Strong link between financial advice and preservation
The Old Mutual Retirement Monitor 2012 examines pre-retirement awareness among working South Africans. The latest survey result, based on face-to-face interviews with 1000 respondents, confirms that overall satisfaction with retirement provisioning is on
Other trends highlighted by the survey include an improved awareness of retirement, greater financial confidence among retirement fund members and an increase in the number of people intent on working longer in retirement. Retirement fund members also showed a greater awareness of the importance of preserving their retirement capital. “One of the important lessons for the financial services industry is that there is a strong link between advice and the preservation of retirement savings,” added Madikiza. It is common knowledge that local savers favour taking cash benefits when withdrawing from their pension funds due to resignation or retrenchment.
Greater awareness of retirement funding
The biggest unknown in the realm of retirement saving is how much is enough. “There are still a lot of people who are unsure about whether they will have enough money to retire on, but the number is decreasing,” observed Madikiza. When asked: Do you think that you will have enough money to retire on? 20% of respondents indicated that they were “not sure”, while 24% said they would be “very short”, 23% said “a bit short” and a quarter reckoned they would have saved “just enough”. Only 7% of the 1000 respondents believed they would retire with “more than enough” capital.
Old Mutual said that the survey respondents seem to be more educated and knowledgeable about their retirement provisioning… It will, however, be interesting to discover how many of the respondents’ guesses with regards the adequacy of their retirement provisioning hold true! The survey results also support that wealthier and older retirement savers were more aware of the capital lump sums saved to date. Lower income earners were less aware of progress made, possibly because they expected government to provide for them in retirement. “The low income space is one that we need to satisfy,” said Madikiza. “In this regard the survey findings resonate well with all the proposals that government is making to ensure that there is adequate provision for everyone in the industry.”
An industry built on trust
The Old Mutual Retirement Monitor provides insight into retirement fund member attitudes towards trustees and pension fund administrators too. According to Hugh Hacking, Head of Retirement Fund Solutions at Old Mutual Corporate, member engagement within funds remains largely unchanged since the survey’s inception. And the bulk of members exhibited a belief in trustee honesty despite having little interaction with fund management. They typically have no knowledge of who their trustees are and do not vote in trustee elections. “People believe in the office of trusteeship,” concluded Hacking. “There is credibility in the industry, particularly around retirement fund management.”
Among the goals of the survey is to determine how retirement savers are experiencing the retirement planning process and to increase our understanding of the retirement saving landscape. It provides valuable feedback on what retirement fund members need to know. We now know that retirement fund members want information that will empower them to make better financial decisions. They want to know more about tax implications of their retirement saving decision, how to work out whether they have enough to retire and the value of their risk benefits.
These needs are not met by current legislative requirements. One law that seems to be ignored is the requirement that members receive an annual benefit statement. “Fully a third of survey respondents said they were not receiving these statements,” said Hacking. This oversight should be of great concern to stakeholders in the industry.
Editor’s thoughts: The financial services industry is full of contradictions. We find it strange that retirement fund members are pretty much left to their own devices with important decisions about their accumulated retirement capital… Should the regulators compel retirement fund administrators (and perhaps large life insurers) to do more to educate retirement fund members in the run up to retirement? Add your comment below, or send it to [email protected]
