'Very much so,’ says Andrew Davison, Head of Advice: Old Mutual Corporate Consultants. ‘OnTrack™ has been very well received. The strength of the tool is that it’s so member-centric.’
As he explains, ‘It considers a fund from the members’ point of view and informs a board how well it is doing with regard to getting the members to retirement with enough money.
‘MANCOs and retirement fund trustees previously had no way of telling whether a fund was delivering for their members. Now OnTrack™ provides them with a scorecard that shows how effective their fund is in terms of delivering sound retirement outcomes for them.
‘It therefore provides valuable insights about the fund’s benefit design, and the choices made by members (if choice is available), and any members who may be “left behind”. As a result, they can take action to ensure that the fund is optimally designed to benefit members rather than holding them back from achieving their goals.’
While that might sound extreme, Davison warns that many fund members believe – wrongly – that merely belonging to a retirement fund is enough for a secure retirement. ‘While it is not imperative for funds to provide members with a 70% replacement ratio, it is important that they reflect the realistic outcome members should expect when they retire so that they can plan better,’ he says.
OnTrack™ also helps funds to identify which steps they should take to improve members’ retirement outcomes. ‘In this way it encourages them to do better,’ says Davison.
OnTrack™: a case study
One of the companies where an OnTrack™ assessment was done, scored a rating of one out of a possible five. ‘It is a security firm made up mostly of blue-collar workers, where take-home pay is a challenge. They had a retirement age of 60 and a very low retirement-contribution rate after risk and other costs. This meant that members could at best expect a pension of about 45% of their pre-retirement salaries.’
Based on their OnTrack™ analysis, the company took the bold step of raising its retirement age from 60 to 65. ‘While some employees were disappointed about having to work an extra five years, most saw the advantages. This impactful change in the benefit structure will significantly improve their retirement outcomes. Although it will take time to manifest in terms of improved outcomes, their annual OnTrack™ assessment will show a gradual improvement, which will lead to a higher rating,’ Davison says.
This is just one example of how OnTrack™ is already changing the conversation around retirement funds. ‘It’s no longer just about where or how you invest or how fast you’re paying withdrawal claims or what administration issues you have,’ says Davison. ‘It’s about whether you’re delivering for your members. Are you helping them accumulate assets while they’re still in your fund? If not, what do you need to change?
‘OnTrack™ has the potential to drive a better customer experience for retirement fund members.’
Mark van Dijk
An award-winning writer who has written for publications ranging from Sports Illustrated to the official magazine of the JSE.