Category Retirement
SUB CATEGORIES General |  Savings & Investments |  Annuties | 

A perception gap

17 May 2006 Angelo Coppola

The 2006 Old Mutual SA retirement fund survey results reflect some interesting issues.

Getting back to basics seems to be the theme of the research survey findings of the Old Mutual retirement funds survey results that were released on Tuesday 16 May and John Kotze an actuary at Old Mutual - says that the average member is spending first and only then thinking about retirement after that.

He mentioned that trustee training is also an issue that became obvious during their research.

At the top of the story however is the unacceptably low level of household savings as a percentage of GDP. Added to which the average person is likely to want 75% of their salary at retirement, but this would mean that people would have to save 15% of their salaries for 40 years.

According to the findings some of the issues focus on member education and it appears that members arent prepared from an educational point of view - to make decisions about retirement, while there seems to be a growing concern that pension benefits arent sufficient.

Intermediaries say that they expect pensioner outsourcing will continue, while 86% of defined benefit funds dont outsource their pension liabilities, on the other hand half of them are considering it. It also appears that 67% of the group surveyed are hedging their assets.

To shed further light on the matter, the intermediary group said that the current system of pre-retirement counselling is ineffective, while only 30% of the intermediaries surveyed are promoting investment in SRI. Only 10% of funds have an SRI policy and only 28% offer investment choice to their members.

There also appears to be a gap between what funds think of their communication and what members think or experience of the fund's communication. It does appear that there is an increase in the number of funds providing investment policy statements to their members.

On the other hand post retirement medical aid liability is receiving attention. It appears that those surveyed believe that its acceptable to offer enhanced retirement benefits in place of post retirement medical aid.

On the asset management side, it appears the multi manager approach is the flavour of the survey, above specialist portfolio management and assurers.

It also appears that the trustees have certain criteria that they use: the top one is past track record, reputation, current investment performance, fees charged, and lastly the recommendation of the consultant.

Editors thoughts:
* Governance, education and a perception gap. All of these are challenging issues and make the life of the intermediary rather interesting.

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