Old Mutual Retirement Fund Survey reveals lack of effective member communication despite increase in costs

Despite considerable investment by retirement funds in improving levels of communication, members still feel appropriate financial education is lacking. That is one of the key findings of the 2008 Old Mutual Retirement Fund Survey released today.

Seelan Gobalsamy, Executive General Manager of Old Mutual Corporate says the cost of providing communication to members has escalated considerably in the last few years as funds look to provide members with more information.

“However, while the survey shows that 71% of funds interviewed have a formal communication policy in place, members feel that it often lacks relevance and they still don’t understand the basics of retirement funds.”

The tendency for funds to focus on written communication is evident from the survey findings. For example, whilst 91% of funds provide some form of communication to new members joining the fund, less than half of funds (49%) use group presentations or workshops and o¬nly 32% offer one on one counselling. on the other hand, 98% of funds make use of information booklets, while 30% provide members with online information.

Gobalsamy says that particularly amongst blue collar workers, verbal delivery of information and education is regarded as more meaningful and effective. Many of these members interviewed say they are embarrassed about their lack of understanding and are instead interested in having group based communication sessions in which others can ask the questions.

According to Gobalsamy, the survey also reveals that many of these workers are suspicious that employers want to keep members in the dark o¬n retirement fund issues. As a result, they generally prefer to receive communication from their unions, who they trust to protect their interests.

He says a lack of financial education among members remains a key barrier to effective retirement planning.

For example, while 93% of all funds indicate a sense of responsibility to encourage exiting members to preserve their retirement fund benefits, o¬nly 50% actually provide advice and counselling to members who exit the fund for reasons other than retirement.

“Preservation is an effective way of improving members' ultimate retirement benefits,” says Gobalsamy. “So, while it is encouraging that most boards of trustees believe members should be encouraged to preserve, it is concerning that the implementation is lacking. Education about important issues like preservation should be provided o¬n an o¬ngoing basis, not only when a member leaves a fund.”

The survey also reveals a similar trend in pre-retirement counselling. While 76% of all funds interviewed provide members with pre-retirement counselling or financial advice, o¬nly 50% offer such advice 1 year before retirement, and o-nly 2% offer regular annual input. However, 91% of funds interviewed consider the counselling to be effective.

“The majority of funds are providing some means of retirement counselling to members,” says Gobalsamy. “However, counselling is undoubtedly more effective when offered to members more than o¬ne year before retirement. It is interesting to note that, while most boards of trustees believe the communication and counselling being offered are effective, the responses from members shows they feel there is lack of communication and, where it exists, it is not effective. Trustees may need to explore alternative methods of communication to bridge this gap.”

He says it is encouraging that according to the survey Umbrella Funds also offer a high level of communication activity, at similar levels to stand-alone funds. “The results suggest that Umbrella Funds may be offering a higher level of one-on-one counselling to members leaving the fund.”

Finally, just less than half of funds surveyed believe it is important to maintain contact with members after retirement. Those who do are predominantly defined benefit funds.