A Fin24 user writes:
Retirement reform has been on the agenda for a number of years.
It was first described in the retirement fund reform discussion paper (December 2004), and has since been a slow process of research, discussion papers, costs analysis, etc.
I am 100% behind the objectives that the Treasury has set out to achieve. What would the position be for umbrella funds as an offering to current employers?
In my understanding this solution has been cost effective (relatively cheaper than retirement annuities).
It also adds value to members, where education sessions are included to inform members of personal financial issues such as budgeting, financial planning, etc and fund assets are managed by top asset managers.
Will the South African retirement reform be implemented in a similar manner as the UK retirement reform at present, whereby the employer has an option to set up his own retirement eund for his employees, or alternatively a national employment savings trust?
I am in the process of launching several workshop sessions with small and medium enterprises concerning retirement planning for employees.
These sessions will be presented with legal specialists in the field of human resources and labour law.
Can you possible give me brief feedback regarding the issues mentioned? Your opinion will be of great value, both to my team and my clients.David Gluckman, head: Sanlam employee benefits future positioning and research, answers:
Sanlam research supports the reader’s contention that well-managed umbrella funds can indeed prove a highly cost efficient retirement savings solution for employees, and that they are generally more cost effective than alternative retail savings products.
There is also a clear size effect, with umbrella funds becoming more cost effective as the number of employees rises.
It is not possible to offer a conclusive opinion on the ultimate outcome of the South African retirement fund reform process.
While we have argued that a compelling case can be made in favour of well-managed umbrella funds, there are other retirement savings models also being considered – in the extreme, a compulsory national social security fund for all employed South Africans.
In May 2012, National Treasury published a document entitled Strengthening Retirement Savings
, in which it has indicated that various other consultative papers will be released during the course of the year covering important issues such as annuitisation, preservation, governance and costs.
Sanlam as well as the Association for Savings and Investment SA will actively engage in the consultative process to follow with the aim of ensuring that the most appropriate savings model is implemented for South Africa.
It is in our view unlikely that such a savings model will be imported from another country and identically replicated – South Africa is in many ways a unique country, and we need to develop our own unique solutions.
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