‘Tough times not impacting take-home pay raises, yet…’
Unexpectedly, salary payments still beating inflation despite inflation rises, says BankservAfrica
The BankservAfrica Disposable Salary Index (BDSI) shows that take-home pay increased last month to the highest level since February 2015. Take-home pay rose by 9.1% maintaining the upward trend of the last four months.
“This increase on a year ago is quite surprising as one would have expected that salary increases would be slowing in these tough economic times,” says Mike Schüssler, Chief Economist at Economists dotcoza.
“Usually we would see January, February and March disposable salaries drop as year-end bonuses no longer form part of the equation. However, despite taking this into account, the average disposable income was still well over the rate of consumer price inflation on a year ago basis.
” The CPI in February 2016 was 7%, higher than a year ago, and which was itself the highest increase since 2009.
Dr Caroline Belrose, Head of Fraud and Data Analytics at BankservAfrica, says, “Even after inflation is taken into account, there was still a 2% real increase in take-home pay. This was the fourth month in a row that the increase in disposable income was higher than the inflation rate.
” Belrose explains that the median or typical disposable salary, which is 74% of the value of the average salary, increased 9.2% on a year ago to R9 809. At the current rate of increase the typical salary will take about three and a half years to catch-up to the average salary. Average salaries tend to be higher as only a few employees earning high wages lift the average whereas the typical salary is the amount paid to the employee in the middle of all the salary groups.
Only 17.3% of the total income group now receive less than R4000 per month – the lowest income category – down from 20.1% in February last year as people move up into the higher categories.
“The largest single category in the BDSI is the category that includes all the employees who get between R10 000 and R25 000 paid into their bank accounts. They currently account for 37.7% of these salary disbursements, up from 35% of all salary payments in February 2015,” says Belrose.
The BDSI indicates that there have only been two months in the last 18 months where salary increases have not outperformed inflation, and one of those was due to delayed agreements in public wage negotiations.
Pensions start to lag salaries again
Regarding pension payments, the February pension payments into bank accounts increased by a lower percentage than salaries after nine consecutive months of pension increases outperforming salaries. This has also remained the case for the previous two months.
It is unlikely that pensions will continue to outperform inflation, particularly considering the general equity market returns are barely outperforming inflation and interest rates are also just above inflation. This means that private sector pensions are unlikely to have high pension increases as they are a function of total returns as well as of percentage draw downs.
Average bankable pensions paid via the South African payment system increased 7.8% in February, down on the average increase in 2015 which was 9.1%. “While still above the rate of consumer price inflation by 0.8% it is clear that bankable pension increases are starting to lag take-home pay increases,” says Schüssler.
The average pension rose to R5 992 in February 2016. However a similar data story to the disposable salary data shows that the average pension drops from the year-end levels in the early part of the next year.
“We have also noted that many pensioners receive an end of the year bonus payment that drops out of the smoothed BankservAfrica Private Pension Index (BPPI) calculation between January and March, as the payments were most likely issued in November 2015 according to the BankservAfrica payment system data,” says Schüssler.
“The average pension paid is exactly 45% of the average take home salary in February 2016. The typical private pension that is paid via the banking system in South Africa was R4 234 which was only 71% of the average pension,” explains Belrose.
The BPPI has outperformed inflation by an average of 3% over the last two years with only one month showing an increase below the rate of inflation.
Contact Wendy Fourie for more information: wendyf@bankservafrica. or 011 497 4119.
Notes to the editor:
The BDSI data is smoothed on a three month moving average basis and adjusted for both weekly payments and pension payments. The average pension payments are only about 60% of those of people in employ, so the BDSI focuses on the employed and their salary payouts. We therefore adjusted the monthly numbers to take this into account. The average disposable salary is adjusted on a constant basis for these two factors. December is a very high payout month and somewhat distorts monthly averages, but we believe that the year-on-year trends remain intact.
Similar to the BankservAfrica Disposable Salary Index (BDSI), the Private Pension Index is an income gauge of money paid into bank accounts from pension schemes. While we do not know the exact number of people, we do know the exact number of beneficiary accounts and this shows that there are about 633 000 monthly payments (for 2014 on average) going through the BankservAfrica system, which have been identified as pension payments.
This number does change slightly from month to month but out of the known universe of 810 000 private pension payments, it appears that the BankservAfrica payments system captures over 80% of the pension payment accounts. This indicates that the sample size of private pensions via the BankservAfrica payment system is extremely good.
We do not consider payments over R100 000 in size as these would typically be lump sum pay-outs of the amount that people can take out of their pension. These could also be pay-outs of the remaining pension in an account to family of a deceased. This remaining amount can often average well over R350 000 for each payment and, as with the BDSI, these payments do tend to distort the averages at certain times of the year. For 2014 these exclusions reduced the number of accounts considered from 633 000 to 628 000.
Payment analysis is conducted from the second of each month to the first of the following month inclusive as payment dates can vary when a month ends on a Sunday. A three month moving average is then calculated for trend analysis.
BankservAfrica is a payment-enabling organisation operating between the various South African banks with a very secure messaging environment in place. Economists dotcoza is an economic consultancy that helped develop the BPPI.