A brave new world

With all the concerns raised by Covid-19 and with changes occurring in our industry, a theme of “Brave New World for Retirement” was set, during the FQ Financial Skills conference, sponsored by Camargue.

Myths and mysteries of retirement

Looking at the retirement industry, Bruce Kokkinn, Manager of FQ Financial Skills touched upon the myths and mysteries of the retirement fund industry.

“Why are so many pension and provident fund members retiring to suck bleak prospects? The figure that is most often quoted is that only 6% of retiring pension fund members retire with financial independence… a 94% failure rate. We need to look for systems and solutions to the problems,” said Kokkinn.

“The challenges is that members are drawn to encashment and have little planning knowledge. Employers (few), after the defined benefit (DB) to defined contribution (DC) changes, have lost much liability and the will to educate. Advisers sell, but seldom teach and service providers play lip service to educate. Many respected publications, papers and reports worldwide encourage enabling members to help themselves through learning and education. Human resources offer the interface with members but have little retirement industry knowledge,” added Kokkinn.

Education and tools needed

According to Kokkinn, there is some light at the end of the tunnel in terms of counselling, Regulation 38, trustee qualifications, Treating Customers Fairly, etc.

“Education and tools are needed. Education that enables members to apply basic principles to plan for retirement. Members need to be educated as to annuity options. A total collaboration of all players to provide funding and knowledgeable educators is needed,” said Kokkinn.

“Pre-retirement member training is an essential element if we are to improve on our current 6% success rate. Every choice taken at retirement will potentially reduce the monthly income and affect the retirement lifestyle,” added Kokkinn.

“The cost of guaranteed periods, spouse’s pensions and inflation links must be considered. The use of FAIS accredited advisers should be considered before deciding on commutation and annuity options. Do Net Replacement Ratios work? Probably not. So, an effective, understandable, and applicable alternative must be sought,” he said.

POPI and due diligence

Anne-Marie Pretorius, Managing Director of Bizmod Consulting, then went on to discuss the Protection of Personal Information Act (POPIA).

“POPI applies to everyone who processes information… employees, customers, supplies, third parties etc. There are eight principles and four POPI Act conditions to comply with,” said Pretorius.

The eight principles are:

1. Accountability
2. Processing limitation
3. Purpose specification
4. Further processing limitation
5. Information quality
6. Openness
7. Security safeguards
8. Data subject participation

The four conditions are to:

1. Take extra care of Special Personal Information (SPI)
2. Secure PI with all Cross Border Flow
3. Ask consent for Direct Marketing (Opt in/Opt out)
4. Have human interface for all Automatic Decision Making

Complying with the POPI Act

“People entrust your organisation with their Personal Information when they want or need to make use of your products or services. In order to maintain this trust, it is important that you do everything reasonably possible to comply with the POPI Act. We cannot disregard the fact that it is a legal requirement to comply with the POPI Act, and non-compliance may result in severe penalties. The best way to reach the required level of compliance is to partner with someone who understands the Act, has extensive experience in running Information Privacy Programmes and can tailor a solution that will suit your business and your budget,” added Pretorius.

“Why is POPI such a big deal? Organisations are struggling with the POPI concept as their thinking has always been that ‘we own our customers’ data. If a customer owns their own information and organisations are only custodians if a product or service is delivered, it changes what we should and can do with this information. For South Africa to continue doing business with the EU and the UK at a minimum, we needed proper legislation to regulate this. POPIA has created this,” said Pretorius.

“POPI cuts across people, process governance, locality and technology. We need to deliver faster, in an iterative way and with less at our disposal. We need to align our culture, structure, roles, competencies to accommodate technology and ways of work requirements. Technology enhancements are enabling speed to market, competitive advantage and improved client focus. Process automation drives a more modern approach to process utilisation,” she said.

“Complying to the POPI Act is a multi-layered exercise, that includes governance compliance to new processes, closing gaps and securing personal information. It is not a quick-fix and implementing new policies and procedures is an unavoidable part of the process,” she concluded.

Writer’s thoughts:
It is clear that retirement member training is an essential element if we are to improve on our current success rate, and also, that the best way to reach the required level of compliance is to partner with someone who has extensive experience and understanding of the POPI Act. If you have any questions please comment below, interact with us on Twitter at @fanews_online or email me - [email protected]