Issue: December 2012 / February 2013

Help members get the support they need

South Africans are notoriously bad at saving effectively and managing their finances. While retirement reforms are helping to pave the way for this situation to be rectified within the retirement industry, it’s a process that will unfold over time and requires the active participation of all stakeholders.

Trustees and employers have a particularly important role to play in helping their members or employees make good financial decisions – particularly when it comes to their retirement savings.

Trustee Times spoke to Karabo Morule, General Manager of Member Solutions at Old Mutual Corporate, about why fund members still need support and education, and how it can be provided.

TT: Once a person is a member of a retirement fund, they should be on track to achieve a good retirement. Is there really still a need to provide them with member support and education?

KM: Most definitely. The statement was correct in the days of Defined Benefit funds and when people worked with one employer from the time they started in their twenties until they retired – the world has changed from that meaning a member of a retirement fund needs to be kept up to date of how much they have saved for their retirement, whether it is enough and whether they should make additional voluntary contributions. The findings of Old Mutual Corporate’s annual research (the Retirement Monitor) into the retirement savings perceptions and positions of working South Africans consistently confirms that there is a dire need for reliable member support. Every year, without fail, the Retirement Monitor shows a very strong link between the overall effectiveness of members’ retirement savings and the extent to which they received guidance and decision support during their pre-retirement years.

TT: Most funds communicate regularly with their members. Doesn’t this mean that fund members are actually getting the advice and support they need?

KM: Unfortunately, that’s not the case. Member communication is very different to member support. Many funds do send out their rules, provide their members with fairly regular statements, and other communication, but this is different from the level of focused support, education and guidance that most fund members need throughout their pre-retirement years. Old Mutual’s research conducted with pensioners confirms this, with 44% of retired individuals surveyed saying they received absolutely no pre-retirement advice or counselling. In terms of preservation, our research indicates that 89% of those who withdrew some or all of their benefits in cash made that decision themselves without any advice or support.

Morule... guidance offered

TT: What are the main areas of retirement savings provision where fund members need ongoing support and guidance?

KM: Given that most retirement fund members don’t have high levels of financial and investment knowledge, member support can add significant value to every aspect of their retirement plans. That said, there is a clear need for member support that is aligned with people’s life stages and significant events like retrenchment, divorce, the death of a spouse.

A lack of preservation when changing or leaving jobs also remains a problem that needs urgent intervention. The vast majority of those surveyed who left a fund in the past 15 years took their full available benefit out in cash. This can be devastating for the person’s retirement plans and is an issue that desperately needs to be addressed through adequate advice.

TT: Now that we have an idea of the need for adequate member support, is there any evidence that providing it will make a tangible difference to members?

KM: The link between support and retirement savings effectiveness shown in the Retirement Monitor research has been verified by Old Mutual’s own experience with retirement funds that introduced formal member support. Not only have we received very positive anecdotal feedback from members utilizing these services, but there has typically been a marked improvement in preservation behaviour, with re-investment levels for these funds rising to between 60% and 75%.

TT: As a key role-player in the SA retirement industry, what is Old Mutual doing to ensure fund members receive the support they need and will it really make a difference?

KM: Old Mutual is absolutely committed to helping funds and trustees meet this urgent need for reliable member support. In addition to the support and advice offerings available through our traditional financial advice channels, we also offer dedicated Member Support Services (MSS).

MSS is automatically available to all new and existing members of Old Mutual Retirement Funds that have enrolled for Old Mutual Corporate’s Financial Wellbeing Programme, which is aimed at empowering and enabling all South Africans to take full control of their money management and create the financial futures they desire through financial education.

MSS gives fund members easy access to professional and personal financial guidance from qualified and experienced financial and investment experts. This helps them make appropriate choices and take correct action when they face milestones or challenges in their lives.

While being part of an employer’s retirement fund already places fund members in a better financial position than the vast majority of other South Africans, just being a fund member is not enough to guarantee a secure retirement. By offering members access to the retirement planning support they need during their working lives, trustees and employers can effectively help to change the future, not just for individual members, but for the SA retirement landscape as a whole.