Adviser and provider collaboration to solve the retirement riddle

Intermediaries and product providers will have to work together for South Africa to have any hope of addressing its shocking retirement funding legacy. The statistic that matters, published every-so-often by the Association for Savings and Investment South Africa (ASISA), is that only six in 100 retirees save enough to ‘buy’ a pension with a 75%-or-better replacement ratio.

Sub-optimal savings outcomes

Sub-optimal retirement savings outcomes were on the agenda at the 2026 Sanlam Corporate Leaders Breakfast, held in Johannesburg recently. The event explored how data-led engagement might reshape financial advice and retirement solution design, thereby empowering working South Africans to retire with confidence. Today’s newsletter focuses on a retirement readiness presentation delivered in two parts. 

First up: Nzwa Shoniwa, Managing Executive at Sanlam Umbrella Solutions, who gave a brief update on the group’s umbrella fund solution. “We hit R150 billion assets under management (AUM) at the end of February 2026,” he said, before conceding that the picture would look different at the end of March due to financial market fallout following the current Middle East crisis. He said the decision to shift focus from standalone funds to umbrella funds has paid off, with just over 370000 active members in the umbrella fund. 

“There are massive opportunities for [the fund and its intermediary partners] to improve retirement outcomes for active members while also making a meaningful difference for beneficiaries,” Shoniwa said. To this end, the umbrella fund has adopted an internal focus aimed at retirement readiness across its in-force book rather than obsessing over AUM growth and measuring against the competition. 

Financial, mental and physical wellbeing

A decade ago, the concept of retirement readiness was framed as whether or not a member had enough money to retire comfortably; today, the focus is more comprehensive, spanning the financial, mental and physical ‘wellness’ categories. “Many of the value-added benefits we are putting in place today are not directly linked to savings and contributions, but rather to healthcare,” Shoniwa said. Employers and intermediaries are also spearheading debt management solutions as more and more members struggle financially. 

“The easiest way to address retirement readiness and increase replacement ratios, is for members to increase their savings and preserve more,” Shoniwa said. Unfortunately, this is also the most difficult outcome to engineer. Asking a member to up their contribution from 12.5% to 20% or higher is out of synch with the financial stress most members are experiencing. The umbrella fund processed over R1.2 billion in two pot withdrawals in March 2026, with 86% of members taking the full amount, and 70% making a second withdrawal. 

Greater care and attention during member onboarding and at retirement could cure much of what ails the industry. It would certainly make it easier to tackle the legacy issue of around R88 billion in unclaimed benefits, making the proposed centralised Unclaimed Benefits Administrator moot. “The main difficulty that we still face is that once the employee-employer relationship ends, we do not have access to those members [to address incorrect data],” Shoniwa explained. But there is a bigger issue lurking on the sidelines. 

Phase two of two pot?

Sanlam Umbrell Trust expressed some concern over possible changes during the phase two of the two pot legislation. The fund supported two pot because of its preservation focus, and the expected improvement in retirement outcomes over the long term. “Our stance is quite strong,” Shoniwa said. “We do not feel that members should have access to the retirement pot.” One exception, it seems, would be to allow some type of withdrawal and closure process for member accounts with balances of R2000 or less. 

The presenter commented on how South Africa’s gambling pandemic was eroding households’ savings. According to Shoniwa, the upcoming Sanlam Benchmark, due in June, will look at whether members are accessing their two-pot savings to feed their gambling habits. And there is a strong likelihood intermediaries and insurers will soon have to manage households through a triple-whammy of financial distress, gambling addiction and mental stress. Lottery plus online gambling could be our undoing. 

John Anderson, Managing Executive at Sanlam Corporate: Investments, used his trip to the podium to reflect on 25 years of change. “Over the years, regulations changed, technology changed and the approach to retirement funding changed,” he said. “We have got a lot better at making sure that members are invested in the right things at the right time.” He was upbeat about progress made on ensuring that fund members’ assets were invested in appropriate defaults. 

Dealing with volatility

Part two of the ‘retirement readiness’ discussion focused on tackling market volatility leading up to and during retirement. Anderson introduced the smoothing of portfolio returns as “an underutilised capability” for retirement fund members, management companies and trustees in managing investment outcomes. The idea is to build a winning investment strategy that combines diversification, exposure to growth assets and access to both impact and private markets with smoothed returns over time. 

“Research shows that up to 3% per annum of value is lost because people try to switch during periods of extreme market volatility,” Anderson explained. He argued that smoothing helps to prevent loss aversion, one of the financial behaviours that drive volatility-linked switching, in much the same way that defaults help to overcome members’ indecision or inertia. He also went to lengths to differentiate between today’s techniques and the “nasty guaranteed smooth bonus funds” from 50 years ago. 

The presenter used return stats from the Alexforbes Global Large Manager Watch to illustrate smoothing in action. Overall, smoothing reduces return variability over time, giving retirement fund members more predictability through their life stages pre- and post-retirement. Most importantly, it derisks a portfolio, allowing a fund member to retain 80-90% exposure to growth-type assets in the decade prior to retirement. That extra exposure to growth assets more than compensates for the cost of the solution. 

A 3.7% per annum pre-retirement boost

A comparison of a typical retirement date-linked approach, involving phasing into low-growth assets or cash pre-retirement, versus a basic smoothing-only strategy proves telling. In this scenario, the basic smoothing solution beats life stage by around 0.6% per annum over time. The bigger win comes from blending life stages and smoothing, in which case members could see a benefit of up to 3.7% per annum in the 10 years leading into retirement, and as much as 1% per annum for the remainder of life. 

“We have gotten more sophisticated at improving outcomes, but there is more we can do by utilising smoothing in the right places at the right time,” Anderson concluded. He urged attendees to “watch this space” as Sanlam was set to release a new smoothing solution within the next quarter or two. The idea is to offer the best of both worlds: exposure to aggressive growth asset coupled with smoothed portfolio returns. 

Writer’s thoughts:

The retirement fund experts make a compelling case for smoothing over the vagaries of market returns. Do you agree with their argument? And is it easy to ‘sell’ smoothing solutions to your clients? Please comment below, interact with us on X at @fanews_online or email us your thoughts [email protected].

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