One of the reasons we enjoy working with the team from Discovery is that they utilise technology and data to help understand the financial journey of South Africans.
A fascinating statistic which was released in 2023 was that the Discovery Health Medical Scheme (DHMS) provided cover to 90 centenarian members (people aged 100 years or older), including two semi-supercentenarians aged 105 during the year.
What is of particular interest is that in 2008 DHMS was providing cover to 9 centenarian members ( 0.0005% of the member base) and in 2018 54 centenarian members, (0.0019% of the base) and that the 90 members in 2023 represented 0.0032% of the base.
What this trend clearly shows is that with improvements in healthcare – coupled with lifestyle adjustments – people are living longer.
As a financial planner or advisor, this gives you pause for thought. Is this just an anomaly in the Discovery membership base or is it a trend? According to some research conducted by Iza Trengrove:
“[the number of] South African people who were 100+ increased from 21,933 in 2022 to 22,525 in 2023. More than 9.2% of South Africans are older than 60. This accounts for about six million people”
If that data is extrapolated for 2024, that means that at least another 600 people will reach the 100 year mark.
Traditionally you have done financial planning where your client will retire at either 60 or 65. In theory, you have worked for 40 or 45 years and your savings are then expected to last you another 10 to 15 years… But what happens if you live for another 40 years after you retire?
Traditional savings and drawdown ratios go out the window as your money is expected to last twice as long in retirement.
While we are aware that South Africa has a chronic lack of savings, this is further compounded by people who are living longer. In 2022, Genesis Analytics and the Financial Sector Conduct Authority (FSCA) conducted research which showed:
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- More than 90% of retirees are unable to maintain their standard of living prior to retirement and two-thirds of members have less than R50,000 in their retirement funds
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- While 92% of workers in the public sector have been forced to contribute to a retirement product, less than 50% of those employed in the private sector are contributing to a retirement product
The introduction of the so-called “Two-pot” system, which will allow savers to withdraw from their retirement savings could further compound this challenge.
While it is easy to focus on the retirement savings element of the equation, there are other considerations:
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- As you get older, you will inevitably face greater medical expenses – so, you will have to decide: which of the medical insurance products are a suitable fit for you? Integrating your financial planning and insurance suite of products to offer the best return on investment will be key while ensuring you have coverage for medical procedures
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- If you have spent 30 years of your professional life contributing toward life insurance or funeral products, what is the cost-benefit analysis of doing so for another 30 years as you age and the products themselves evolve?
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- What does your Estate Planning and Tax strategy look like at 100 years of age? If you consider that your kids may be 75 years old and your grandchildren could be in their mid-50’s, what implications does this have for generational wealth transfer?
We cannot ignore the fact that South Africans are living longer. The question you need to ask yourself is whether or not your financial plan is able to adapt to accommodate this mega-trend or whether you will be caught short. Let’s plan your financial future so that you can afford to turn 100 with a smile.
Disclaimer: Isihlangu Financial Services is a juristic representative of Discovery Life Limited. Discovery Life Limited, Registration number 1966/003901/06, is a registered long-term insurer, and an authorised financial services and registered credit provider, NCR Reg No. NCRCP3555. Product rules, terms and conditions apply.