Sobering statistics

Statistics from employee benefits company Lekana have spotlighted the average retirement fund member's failing chance of survival into happy retirement after continuous employment.

According to Ann Weisz, executive director of Lekana Employee Benefit Solutions, South Africa is reaching a stage where only one in 16 members of some retirement funds may make it all the way to retirement and a lump sum pay-out from their retirement fund.

The entire retirement fund industry confronts disappointing investment returns, the higher cost of health, death and disability benefits in the AIDS era and erosion of the sum left for investment.

These issues create a challenge for those responsible for benefit structures. What receives priority: health, death and disability benefits, or the investment portion of fund contributions that determines how much a retiree has to live on late in life?

Lekana's study of the experience over recent years at one retirement fund spotlights high casualty rates. It shows that statistically only 6-7% of members can expect traditional retirement in their current industry with their current employer.

Before then, members risked:

* Premature death while in employment;

* Disability or a level of illness that makes it impossible to continue work;

* Dismissal;

* Retrenchment, with little chance of re-employment in the same industry.

Says Weisz: "Aggressive downsizing, not simply by an employer but an entire industry, is a major risk factor. So, of course, is HIV/AIDS.

"Traditionally, the emphasis at many funds was on investment build-up and a tidy investment entitlement at the end of perhaps 30 years with a single employer. This scenario is becoming rare.

"Benefit structuring now sees more emphasis on death, disability and health care benefits that may be in greater demand in a worker's 30s rather than lump sum entitlements that become due in your 60s."

Lekana can't see the trend eroding the investment portion of a benefit package out of existence as most members are acutely aware that traditional support structures like extended families may have to be complemented by hard cash and perhaps an income stream from an annuity.

However, decision-making by trustees is certainly complicated as the HIV/AIDS environment increases the need for higher risk benefits, but better benefits further erode the retirement entitlement.

At the same time, investment build-up is often important as security for a housing loan.

Weisz adds: "It is a balancing act. What the figures tell us is that the variables in the benefits mix shift more quickly and dramatically than they used to and that it is absolutely vital to communicate these issues honestly and regularly to the membership."