IN recent years, increasing job losses have become a reality in South Africa, especially for young people who are either working for the first time, or supporting a growing family.
According to Statistics South Africa’s Quarterly Employment Survey for the third quarter of 2017, there was a decline of 31 000 jobs in the formal non-agricultural sector in the quarter ended in September 2017. The mining industry alone shed 70,000 jobs in the past five years and this trend is not showing any signs of slowing down.
Liberty Economist, Tendani Mantshimuli says, “Increases in VAT from 14% to 15% along with the recent increases in the petrol price are placing immense pressure on consumer pockets. As a result, spending is reduced and small- to medium-sized businesses are expected to feel the impact the most. This reduction in spending will have an impact on companies’ profitability driving the likelihood of retrenchments up even further.”
Another major concern that may drive up retrenchment numbers is the potential introduction of a new National Minimum Wage. While it is expected to make a positive difference to the lifestyles of lower income earners, small and medium size businesses may be forced to restructure their operations to handle this increase. This could result in retrenchments across all income levels as companies struggle to absorb the cost.
Your income is your most valuable asset
Income protection claims related to retrenchment is a growing trend that is also reflecting in Liberty’s Claim Statistics. The statistics reveal that everyone is at risk of retrenchment and income protection cover is an essential part of financial planning. Head of Risk Product Development at Liberty, Henk Meintjes says, “Liberty Claim Statistics for 2017 show that for Young Achievers (Millennials) retrenchment was the most common cause of income protection claims making up 17% of total claims. When compared to retrenchment claims in 2016 at 11.7%, there was a significant escalation in retrenchment related claims – 6%increase, to be precise.”
The claims statistics also show that retrenchment claims for Young Parents were at 9.3% in 2016 but once again increased to 11% in 2017. Established Providers (Parents with older children) however, saw no claims for retrenchment in 2016 but 4% of claims in this segment were for retrenchments in 2017.
The increase in claims for retrenchment cover is a serious concern and highlights the important role income protection plays in financial planning.
Meintjes says, “Having a plan in place to protect ones income is the right step towards planning for a financial future. Your income is your most valuable asset when you are working; and that is why it is important to put the right insurance cover in place to mitigate the risk of retrenchment.”
Speak to an accredited financial adviser or broker soon to ensure that you have adequate income insurance in place.