Employee benefits : what does the future hold?

The employee benefits landscape is rapidly evolving due to the continued impact of the rationalisation of funds into umbrella funds and the emergence of technological enablers.

The shift from freestanding fund arrangements into umbrella arrangements has been a key trend over the past decade.

The present and the future

It is assumed that this trend will continue with larger employers considering the umbrella fund route as a cost effective, effort efficient and governance strong vehicle to move their employees towards better retirement outcomes.

Asset managers have also noted this trend and have reacted by partnering with umbrella funds in order to create quasi-institutional LISP’s, with a view to winning a share of the asset base of the fund.

As the umbrella industry matures, greater levels of simplicity, transparency and portability between fund sponsors will result in a more competitive marketplace for employers to exercise choice and discretion.

Fulfilling a range of financial needs

It is also anticipated that the number of fund sponsors will reduce to a handful of large umbrella funds as clients migrate to better umbrella funds. This is due to superior efficiencies, governance structures and product features available on such funds.

Umbrella funds have taken the lead to enable and empower individuals to move towards good retirement outcomes. Some providers have leapfrogged the proposed default regulations and have already implemented in-fund preservation and in-fund living annuities to provide members with highly competitive options.

Over the next decade, umbrella funds will act as the conduit for employees to fulfil a range of financial needs including healthcare, retirement funding, annuitisation, short-term insurance, life cover and advice.

Next level technology

Technological change has had and will continue to have a dramatic impact on the employee benefits industry.

For instance, the widespread use of smartphones has enabled funds to provide applications to members to increase engagement, promote education and encourage better savings behaviours.

Some umbrella funds are in the process of releasing applications targeted at financial advisers contracted to respective employees in the fund. These applications will enable advisers to identify compelling events that require the provision of high quality advice. In this sense, technology is enabling advisers to identify opportunities to add value to the members within the fund.

Technology is also being used to engage employees in their retirement funding process where the most important decisions are made – on day one of employment. It is usually at this point that new employees face an induction process with the retirement fund decision making component bolted on towards the end of the day.

Typically, decisions are made with due consideration or guidance and employees largely stick with the decision made at this point through their tenure at the company.

Technology enables funds to actively engage employees at this critical juncture by providing various scenarios to consider on a dynamic electronic platform based on their immediate decision set. Employees can then model various outcomes by changing their decisions and, in doing so, are empowered to make better choices that lead to better outcomes.

Transforming member engagement

Technology also bridges the gap between funds and members as engagement with the proposed Retirement Benefit Counsellors can be done online via video-chat or by using text based chat services.

The impact of technology in our context cannot be understated as it will transform member engagement, administration, analytics driven advice as well as retirement outcomes. Technology, in a very real sense, will bring the fund and all of the benefits that come from being a member thereof, out of a long forgotten folder filed away in a cabinet right to a member’s workspace, home and pocket. These new technologies will also make it easier and more efficient for intermediaries to service members and help them with their personal financial planning.