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Retirement planning in the time of Covid-19: New retirement tools helping South Africans navigate a smoother retirement

19 August 2020 Nedgroup Investments

South Africans close to or at retirement are extremely vulnerable to financial shocks or setbacks. However, they also seem to be amongst the least supported when it comes to financial advice or assistance.

This is according to Quaniet Richards, Head of Institutional at Nedgroup Investments who undertook extensive engagement with people approaching retirement in South Africa last year. “The choices made in the few years before retirement are probably amongst the most important and impactful decisions a person will ever make. And yet, prospective retirees told us that they have significant concerns about making the right decision when it comes to investing their retirement savings. Furthermore, they don’t feel that they have the right support to help them,” he says.

The biggest knowledge gap that needs to be addressed, according to Richards, is to help people close to retirement decide how to allocate their formal retirement savings. Traditionally, this is a choice between either a living annuity or a life annuity.

“This is not an easy or simple decision and should be considered with one’s individual financial circumstances, risk factors and desired outcomes in mind. We have found that while most people are aware of the options at retirement, they lack a detailed understanding of how their decision could affect them in the years to come.

We also found that many people did not feel comfortable with either option. This uncertainty is contributing to high levels of anxiety regarding their financial situation after retirement,” says Richards.

To address this need, Nedgroup Investments recently launched its MyRetirement Solution – a solution that helps retirees to plan for retirement. It includes a digital tool to visualize outcomes, a retirement coach and an innovative new living annuity product.

The MyRetirement Solution uses a world-class algorithm which provides prospective retirees with a clear and comprehensive retirement action plan for their formal retirement savings.

“The algorithm is supported by a retirement coach that assists retirees in navigating the tool – not only on retirement but also annually as retirees’ circumstances change. The human touch is still extremely important to this group of people – now more than ever - and we didn’t want to lose that,” says Richards.

Nedgroup Investments also identified the need for a retirement solution to address the most typical concerns and limitations of traditional annuities. MyRetirement Solution uses an algorithm to recommend one of three annuities - a living annuity, a life annuity or the innovative new ‘Living Annuity Plus’.

The Living Annuity Plus effectively offers retirees the best of both worlds, providing the security of an income that last longer while still allowing annuitants flexibility to select their income and enabling provision for an inheritance.

Another key consideration when creating the MyRetirement Solution was the need to keep costs as low as possible in order to maximise the amount of members' savings that are available to provide them with an income – so the effective annual cost (EAC) of the solution is very competitive.

Richards says the fact that the tool is available online has made it increasingly popular with prospective retirees as a result of the Covid-19 lockdown. “There is much more appetite for online interaction now and tools like this will go a long way to helping retirees make better, more informed decisions,” he says.

Quick Polls

QUESTION

The intention with lockdown was to delay or flatten the Covid-19 infection curve and give both the private and public healthcare sectors time to prepare for the inevitable onslaught. Did the strategy work?

ANSWER

No, the true numbers are not reflected. Almost a quarter of South Africans may already have been infected with Covid-19
It’s too soon to tell. We will likely get a second wave with stringent lockdown regulations in place again
Yes, South Africa bought enough time to make a significant difference. We saved lives and have passed our peak. The worst is over
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