When you started saving for retirement many years ago, could you ever have thought that trade tariffs levied by a US president in Washington could have such a big impact on your retirement income?
Local pensioners were not too concerned when president Donald Trump first announced a 10% trade tariff on all imports into the US, but we all started paying attention when he announced his “Liberation Day” tariffs on almost all countries in the world on 2 April and the 25 biggest pension funds in the US lost $169 billion within four days.
We got even more worried when stock markets lost 15% in the following week, while the oil price fell to $60 per barrel. According to Reuters, the S&P500 Index, which includes 500 leading companies in the US, lost $5 000 billion in market value.
And we all heaved a sigh of relief when Trump reconsidered and postponed the tariffs for 90 days to give countries a chance to negotiate with the US about the tariffs.
But China was not so lucky. The US increased its tariff on China’s imports to 145% and in retaliation China increased its levies on US imports to 125%. The dreaded trade war has begun.
The big question for pensioners is – should we be worried about these developments halfway across the world?
Why do the US tariffs matter for your pension?
What happened in South Africa? The rand started losing some of its value, falling by a steep 4.6% since the start of the year and by 3.1% since 15 April. The rand also fell by 7.8% against the euro, 5.6% against the pound and 7.3% against the Japanese yen.
What does the falling rand mean for your pension? When the rand weakens against the dollar, the fuel price goes up because we pay in dollars for Brent crude oil. Higher fuel prices make everything we buy more expensive because it becomes more expensive to transport them.
Food prices are some of the first prices to increase and this affects your household income, which means you can buy less with your pension. When the rand is weaker, imported goods also cost more, such as imported fertiliser that increases the cost for farmers to grow food. And if food costs more, inflation goes up.
It is not only food prices that affect your pension. Higher inflation and geopolitical events, such as the US import tariffs, cause market volatility that affects investor confidence, when investors become unsure of how it might affect the companies they invested in.
Because the money in your pension is often invested in the stock market, market volatility and adverse investor confidence can affect its value.
But inflation is the more urgent problem because as a pensioner, you cannot bargain on a salary increase so that you can afford to pay more for food and your other needs.
If your income from a living annuity is R120 000 every year, higher inflation can mean that it is worth less as the years go by. If the inflation rate is 6%, your R120 000 can be worth only R113 277 the following year.
What an experts says
Izak Odendaal, chief investment strategist at Old Mutual Wealth, says making rash decisions usually do more harm than good. “The situation is fluid and unpredictable but if you are a long-term investor with a diversified strategy, the events of the past few days will cost you short-term returns but are unlikely to leave you much poorer ten or so years from now.”
This means that you might find your pension is worth less than a year ago, but the situation can improve over the next few years as markets settle down.
What can you do?
• Don’t panic. Stay calm and stick to your financial plan.
• Speak to your financial adviser. This is not a time to try and go it alone.
• Ensure that you have a well-considered financial plan you can turn to and stick to.
What retirees say
Retired couple Michael (85) and his wife, Ronel (80) are concerned as older pensioners. Their pension is virtually their only fixed monthly income, and therefore national and international geopolitical developments affect them in a number of ways.
“Events that cause uncertainty in the markets, whether it is the Trump administration’s tariffs, the war between Russia and Ukraine, the instability in South Africa’s Government of National Unity, the exchange rate or the oil price – all have a negative effect on a pension fund’s investments and our income. These developments worry us, but they also frustrate us because we personally cannot do anything about it.”
YEI Article written by: Ina Opperman, Financial Journalist
Whilst I enjoyed reading the article on finance by Ina Opperman and her “What can you do” comments were quite correct, readers need to be wary of their interpretation of the word “lost” in the context of investments.
Those of us who have sensibly invested for our retirement, will all have some exposure to various types of “investment”. Whilst the value of these investments fluctuates on a day-to-day basis, we actually loose or gain nothing until an actual sale is made.
Short term market news, such as the tariffs imposed by a lunatic, which happened early in April 2025, generally only affect markets for a limited period. This can be seen when looking at the SA All Share Index, which crashed after the 2 April announcement. By the Easter weekend the Index is almost back to where it was at the end of March.
After news such as the above, we, as ordinary people, hear the news too late and therefore the best advice is to take a deep breath, and weather the storm.
Hi Adrian – thank you for your thoughts and your good, solid advice.
The YEI Team
My wife and I, although living outside of Durban, are clients of Personal Trust, a Cape Town based company, and have the utmost faith in their prudent advice.
Hi Adrian – thank you for the feedback. YEI does know Personal Trust, and agree that they are a wonderful totally trustworthy investment company offering good, solid financial advice. Thank you for the heads up.
The YEI Team