for reducing the risk of potential financial catastrophe. The importance of insuring against unexpected life events such as death and disability was underlined by the current pandemic, with South African life insurers paying R522.7 billion in claims during 2020 (according to ASISA), which was an increase of R31.7 billion from the R491 billion paid in 2019.

Thus, employment and retirement fund membership remain the door to prosperity for many South African households.

Dumo Mbethe, CEO at Momentum Corporate, says that: “Expanding employment is not an end in itself but rather a means to give more South African households the opportunity to continuously improve their living standards, achieve a degree of financial freedom and the ability to create a legacy of wealth transfer.”

ENDS