In another twist involving the public protector’s office‚ the Minister of Co-operative Governance an.
Few people realise the full affect longevity could have on their financial status in retirement.
Studies have shown there has been a demographic shift in recent years that has resulted in people living longer.
Experts believe the realities of longevity, including inadequate savings and an increasingly complex and volatile investment environment, position retirement in an entirely different situation than the one many people were used to.
Old Mutual Unit Trusts' Ralph Mupita says: "In the past, your life was divided into the productive working years up to retirement - a period during which you accumulated as much wealth or assets as possible - and the retirement years, usually after 65, when you lived off the income distributed by those assets."
But things have changed says Mupita, and now the average person can expect to live for 28 years in retirement, twice the 14-year retirement average in the 1980s.
He says: "That's because the average retirement age has been reduced by 10 years to 55 and people can expect to live much longer than before.
"With advances in medical healthcare and people living much healthier lives than in the past, a third of all retirees can expect to reach the age of 90, versus 16percent in the 1980s."
Mupita says whereas slightly more than half the population could expect to live until 65, now that proportion of the population is likely to be about 80.
Mupita says the main implication of these trends is that planning for retirement can no longer be neatly divided into pre-retirement and post-retirement investment phases.
"Whereas conventional wisdom held that a person retiring should get out of equities at retirement, moving into low-risk assets, such as bonds and money market funds, that is no longer the case," Mupita says.
He says South Africa is not alone in experiencing this affect of longevity on post-retirement income. The trend is mirrored elsewhere in the world to greater or lesser extents.
Mupita says most retirees are unlikely to experience financial freedom unless they have won the lotto, inherited millions or are willing to take on a certain amount of capital risk to get them through the extended 30-year investment horizon they are now confronted with at retirement.
Mupita believes that because of the dwindling interest incomes, those retiring today require more capital to buy the same nominal income because of lower interest rates.
Mupita says: "Individuals need to take on more risk than in the past if they have any hope of their money comfortably lasting as long as they probably will."