Issue: March 2012 / May 2012
Expert Opinion


The vast majority of South Africans who reach retirement are unlikely to be able to support themselves financially in their later years. This is a serious issue for both individuals and businesses. Fortunately, there are ways to help avert this looming crisis.

According to Willem Loots, head of Umbrella Fund Solutions at Liberty Corporate, several issues have contributed to this complicated scenario.

According to Willem Loots, head of Umbrella Fund Solutions at Liberty Corporate, several issues have contributed to this complicated scenario.

While South Africans may have a lower average life expectancy, our overall health and longevity is better than at any other time in our history. This is thanks to modern medicine and technology. While it’s great news for many of us, it also brings its own set of challenges.

For example, if one considers the average retirement age between 60 and 65, in the past we may have had to plan for another 15 years. Now we’d have to plan for 20 to 25 years ahead.

Loots says this could mean looking at the possibility of working beyond ages 60 to 65: “From an individual perspective, this has both financial and psychological advantages. From an organisational and collective perspective, there is no match for good old-fashioned wisdom and experience that comes from older people who have worked successfully within an industry.”

But in the broader economy, South Africans are faced with the challenge of high debt, high unemployment and a culture of poor savings. Statistics show that there are currently around nine million South Africans with accounts in arrears.

This is a staggering number for a country where 13 million people are employed. We simply don’t have enough saved to comfortably support ourselves or our economy. As a result, he adds, we rely on capital from abroad to finance our economic growth. This leaves us vulnerable to the turmoil in global markets.

Loots believes it is crucial that South Africans start to take responsibility for their own financial futures: “As a vehicle to pool occupational retirement savings, an umbrella fund provides an excellent option for businesses to consider for their employees. Typically, employers would choose to participate in an umbrella fund rather than start their own funds as it offers a sound bundled retirement-fund solution.”

The employer then gets access to retirement savings and group risk benefits, while effectively outsourcing the complex administration of such an arrangement. The umbrella-fund model offers both the vehicle for employees to save for retirement in a tax-efficient manner, as well as the ability to pool risk.

In addition, he notes, an organisation generally incurs a substantial management burden in setting up its own standalone retirement fund: “An umbrella fund takes away the management burden from the employer by offering its own set of trustees who adhere to regulatory requirements and implement proper governance.”

From a cost point of view, the employer has access to economies of scale through umbrella funds in terms of administration, governance and investment costs. By partnering with an established employee-benefits provider, a company also gains from access to expertise in benefit design, and the assurance of proper governance, in that the fund is overseen by professional trustees.

Viewing one’s future in a positive light is far easier when you know that you have planned for the comfort and pleasures which a sound retirement solution will provide you, Loots advises. “It is vital that businesses and their employees engage with an expert and view their options with a critical eye to ensure that their golden years are indeed golden.”

Liberty Corporate is a core division within the JSE-listed Liberty Holdings and part of the greater Standard Bank Group. We are market leaders in providing employee benefits, investment and risk solutions to the South African business community. With over 50 years’ experience and more than 8 500 funds currently under administration, Liberty Corporate partners with companies to enhance the lives of their most valuable asset; the people that work in their organisations.