Making steady progress forward in the retirement industry
When employees join retirement funds, do they opt into success but default into failure? Or do they default into success and opt into failure? This is a question that is seemingly subjective, but it is more cut-and-dry than we think bearing in mind the small percentage of the South African population that is able to retire comfortably.
This is a factor which has been prevalent in South Africa for a number of years, and has even got serious enough for government to step in and formulate a number of reforms which it hopes will improve the rate at which people can retire comfortably in the country.
The key role player
The question posed at the beginning is one of the issues which will be discussed at the upcoming release of the 2015 Sanlam Benchmark survey. While common sense says that the majority of the public will rely on advisers to give them financial advice; Viresh Maharaj, Marketing Actuary at Sanlam, points to another key role player in the retirement planning matrix.
He points out that the 2015 Survey shows that a lot of employees are heavily reliant on their employers, and the company’s human resources (HR) department, to provide them with financial advice.
The survey sample includes 503 members of the public who are actively saving towards retirement. The survey points out that 35% of this sample would contact HR for financial advice at retirement rather than an adviser. Twenty seven percent of pensioners still contact the HR department for assistance, while 41% of pensioners got advice from their employer pre-retirement.
The tale-of-the-tape
There is a significant focus in the 2015 Survey on the normal pensioner and the affluent pensioner. An affluent pensioner is defined as a pensioner who currently earns an annuatised pension in excess of R25 000/m.
We have already given a good indication on the advice habits of the normal pensioner. But what are the habits of the affluent pensioner? The survey found that affluent pensioners were 25% more likely to seek financial advice pre-retirement. It also found that affluent pensioners are 78% more likely to seek financial advice post-retirement. This means that despite the heavy reliance on the employer, there is a role for the adviser to play in retirement savings.
One of the more scary figures is that only 5% of members will seek financial advice 20 years prior to retirement; this increases significantly closer to retirement where 49% will seek advice within 10 years of retirement.
While the earlier statistic was frightening, the next comment could arguably be seen as sad; 67% of pensioners first received advice within 10 years of retirement. Even worse is that the Survey shows that 20% of pensioners first received advice at retirement date. This is a shocking statistic, and one that needs to be looked at if government is going to achieve its vision of increasing the country’s comfortable retirement rate.
Concerns of female fund members
Perhaps for the first time, the Survey is also making a clear distinction between the concerns that men and women have by raising some of the concerns that women have leading into retirement.
The Survey shows that 98% of the standalone and umbrella funds questioned for the survey, 100 funds in each case, allow females to continue to participate in the fund during maternity leave.
The Survey adds that 21% women and 3% men remember specific factors for women to take into account when saving for retirement at induction. This points to the fact that the communication of issues affecting retirement savings is not as effective as it should be; the Survey goes on to add that only one of the 200 funds has tailored communication targeted specifically at female employees, while only 13 funds discussed retirement issues specific to female members.
The above is important bearing in mind that there are more families in this generation where both partners work than preceding generations. However, Maharaj adds that there is a large percentage of women who rely on their spouse’s retirement fund to look after them during their golden years.
Editor’s Thoughts:
While we are well aware of the dire situation in South Africa, it becomes hard at times to put the situation in perspective because the stats in the industry could vary from one survey to the next. But if we go by what Sanlam is reporting, the situation is possibly worse than we thought, and it seems that we may need more than help from government to come close to their objectives of a higher rate of comfortable retirement. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
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