How much money is enough?


As a member of one of ISASA retirement funds you have a pool of money saved for retirement, and depending on your length of membership of the Fund and growth received on your and your employers’ contributions, your pool of money may be quite substantial.

For many members of funds however, the sad truth is that although they have capital saved for retirement – it might not be enough to sustain their standard of living after retirement.

Your final retirement benefit (accumulated credit at retirement) will be influenced by many factors over the years – level of contributions to your fund; investment growth on your assets; inflation; and change of employer where your fund investments were not preserved. Each one of these factors needs serious consideration when doing your financial planning.

Most people will be able to live on about 70% of their working salary during retirement, without lowering their standard of living. This is based on the assumption that their bond is paid off, they have less dependants and less debt.

To assist members on ascertaining how close they are to their targeted pensionable income at retirement, a replacement ratio is used to highlight this target. A replacement ratio is used to highlight how close they are to their target pensionable income at retirement.

What is a replacement ratio?

Your replacement ratio can be described as your projected monthly pension at retirement divided by your projected monthly salary at retirement.

A replacement ratio of less than 100% means you will receive a pension/income after retirement that is less than your salary before retirement.

For example: If Joe Soap has pensionable earnings of R10,000 a month just before he retires, a Replacement Ratio of 65% would mean that he will receive a pension of R6,500 per month (65% of R10 000) on his retirement.

Why is this information important?

Only one in five South Africans have enough money saved at retirement and are financially independent. Most must rely on family and the state old age pension to survive. It is important to keep an eye on how well your fund credit or fund value is growing and whether or not you will be able to replace your salary at retirement with a pension income that will be sufficient for you to live on.

What can I do?

You will receive your annual Benefit Statement in the form of an electronic Info Slip in May each year. You need to study this document and make sure you note what your replacement ratio percentage is. Remember that if you want to retire comfortably, you will probably need a total savings pool which will give you a pension after retirement of between 70%-75% of your income just before retirement.

The analysis done on your benefit statement is based ONLY on your savings in the fund. You might have other investments outside of your fund and other assets that could boost your replacement ratio. It is therefore important that you consult with an accredited financial advisor who could assist you to draw up a financial plan.

If you are concerned about your monthly income levels after retirement consider one of the following possible solutions:

  1. Consider working past normal retirement age, only if this is allowed by your School.
  2. Consider increasing the contribution rate to your Fund or making additional voluntary contributions to your Fund. SARS currently allows a tax free amount of R1800 per annum.
  3. Consider making additional savings/investments for retirement, outside of your Fund.
  4. Lastly, you could consider investing your retirement assets in a more aggressive investment portfolio, an investment portfolio that has more exposure to equities. This could result in greater investment growth over the long term, but carries additional risks.


All investments involve some degree of risk. The reward for taking on risk is the potential for a greater investment return. If you have a financial goal with a long time horizon, you are likely to make more money by carefully investing in asset categories with greater risk, like shares or bonds, rather than restricting your investments to assets with less risk, like cash equivalents.