By Tkay Nthebe
Tsietsi’s story is one many of us can relate to. Having worked 18-months as a Social Media Officer he is finally appointed into a permanent position. Along with other new employees at the company, Tsietsi is invited to an Induction session to learn about the company’s values, strategy, as well as the benefits and reward structure.
During the session, he learns that all employees are required to contribute towards a company pension fund and medical aid. This comes as a BIG surprise for Tsietsi because he believes he is still young (only 25 years old) and has his whole life to save. Why deduct LSL 1,162.50 contribution to a pension fund, reducing his net pay to save for something that is many years away? This seems unreasonable!
He decides to have a conversation with ‘M’e Nthabiseng who (didn’t have access to financial literacy sessions during her time) is 4-months away from retirement to better understand.
“Why am I forced to contribute towards retirement? Nna ke monyane ‘M’e Nthabi, can start saving after I turn 35? I want to enjoy life – buy nice things, go out and travel.”
‘M’e Nthabi sighs, looks at Tsietsi with concern and pity. “Oh, to be young and naive. I wish I had the opportunity to go back and change my views on retirement savings Tsietsi. I wish I knew better, started saving earlier towards my retirement, but I did not do that. My retirement package is just LSL 350,000.00 which is not enough”
Shaken by ‘M’e Nthabi’s unexpected response, he goes back into the session but struggles to concentrate, worried by his new net pay. He however cannot shake off ‘M’e Nthabi’s retirement package that seemed so little. Tsietsi does not want to make the same mistake and is looking for creative ways to plan for his retirement.
Here are some creative ways to start planning for retirement:
- Increase contributions to your retirement fund: Employees can contribute towards a Pension or Provident offered by employers, where they have the option to increase their contributions beyond the minimum threshold and the earlier you start, the better.
- Voluntary savings for retirement: Individuals can save for retirement from LSL250.00 via Retirement Annuities (RA) offered by licensed Asset Management companies or Insurance companies.
- Start an investment: You can open an investment e.g., Unit trust and start saving from LSL 500.00 and invest consistently.
- Start and build a business: Another option is to start a business or side hustle and increase your sources of income.
- Have insurance: Ensure that you have insurance to protect any valuables, so that you avoid getting into debt replacing them.
An alarming number of Basotho working professionals – young and old – are not financially prepared for retirement. The next few articles will focus on how we can start planning for our retirement because it’s never too late to start!
