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Retiring with financial independence is something that all citizens should be able to do – but unfortunately, it’s simply not a reality for most. According to an article on Moneyweb* in October 2021, only as few as 6% of people in South Africa who have access to a retirement fund can afford to retire comfortably. Here are a few trends in the industry which I believe will impact retirement savings rates further, and hopefully also provide some possible solutions.

1. Retirement Fund industry reform

The retirement fund industry has undergone many reforms in recent years, aimed at improving preservation, making tax effective savings vehicles available, and cutting fund administrative costs to improve the outcomes for retirement fund members.

With low barriers to entry, the South African retirement fund industry had many registered retirement funds. As part of regulatory reform and the FSCA’s initiative to drive fund administrative costs down, the FSCA made recommendations to consolidate smaller funds into commercial umbrella funds, in order to benefit from simplified governance structures and scale.  

National Treasury highlighted these cost issues further and introduced fee disclose standards for service providers, which makes it easier for retirement funds to know what they are paying for and also allows for an easier comparison of service provider fees.

There are other ways in which service providers can reduce the costs of retirement fund solutions. The design of the Sasfin Wealth Umbrella Fund recognises the need for cost effective solutions, utilising passive investment strategies alongside active investment ones. The passive investment strategies generally form part of the offshore components, while the local components are managed actively.

2. ESG aspects

ESG, which stands for Environmental, Social and Governance, prioritises optimal environment, social and governance investing. Retirement funds are required to consider any factors that may impact the sustainability of their investments. Regulation 28 of the Pension Funds Act supports and recommends that retirement funds must apply due consideration when deploying their members’ monies into investment markets and assess the risk adjusted returns associated with these investments.

At Sasfin Wealth, we pay close attention to what we invest in, using an outsourced ESG researcher, MSCI (Morgan Stanley Composite Index ESG Research) to screen our investment solutions for sustainability. MSCI ESG research screens the portfolios using various ESG related matrices such as reputational risk, carbon risk, human capital, pollution and waste, and social opportunities – among others – and then attaches a rating to each of these, based on the findings of the assessments.

3. Technology

There’s a misconception that those who are members of retirement funds are an older demographic, when in fact there is a growing number of members in South Africa who are millennials. This tech-savvy generation need to have access to innovative apps that have relevant information on their financial solutions, and demand systems that empower them to be more proactive in managing their savings journey.

That’s why we’ve designed our member app to offer tools like a budget calculator, which shows you how your daily spending has a long-term impact on your retirement savings. The app also gives members access to a retirement calculator which assists them in tracking their retirement goals by incorporating savings outside of their retirement benefit.

Members can also view their investment performance statements, add in any other retirement savings, and see at a glance if they’re going to meet their retirement goals or not. Members have access to this app on both Android and IOS portable devices – making the management process more seamless and convenient.

4. Preservation 

The pandemic exacerbated what was already a much more fluid job market than in previous generations – with millennials and their younger counterparts no longer remaining with the same company for decades like Gen X or Baby Boomers did, instead switching jobs much more often.

The volatility of the previous few years has had even more of an impact on this, with people losing jobs or simply resigning due to changing priorities or life circumstances. This phenomenon is a global economic trend known as ‘The Great Resignation’, and it describes the record numbers of people who are leaving their jobs after the pandemic ends.

This affects the preservation of retirement funds, as many are choosing to cash in their fund benefit when they move jobs. The current economic climate means that most people are struggling financially and are using their cashed-out retirement fund benefits to pay off debt or cover daily living costs, instead of reinvesting.

To encourage people to preserve their retirement savings, the National Treasury introduced default preservation requirements to retirement funds, effective March 2019. All retirement funds are required to have a default investment portfolio strategy, a default preservation strategy, and an annuity strategy.

For example, if a member is changing jobs, they must be presented with an option of a default preservation in which their fund benefit can be invested, should they be unsure about what to do with their savings. The requirement to have a default annuity strategy is meant to assist members when they reach their point of retirement.

Besides these sorts of measures, we try our best to give members all the relevant information they need to make informed decisions, and to help them navigate their savings and retirement journey in the most beneficial way possible.

Need an obligation-free analysis or quote? Please call us on 012 943 6193, email us at or visit our website.

Sasfin Wealth Retirement Umbrella Fund

The Sasfin Wealth Umbrella Retirement Fund (SWURF) is an umbrella retirement fund solution, offering members an in-fund Pension / Provident Preservation Fund, in-fund Living Annuity and a Sasfin Retirement Annuity, for capital accumulation purposes. Our umbrella fund has been designed to offer people a complete retirement solution based on sound investment principles, a dynamic life-stage model, value for money and robust systems and processes.

The SWURF offers an award-winning range of funds and portfolios which can be utilised to construct a custom designed life stage investment strategy. Members are allowed to make portfolio switches at any time at no extra cost, and some of the supplementary services included are financial planning, health care and fiduciary services.

Please click here to access the article by Moneyweb

About the Author

Bongiwe Momoza
Senior Asset Consultant, Sasfin Wealth

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