Retirement reform & a lack of effective communication

Mark Swanepoel, Senior Associate at Axiomatic Consultants.

As a member of the millennial generation myself and having had a fair amount of exposure to the retirement fund industry as an employee benefits consultant thus far, one thing has always been abundantly clear - this is an industry full of unnecessarily over-complicated jargon. Those who do not understand it tend not to ask questions and hope that their Trustees/Management Committee is doing what is best with their monthly retirement fund contributions.

Contributions which are often (particularly by low income earning millennials) simply seen as a compulsory salary deduction toward their employers’ retirement fund, but are not seen as a value proposition by the employer. This is evident when the following question is asked of members, “How often do you log onto the online member portal to see your fund credit and expected replacement ratio?” The answer is always “NEVER.”

The question is then, “Who in their right mind would pay money every month (whether “forced” to or not) and not ensure that their money, which is part of their package, is benefiting them?!” Yet – if their net pay changes by R50 etc. they will immediately raise a query with HR or their payroll department.

Is it because members trust their funds and the retirement fund industry so implicitly that there is absolutely no need to check where a percentage of their salaries is going?

From the many interactions I’ve had with retirement fund members, it is clear that the answer to the second question is not because members trust implicitly.

The reason is poor communication.

Members see contributions to the fund as a “grudge purchase” as no one explains clearly and simply the benefit and importance of saving for retirement now as well as the other associated benefits e.g. risk insurance etc.

Personal experiences with retirement fund members aside, the drawn out implementation of only some of the retirement reform proposals has illustrated a complete lack of trust and knowledge by members in the government and the industry.

Many fund administrators and consultants do the bare minimum and ensuring they are compliant with PF 86 and PF 90. This may appease the Trustees or Management Committee members, but the fact is that communication is persistently presented with significant jargon that those self-same Trustees and Management Committee, sometimes, do not even understand it themselves.

So before the retirement reform proposals even come into the discussion, members are already on the defensive and lack confidence in their fund which is further extenuated by frankly, what can only be described as inaccurate facts in the media.

However, effective member communication should circumvent members’ being influenced incorrectly as effective member communication will always educate members in the facts and allow them to make informed decisions or, at the very least, be conscious enough to seek professional advice.

Addressing the current status quo of ineffective member communication is obviously not an overnight job and requires a significant time investment and shift in the mind set of many employers, retirement fund administrators and/or their employee benefit consultants. At the outset of designing an effective communication strategy the focus should simply be gaining an understanding of the members, their wants, their concerns and their level of financial literacy. Less of a focus should be placed on retirement wellness and more on financial wellbeing.

In doing so, the message is targeted, unambiguous and relatable which after plenty of persistence, slowly builds the trust of the members that retirement funds are a means to providing financial freedom.