FANews
FANews
RELATED CATEGORIES

Employee benefits to encourage savings

15 May 2012 Hugh Hacking, Head of Retirement Fund Solutions at Old Mutual Corporate
Hugh Hacking, Head of Retirement Fund Solutions at Old Mutual Corporate

Hugh Hacking, Head of Retirement Fund Solutions at Old Mutual Corporate

While details around Government’s retirement reform initiative have yet to be finalised, it appears that the debate around the issue is resulting in an increased focus among employers and employees on the need to save for retirement.

That is the view of Hugh Hacking, Head of Retirement Fund Solutions at Old Mutual Corporate, who says that he is seeing an improvement in awareness levels among companies regarding the importance of retirement savings and other employee benefits.

More and more, companies are acknowledging that employee benefit programmes are a key tool to increase the savings rate of the working population.

“Employee benefit programmes create the structured mechanism through which employees will save regularly for the future and thereby become more financially secure,” he says.

This renewed enthusiasm among local companies for providing employee benefits is being tempered by affordability issues in the wake of the global financial crisis and concerns around the economic outlook in South Africa. “As a result, it is crucial for employers to look at employee benefits in the context of what is ideal, but realise that they do not need to implement everything at once.”

According to Hacking, an ideal employee benefit programme could include a mixture of retirement savings, group life insurance, medical aid, funeral and disability benefits, but that the importance of these elements vary from company to company and from employee to employee.”

When structuring an employee benefits package, it is important for companies to understand the core needs and priorities of their specific employees.

“For example, younger employees who don’t yet have families may not place much value on group life cover. They are also likely to feel that their salary, not their retirement savings, is their primary wealth generator. In these instances, employers need to have a strategy in place to communicate the benefits of long term saving and investing.

“While employers have a responsibility to ensure the long term financial wellness of their employees, there are also self-serving reasons for companies to implement an effective employee benefits scheme.”

Old Mutual research has shown a direct link between people who are members of retirement funds and higher levels of confidence in their financial planning. “Simply the act of putting an employee benefit programme in place has a positive impact on the workplace. Happy employees tend to be more productive and more incentivised to work for an employer when they know that the company has benefits in place for them and their dependants,” says Hacking.

In addition to these advantages, well-structured employee benefits can help small businesses avoid disaster in the event that one of their employees becomes disabled or dies.

“Many small businesses insure their equipment but neglect to consider the financial consequences of a staff member becoming too ill to work or dying”

According to Hacking, the savings benefit of an employee benefit programme is not only for retirement. “Employee benefit programmes create long term wealth and financial wellbeing for employees. The savings they generate can protect them from financial shocks such as job loss and create wealth that, importantly, can be passed on to future generations. It is crucial that South African employers get on board with this to address the savings crisis in the country,” he says.

Quick Polls

QUESTION

How confident are you that insurers treat policyholders fairly, according to the Treating Customers Fairly (TCF) principles?

ANSWER

Very confident, insurers prioritise fair treatment
Somewhat confident, but improvements are needed
Not confident, there are significant issues with fair treatment
fanews magazine
FAnews June 2024 Get the latest issue of FAnews

This month's headlines

Understanding prescription in claims for professional negligence
Climate change… the single biggest risk facing insurers
Insuring the unpredictable: 2024 global election risks
Financial advice crucial as clients’ Life policy premiums rise sharply
Guiding clients through the Two-Pot Retirement System
There is diversification, and true diversification – choose wisely
Decoding the shift in investment patterns
Subscribe now