Retirement target = 60% income replacement ratio at retirement

The objective of your retirement investment is to enable you to maintain your standard of living in retirement. The retirement goal is thus to secure a pension for life — inflation protected — that replaces at least 60% of your final salary.

We believe 60% is a sound minimum target but the number will vary by individual. Note that the target does not impact the actual income replacement ratio you will receive at retirement.

You may believe 60% is low, but remember you will no longer contribute to a retirement fund, your tax rate should reduce and your expenses are likely to drop (your two biggest expense items – mortgage and children – should fall away in retirement, against this your medical expenses are likely to increase).

The average replacement ratio achieved by pensioners in South Africa is less than 30%.