Lack of transparency and too much fine print often leave pensioners confused about what their pension package actually offers them. In light of this, Sanlam Employee Benefits through Sanlam Structured Solutions have launched The Complete Picture Pension. This product is the first of its kind in the market, offering pensioners a simple, transparent increase formula, with no decreasing pensions, no increase surprises and a high exposure to equities.
Dawie de Villiers (pictured), CEO of Sanlam Structured Solutions, said “Transparency is extremely important. Pensioners are often disillusioned when they receive increases not in line with the performance of financial markets - and this leads to a lack of trust in the service provider.”
“With this product, pensioners can calculate, and will know on an ongoing basis, what increase to expect and can plan their lifestyle accordingly. In addition, there is protection against negative returns as pensions can never decrease. There are no hidden clauses and the pension is guaranteed for life. The pension increase formula is uncomplicated and easy to understand, which makes the offering credible.”
The Complete Picture Pension is a comprehensive and unique solution for pensioners because it pays increases according to a fixed and transparent formula. The formula is the average of an equal weighting of the performance of the ALSI 40 (total return index) and the ALBI over 5 years with a minimum return of zero guaranteed; even if financial markets have a negative return over this period. This makes it an optimal solution, maximizing risk adjusted returns.
Back testing has shown that pensioners would have been far better off investing in this product than typical older generation products currently available. A Complete Picture Pension of R1 000 per month in 1993 would have grown to R4 411 in 2008, compared to pensions in older generation products varying between R2 837 and R3 901. Older generation products tend to have lower exposure to equities, a lack of transparency and “black box” increase calculations. Furthermore, historic deficits are funded by future pensioners. With the Complete Picture Pension all these drawbacks have been addressed.
“With this solution we have moved away from the traditional black box methodology and have created a solution that is easy to understand and transparent. Generally people can take the good news and the bad news; they just do not like any surprises. With this product a pensioner will understand his increase and will know what to expect. With a more predictable income, it’s easier for pensioners to plan their lives,” said de Villiers.
Pensioners who currently have funds with Sanlam can switch to The Complete Picture Pension without any penalties.
Sanlam Structured Solutions develops and provides structured investment and retirement solutions for the institutional and retirement fund industry..