Survey reveals oversights in the administration of South African retirement funds

At a recent educational session for Trustees, over 200 delegates responded to a survey on how well they felt funds were doing in helping members achieve a reasonable standard of living in retirement.

“The survey provided insight into the effectiveness of funds in implementing strategies and mechanisms to help members meet their retirement goals” says John Anderson, Alexander Forbes Financial Services (Pty) Limited.

Some of the insights gained from the survey conducted at the session were that:

1. Trustees spend too little time on strategic issues.

2. Increased legislation has resulted in much more time being spent on operational compliance.

3. A more strategic approach to retirement fund governance was required in the South African retirement fund industry.

4. Employers have a valuable role to play and should become more proactive in improving the retirement outcomes of their employees.

5. Employers were not doing enough to educate and guide their employees in making the right choices concerning their retirement savings.

6. Trustees needed to ensure they regularly reviewed their governance budgets and that their processes were commensurate with their resource capacity.

7. It was important for trustees to measure the achievement of goals, like whether members achieved reasonable pensions at retirement, and whether communication and educational initiatives improved the ability of members to make the right retirement decisions or alter their behavior to better meet their retirement objectives.

The survey provided confirmation that Alexander Forbes’ new outcomes-based approach to retirement fund management was well positioned to provide valuable direction to trustees of retirement funds.

An outcomes-based approach seeks to change the way the industry measures the effectiveness of retirement solutions by focusing especially on maintaining each member’s standard of living in retirement, together with all the factors affecting this.

As such “an outcomes-based approach is much more effective in delivering desired retirement outcomes than the industry’s traditional concentration on investment returns and operational and compliance matters” concludes Anderson.