-Allianz’s 2023 Global Pension Report reveals African retirees are among the poorest globally.
-African countries have inadequate pension systems, leading to low-income replacement ratios.
-Governments must prioritise pension reform to ensure a better standard of living for retirees.
A new report by Allianz, an international financial services provider, has revealed that retirees in several African countries are among the poorest globally. The report, which surveyed 75 countries, including five in Africa, cites an ineffective pension system and a lack of adequate retirement benefits as the major reasons for the alarming trend.
In Egypt, for instance, the report notes that the gross benefit level is merely 18 per cent, leaving many senior citizens struggling to make ends meet. Similarly, South Africa has a low benefit ratio of 22 per cent, while Nigeria’s benefit ratio is only 16 per cent. Mauritius, on the other hand, fared better with a benefit ratio of 39 per cent.
According to the report, an ideal pension system should provide a benefit ratio of between 40 per cent and 60 per cent of an average wage, with public pensions often being the only source of income in old age. However, many African countries fall short of this standard, leaving retirees in a precarious financial situation.
The report highlights several factors that contribute to the problem, including the inability of local pension schemes to mobilize adequate funds, a lack of legal mechanisms to delay retirement, and the absence of a proper ratio between current and future pensioners. In addition, poor monthly contributions by workers and low pension coverage are also cited as major challenges in many African countries.
The situation is particularly dire in countries like Kenya, Lebanon, and South Africa, where the ‘poorest’ pensioners can still be found. “The low benefit level is also due to poor monthly contributions by workers, with the only pension scheme that a lot of employees participate in being the National Social Security Fund (NSSF),” the report notes.
Critics have been pushing for increased contributions to NSSF, noting that the current contribution of just Sh200 in Kenya, for instance, is not enough to secure the future of retirees. Others have suggested that well-run retirement benefit schemes can compensate retirees with an equivalent of 30 per cent of their incomes.
The report’s findings are particularly worrying given that many African countries are experiencing a demographic shift, with a rapidly ageing population. Without adequate retirement benefits and support, many retirees are forced to work well into their golden years, raising concerns about their health and well-being.
As such, there is an urgent need for African governments and policymakers to address the pension crisis and ensure that retirees can live with dignity and financial security in their later years.