Prioritise Financial Wellness for growth and greater inclusivity

24 March 2017Momentum FundsAtWork
Katherine Barker, Head of Momentum FundsAtWork

Katherine Barker, Head of Momentum FundsAtWork

Improving the Financial Wellness of South Africans is an urgent priority for creating a growing, more inclusive economy. Innovative insurance and retirement savings solutions are urgently required to enable employers to promote the Financial Wellness of their employees, particularly low-income earners to whom affordability is a huge concern.

In his 2017 Budget Speech, Finance Minister Pravin Gordhan referred to the need for creating a more inclusive and shared economy, before he outlined the economic growth challenges facing South Africa. He highlighted that growth and improving inclusivity of all demographic groups required effective collaboration among all stakeholders. 

Katherine Barker, Head of Momentum FundsAtWork, said that South Africans are notoriously poor savers and that high levels of indebtedness underpin low savings levels. She stated that many South African households tended to use their retirement savings when they changed employers to cover cost-of-living expenses. This leaves them with inadequate savings or income when they retire. 

According to the FinScope South Africa 2016 Survey, making up the majority of South African employees, low-income earners are particularly vulnerable in the area of Financial Wellness. Ninety per cent of employed South Africans earn R15 000 or less a month, while 81% of the 90% earn R6 000 or less. There is very clearly a dire need for innovative financial services solutions for these members of the population. 

MMI has done extensive research on employee productivity, creating South Africa’s first Effective Employee Index. This shows that physical health and financial wellbeing are key drivers of employee productivity. Low productivity affects the Financial Wellness of a business/employer directly, influencing its ability to grow. According to the MMI Effective Employee Index, unproductive employees cost South Africa R70 billion annually – which is around 2% of GDP. By providing appropriate insurance and retirement solutions and by engaging in the correct wellness programme, employers are able to influence up to a third of lost productive employee time at work.

National Treasury is embarking on significant regulatory reform to encourage household savings, particularly amongst lower-income earners. Moreover, National Treasury has raised concerns about the general low level of financial literacy and a lack of preservation, and has highlighted how high investment charges and costs as well as complicated products are failing to provide in the needs of low-income earners. National Treasury has therefore emphasised strongly that retirement savings products in particular be made simple enough to be understood and be cost effective without compromising on value to the consumer.

According to Barker, there is a shortage of suitable solutions to deal with these issues: “It is not surprising that, with the exception of banking, the penetration of financial products/services is low across low-income earners. Only 54% have employer-sponsored insurance and retirement savings benefits while a mere 31% have access to cover for private healthcare.”

Barker further states that the financial services industry and particularly those who offer employee benefits need to step forward with suitable solutions. According to her, “innovative, yet simple, low-cost approaches that are carefully constructed to deal with the issues that National Treasury has highlighted are urgently required.  For example, why not waive asset management fees for very low-income earners?”

She reiterates that employers and their employees also need smart solutions that appreciate the interdependence between financial wellbeing and physical health, and present holistic benefits that will address both these aspects.

The current situation is also a function of poor financial planning. Barker praises financial advisers for playing a vital role in promoting the Financial Wellness of the nation. “Financial advisers are working in close partnership with insurers and employers to foster a relationship of trust with low-income-earning South Africans, and to demonstrate the value of financial planning.”

Quick Polls


Health Minister Aaron Motsoaledi has said that the NHI will bring about change in the industry which will see medical schemes a slim picture of their former selves. Do you think this is the right approach to be taken?


No, medical schemes offer invaluable coverage in a market that is being ravaged by high costs.
Yes, universal healthcare will benefit the country in the long run.
Just wait, the minister will soon find out that a medical industry without medical schemes is no industry at all.
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