As a young person, old age seems like a long time away. When you have a source of income, it can be easy to focus on more immediate concerns like transport expenses, paying for education or even keeping up with the latest technology. It is easy to forget that in old age, you will no longer be earning money on a regular basis, or even at all. It is never too early to start thinking about that period of uncertainty. A pension is one of the best ways of making sure you still have a steady source of income in old age.
WHAT IS A PENSION?
A pension fund is a pot of money that you deposit into on a regular basis. You let the money in this fund build up over the course of your life and you can use the money in old age. A pension is a long-term investment and the money in this fund will gather interest during your lifetime. It is the most effective way of saving for after you stop working because you don’t pay tax on the contributions into your pension fund. You can change how much you pay into your fund too. This means the more you earn, the more you can pay in. The longer you leave your pot to build up, the more money you will have in old age. That’s why it’s important to start early.
WHY DO WE NEED PENSIONS?
Over 60s are the fastest growing population in Africa: between 2000 and 2015, there was a 50% increase. These elderly people are often particularly exposed to financial difficulty. Indeed, one in five of the world’s poorest people living on less than one dollar a day are over 60. It is true that elderly people are often respected and looked after well in Africa. However, because of urbanisation and smaller family sizes, the same level of family support for the elderly is not guaranteed for the future. Therefore, a pension can provide a guarantee of income for the future and an important safety net. A pension can also be a way to plan for unexpected costs in old age such as health crises or sudden, unforeseen financial difficulties.
WHO CAN BENEFIT FROM A PENSION?
And it is not only the pension holder themselves that benefits from having a source of income in old age. The benefits of a pension are shared with all community members. With a guaranteed source of income, an elderly person can help provide for themselves and their household. They can contribute to bills and help provide clothes, food and school materials to their grandchildren. Pensions provide security for the future for all generations. They also mean you can carry on playing an active role in the community after you stop working.