Tuesday, December 7, 2021

The new economy breeds ‘poor’ retirees

Unlike yester year’s retirees, who had cattle posts that they could rely on for supplementary income, people who retire nowadays do not have alternative sources of income to depend on. These sentiments were shared by Regina Sikalesele-Vaka, Chief Executive Officer (CEO) of the first indigenous life insurance company in Botswana, Bona Life. Sikalesele-Vaka said the new trend is a result of people dedicating all of their time to a job that they hold in their productive life and not investing any effort in other ventures that could generate income.  

“This means that when that job ends, they would have no alternative sources of income,” she said.

The reality is that people are forced to retire in this shifted economic tide, where they are trapped in the debt maze due to a mismatch between their stagnant wages and the ever rising cost of living. People therefore compensate for the shortfall with borrowed funds so as to meet the constantly rising living expenses. That being the case, it follows that the likelihood of people retiring into poverty is as real as the hapless economic conditions of their productive lives. Sikalesele-Vaka acknowledges that the retirement net that employers provide their employees is not sufficient to ensure that they continue to live comfortably post their employment. In recognition of that predicament she advises individual employees to seek additional retirement covers on their own so as to ensure a wider financial cover after retiring.

The augmented cover, says Sikalesele-Vaka, will counter the likelihood of people retiring into a dire state of lack. Moreover, she pointed out that a small portion of companies in Botswana cater for their employees’ retirement cover whereas the majority does not. She therefore offered a solution in which the responsibility is shared between the employer and the employees. 

“This can be done through companies actively encouraging their employees to buy individual pension plans. Also importantly, companies can create a deduction point which ensures that money is automatically deducted from employees’ salaries to cater for retirement. The support of the employer, in the form of automated deduction points, will make it easier and attractive for the employee to buy a retirement cover,” she said. 

With regard to how Bona Life will further shape the life insurance industry and the economy as a whole, Sikalesele-Vaka said her company is intent on setting an example to the nation that wealth created can be filtered to the ordinary citizen. 

“The wealth of the insurance industry is not in the hands of Batswana because all companies in the industry are foreign owned. It follows that most of the wealth that was created in the past 40 years in which the industry has existed has not trickled to citizens,” she said. 

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