Issue: June/August 2008
Key role for umbrella funds in addressing retirement savings crisis
Executive General Manager at
Old Mutual Corporate
The need to encourage South Africans to save adequately for their retirement continues to be a major focus to government and industry players. In his 2008 budget presentation, Finance Minister Trevor Manuel highlighted the current reform of the retirement system which aims to address this issue by encouraging more people to make provision for their retirement so that they are not dependent on the State.
According to Seelan Gobalsamy, Executive General Manager at Old Mutual
Corporate, the importance of these initiatives is brought into perspective when
one realises how few South Africans employed in the formal sector manage to
retire with adequate savings, never mind those in the informal sector. “Planned
reforms by government may compel formally-employed individuals to contribute to
retirement, and that will definitely go a long way in addressing this problem,”
“...encouraging more people to make provision for their retirement so that they are not dependant on the State. ”
He adds: “There is such a large number of small retirement funds that our current retirement system is not as cost effective as it could be. Increasing requirements for governance in retirement funds will make small funds even more costly in the future. These factors point to an increasing role for large, well-managed and efficient multi-employer (umbrella) retirement funds to meet the needs of employers and their staff. Industry has to drive the consolidation of costly small funds into more efficient and larger, multi-employer funds.”
Some benefits of multi-employer (umbrella) funds:
Gobalsamy says Old Mutual, which has been delivering multi-employer solutions to small and large businesses for more than 20 years, servicing more than 6 000 employers with a membership base of around 230 000, has the necessary experience to ensure that participating employers enjoy all these advantages.