Issue: April/June 2010
That huge NSSS challenge
David Gluckman, managing director of Sanlam Umbrella Solutions, outlines ways forward.
In his 2007 State of the Nation address, then President Mbeki announced government’s intention to address SA’s social security challenges by establishing a National Social Security System (NSSS) founded on principles of equity, risks pooling, mandatory participation, administration efficiency and solidarity.
Shortly afterwards, this announcement was expanded by release of a second National Treasury discussion paper entitled Social Security and Retirement Reform. A high-level document, it contains some radical proposals for the restructuring of the retirement funds, insurance and asset management industries.
The message from government is clear. It’s that the private sector has failed consumers, and government is stepping in to sort out the mess.
Implications for the private sector are stark. In a research paper, securities firm Barnard Jacobs Mellet estimated that some R15bn (equivalent to 6,2% of market capitalisation) could be wiped off the value of the JSE’s insurance sector if the draft proposals were implemented.
There are two ways for an industry player to respond. The most obvious is to engage with government, labour, business, industry associations and other key stakeholders in an attempt to influence the final solution; hopefully to contribute positively towards an enhanced solution.
Clearly, this is an important strategy. It can also be regarded as our responsibility as a concerned corporate citizen, and Sanlam is engaged at various levels in this regard.
There’s another method, applied on the ground. It’s in the products and solutions being brought to the market. Since June 2007 when Sanlam Umbrella Solutions was established, it’s had a specific mandate to develop such a practical response to challenges arising from the NSSS proposals.
Our practical solution is premised on using all Sanlam’s intellectual capital to build the best multi-employer packaged retirement savings, risk insurance and administration offering available. This is not a shortterm commitment. It’s a carefully considered, sustainable response to the many challenges facing the employee benefits shaken by such scandals as Fidentia, secret profits, high costs and lack of transparency.
The Sanlam Umbrella Fund will become our core product offering. It will combine the strengths of our various historic offerings such as the Wizard Universal Umbrella and the Reinforced Umbrella.
SOME FEATURES OF THE SANLAM UMBRELLA FUND’S CORE PRODUCT
Our underlying philosophy is to create value-for-money offerings for the ultimate benefit of members. The core belief is that, in a definedcontribution environment, the employer determines the overall company budget available for employees’ retirement savings and group risk benefits. Provided these budgetary constraints are adhered to, and provided the administration experience is efficient and hasslefree, it is in any employer’s interests that the best possible deal is offered to employees.
Government, organised labour and business appear to agree that consolidation in the retirement funds industry is necessary and desirable. SA simply cannot afford the luxury of an industry comprising some 13 500 standalone retirement funds. It is possible to envisage a future dispensation where only the largest occupational retirement funds will continue to exist. All other formalsector employees will participate in either a multi-employer fund such as the Sanlam Umbrella Fund or the National Social Security System, or both.
We at Sanlam will be right up there, determined to lead the industry into this new age.