Edition: June - August 2015
Right time, right place
These must be top of mind for success in employee benefits
communication, suggests Ashleigh Davies,
Thought Leadership Manager at Old Mutual Corporate.
Employed South Africans are often provided with benefits
that go well beyond take-home pay. Access to clinics,
medical aids and retirement funds are examples.
Just take retirement funds. There are many good reasons
that employees should take advantage of the opportunities
these funds present e.g. tax-deductible contributions,
cost-effective risk benefits and no additional administration
fees on additional contributions. Many members don’t
maximise these benefits.
Why? More than employee apathy are perhaps ineffective
education of members and poor communication with
The question then arises – how should this be tackled and,
perhaps, more importantly, when is the best time and
place to engage with the members?
The new member
When a young employee joins a company, this is the ideal
time deal to impact on his or her future financial security.
Starting to save at age 25 rather than at 30, for instance,
could add an extra 30% to a member’s retirement income.
A 25-year old employee will need appropriate counselling
as retirement saving and financial security are usually not
priorities for many young people. The most important
consultation during the employee’s induction process
will most likely be about the staff benefits offered by
the employer, as these may form the foundation of a
successful financial plan.
It may also be a good idea to introduce the employee
to the principal officer or other representative, such as a
trustee or management committee member. This should
convey the importance, effort and commitment behind the
paperwork, and should have positive benefits for both the
fund and the employer. It will also allow the new employee
to ask questions.
If this is not an employee’s first job, it may still be possible
to discuss the preservation of the benefit accumulated
in a previous employer’s retirement fund, either in a
preservation vehicle or by transferring it to the new fund.
This will be an important contributor to the member’s final
retirement outcome. In addition, depending on how this
on-boarding process is managed, it could be an ideal time
to introduce the member to an onsite advisor who can
assist the employer’s HR department/fund representative in
explaining the employee benefits available.
Future communication prompts
Similar to salary-increase letters, members generally scan
their annual benefit statements in a superficial way until
they see the value of their accumulated credits. Often little
attention is paid to the amounts of death or disability cover
provided by the fund, notwithstanding how important this
may prove in future. As it is also unlikely that members
digest much of the information presented in their annual
member-benefit statement, they should be encouraged to
revisit their financial plans at significant times.
These are when their circumstances change through salary
increases, promotions, bonus awards, marriage, birth of
children and divorce. They might also have to consider
their positions when they can withdraw from the fund
(e.g. through job retrenchment or resignation), and should
routinely do so on receipt of their annual statements.
Increasingly, employees have a number of employers
in their working lifetimes. The principal officer or other
fund representative should ensure that part of the exit
process includes advice on the member’s options and
the importance of maintaining the plans made when the
employee joined the company.
Davies . . . engagement prompts
Should a member be unable to work because of illness
or injury, it will be reassuring for the person to know that at least his/her financial circumstances have been catered
for by their retirement and medical aid funds, which could
include disability cover as part of their benefit. At this
vulnerable time, expert financial counselling is invaluable.
If properly managed, it can only deepen the employee’s
perceived value of the sponsored benefits and associated
Sadly with tightening economies, changing industries
and the increasing use of technology, retrenchments
have become an inevitable outcome of the risks to formal
employment. Given the impact of the loss of work at this
time, emphasising the contribution that can be made for
this time is hard to overstate.
Retirement investment is a long-term business. If proper
planning is left too late, little can be done. So regular
reviews are important to ensure there is sufficient time to
make a meaningful intervention for adequate retirement
Employees within 15 years to retirement should be
encouraged to attend workshops to educate themselves
on how to manage their funds, and possibly boost their
savings when approaching and reaching this milestone.
There are a number of ways in that this can be done.
If the staff complement is sufficiently large to warrant
it, workshops should be held by the employer at least
annually. Members should be encouraged to attend these
at five-yearly intervals until five years from retirement,
where after they should attend annual events as many
important decisions will need to be taken during this time.
This time of change can be a stressful time for members.
Members should have had ample opportunity for
counselling prior to retirement on the type of annuity
that best matches their needs, and to gain a proper
understanding of their future financial circumstances.
Most employers will be cautious of being seen to be
somehow responsible for retired staffers. This might
present an opportunity for fund representatives to improve
the trust between the financial-services industry and its
A final counselling session initiated by the company/fund
should ensure that the member understands the various
options upon retirement. It can include explaining why a
particular default annuity was selected by the trustees /
management committee member and the full implications
of not opting for this i.e. how a large sum of money can
be saved by accepting the default due to the pooled
nature of annuities, the absence of commission and lower
If members opt for living annuities, it will be important that
they understand the financial risks associated with their
choices of underlying investment, amount of drawdown,
the need for capital preservation, market fluctuations,
longevity and their financial acumen to manage these
Future security depends on the solution chosen by the
member. Post-retirement planning is as important as the
planning undertaken at the first day at work.
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