OLD MUTUAL CORPORATE: Expert Opinions: Edition October 2019 / January 2020

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A recent analysis conducted by Old Mutual Corporate Consultants estimates that more than 40% of retirement fund members contribute 10% or less of their salary toward retirement savings every month. It is however advised that retirement fund members should contribute at least 15% of their salary toward retirement, to have enough saved up when they retire.

It is imperative for employers to take a holistic approach to the financial wellbeing of their employees incorporating a solid employee benefits package that is designed to deliver sound outcomes. Many employees make the mistake of believing that mere membership of a retirement fund assures them of a comfortable retirement. The reality is that not all retirement schemes are created equal. Some are optimally structured to deliver a pension that resembles the employee’s salary while they were working, but other schemes are only a retirement fund by name. Those funds usually do not deliver the benefits members expect.

THE VALUE OF ADVICE

In the time-starved environment that most executives of companies find themselves in, actuaries are very specialised professionals and provide a valuable service – particularly in the retirement funding industry. They calculate replacement ratios, fund valuations, fund interest declarations and employer liability valuations. They establish and convert funds, advise on mergers and acquisitions and manage Section 14 transfers. There are many reputable retirement and actuarial consultancies in South Africa, each bringing their own unique blend of strengths to the table. Although this can be a costly service, the value of the advice will far outweigh the consultancy costs. By examining issues such as the overall cost effectiveness of the fund and its impact on members’ benefits, Old Mutual Corporate Consultants’ actuarial services provides valuable information to trustees and other stakeholders to help them make informed decisions.

TRACKING YOUR FUND’S PROGRESS

Having a retirement fund in place that provides benefits to employees is one thing. But how healthy is that retirement fund and, more importantly, is it delivering on its promises? By regularly monitoring a fund’s progress and taking steps to improve the assets accumulated by members, funds can deliver superior retirement benefits to a much higher proportion of members. Tracking tools have the potential to transform the way trustee boards and employers approach their retirement funding arrangements. OnTrackTM, a new consulting tool launched by Old Mutual Corporate Consultants, helps trustee boards and management committees to assess the effectiveness of their funds and benchmark them against other schemes of similar size or in the same industry. OnTrackTM sets clear target levels of asset accumulation, using savings as a multiple of annual salary, for each member, based on their number of months of service in the fund. The actual level of assets accumulated by each member is then compared to this target to determine whether they are ‘on track’ or not.

WHAT CAN EMPLOYERS AND FUND TRUSTEES DO?

Speak to a consultant that has the expertise and a proven track record to help you package your employee benefits to suit your business’ unique needs and budget. Ideally, one that is focused on delivering specific, well-defined outcomes for your employees. That means they partner with you to ensure that your staff are on track with their retirement savings and the outcomes they want for the future.

Call us to create a smart strategy for your business.
Rodney Msimango: Head of Business Development +27 011 217 1420 or RMsimango@oldmutual.com