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Characteristics of the South African retirement fund industry

11 September 2022
Publication Type: Working Paper
JEL Code: D14, D81, G23, G51, H55

Using administrative data, we examine three characteristics of the South African retirement fund industry–funding stability, risk sharing and efficiency–over the period 1996-2018. We find that there have been significant decreases in assets per member for private funds, pension funds and retirement annuities, which could reflect decreasing funding ratios in the retirement fund system. The retirement fund industry in South Africa is dominated by DC funds. Households, therefore, bear a greater risk which they may not be equipped to withstand. We find that South African retirement funds are not operating at an efficient scale. There are strong significant economies of scale present in the industry with total administrative costs increasing by only 72% when the total number of fund members doubles. Preservation funds and retirement annuities are found to be most efficient and operating at an efficient scale. None of the benefit structures are operating efficiently but hybrid funds are the most efficient.

Working paper 880
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