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Insights into how the industry is evolving

09 December 2021 Myra Knoesen

The remarkable recovery of investments following the pandemic and the need to continue consolidation of umbrella funds were among the key insights at the Sanlam Umbrella Fund Symposium.

The Symposium also illustrated how rapidly the retirement funds industry has evolved over the past decade, and how leading commercial umbrella funds are working to improve member retirement outcomes. 

Here are some key take-outs from the event, which was themed ‘Be Confident. Set Goals. Achieve Success’ to tie into the Group’s longstanding purpose to ‘empower people across the continent to live with confidence’.     

Costs, competition and trust

David Gluckman, Sanlam Umbrella Fund Chairman, said the issues raised in the Department of Social Development’s Green Paper on Comprehensive Social Security and Retirement Reform could not be regarded as resolved. The paper was gazetted during August 2021 but was temporarily withdrawn soon after. 

He said the Green Paper reflected concerns from government that costs were too high in the retirement industry, that competition was inadequate and that institutions could not be trusted. 

Gluckman said the commercial umbrella fund market had fared very well in all these factors over the past decade, and that member retirement outcomes had, as a consequence, been significantly improved. 

“The evidence is that the consolidation trend advocated by National Treasury and the FSCA has borne significant dividends for ordinary South Africans,” said Gluckman. He echoed the call from newly appointed Finance Minister Enoch Godongwana that this policy should be continued and even accelerated.                                                                            

Remarkable recovery in markets

Darryl Moodley of Sanlam Corporate Invest said the COVID-19 pandemic had impacted investment markets in every region of the world not least South Africa. “This has led to a seismic shift in global politics, and one that must ultimately impact long-term investment decisions one way or another.” 

Moodley said, “Given the depths of the market crash last year, where equity markets had fallen 35% in just a few short weeks, we have witnessed nothing short of a remarkable recovery since then.” 

Moodley cautioned that “the future may be nothing like the recent past, the emphasis remains on a long-term perspective that will support positive investor outcomes”. 

Looking forward

Avishal Seeth, the Head of Sanlam Umbrella Solutions, said the ongoing rapid growth of the Sanlam Umbrella Fund, where members assets had surpassed R60 billion, was as a result of member trust and innovation. 

“Initiatives include free virtual doctor and nurse consultations, free wills drafting, better credit management tools and new technologies used to improve member communication and client experience.” 

Protecting member interests

A panel of three independent trustees - Jolly Mokorosi, Joelene Moodley and Cheryl Mestern - facilitated by Product Development Head Anna Siwiak, discussed concerns raised by government around governance issues in umbrella fund boards. Concerns centre around member representativity, true independence, competence and transformation. 

Mestern explained that independent trustees need to be particularly vigilant when considering products and services offered by the sponsor and they must interrogate the viability of those products and services to ensure that they are market related, cost effective and meet the needs of and are in the best interests of members and the fund. 

As regards Joint Forums, Moodley said that these serve a very useful purpose “to bridge the gap between the trustees and members at a specific employer level” and are a very useful feedback loop that ultimately helps the trustees and sponsor improve the product offering. 

As a final point, Mokorosi echoed the view that the Sanlam Umbrella Fund’s ever-increasing economies of scale allowed the team “to do things that others might not be able to” and expressed pride in what had been achieved to date, despite very challenging conditions. 

Writer’s Thoughts:
Remarkable recovery and improved member retirement outcomes give us hope. However, like Moodley said, “the future may be nothing like the recent past.” Until the country emerges from the ravages of the pandemic, what do you believe will be the retirement funds industry’s key challenge over the next year? Please comment below, interact with us on Twitter at @fanews_online or email me - [email protected]

Comments

Added by Cynical Simon, 09 Dec 2021
Member" representativity" as illustrated by the lack of meaningful mandates and proper representation of joint forums and true independence of trustees who are institution appointed remain major causes for concern.
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