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3 May 2016
Now in its 35th year, the 2016 Sanlam BENCHMARK Survey consisted of over 500 hours of research and analysis with retirement fund members, pensioners, employer representatives and principal officers to provide a comprehensive annual review of the nation’s retirement industry. The findings uncovered the top six interventions needed to enable all South Africans to retire comfortably.
“A real advice gap exists as three quarters of total pensioners revealed that they first received advice within 10 years of retirement, and 32% only became aware of their retirement benefits 5 years prior to retirement. This points to a gap in the manner in which members are being communicated with, in that when interviewing financial advisors, a mere 27% confirmed that they had a proactive member strategy in place to provide financial advice to members”, says Viresh Maharaj, chief actuary at Sanlam Employee Benefits.
Member communication is critical as members look to advisors for support and financial guidance through their journey from Day One of employment to Day One of Retirement. Survey results reveal that current forms of communication include Roadshows (34%), Member Q&A’s (33%), Wellness days (2.5%) and Web-based communications (5%). However survey results reveal that these methods are highly ineffective and most members admit to not engaging with them.
Maharaj continues “The information gap is apparent in the choices that a vast majority of members make in terms of preservation. 55% of pensioners interviewed admitted to withdrawing their benefits in full during the course of their working lives. The lack of information is apparent as 38% of the survey group revealed that they were unaware of the long-term effects of withdrawing, and an astounding 48% regret withdrawing from their retirement savings. The importance of preservation must be stressed to members by both employers and advisors alike, from early on in the retirement planning journey”.
Life stage strategies are critical as they take into consideration members’ current living situation, liabilities and short-term goals when working out member contributions. Willem le Roux Head: investment consulting & actuary at Simeka says ‘The survey results showed that only 31% of members have aligned the life stage solution with the annuity strategy. It is a concern that life stages are overlooked, and this highlights the dire need for members to receive information that is timeous and customised to their individual needs and circumstances. It is key for financial advisors to factor in life stages to member advice models as this could assist, for example, graduates wanting to plan for retirement and would factor in elements like student loan debt in to their savings strategy long term’.
Another key factor contributing to retirement refugees addressed is the fact that employee benefits tend to remain with the same fund indefinitely. Maharaj explains, “74% of employers have never moved from the first Umbrella Fund (UF) that they entered. The decision by an employer to outsource the fund to a particular Umbrella Fund cannot be a once off decision and regular rebrokes need to be implemented so that employers are actively considering their options to ensure that their employees’ retirement funding journeys are well optimised. On the contrary, employees should also proactively ask questions about the type of fund being offered to them and investigate whether this is the best option”, says Maharaj.
The current gap in member communication, identified throughout survey findings, could pave the way for a greater emphasis on Apps and Gamification, enabling targeted member communication and access to real time feedback. To this end, 37% of funds would consider using robo-advice, with the bulk of these preferring that a person is still available to assist in conjunction with the robo-adviser.
Dawie de Villiers, chief executive at Sanlam Employee Benefits stresses the importance of viewing a holistic retirement benefits industry that is changing everyday, he says “Recent years have seen numerous changes in the financial services industry, profoundly brought about by technology. This ranges from the way investment administration platforms are managed, to the way funds and employers engage with members. In order to best utilise these changes, we must combine the needs and desires of our members with online tools to add value to their retirement savings journey”.