One of the most hard-hitting moments of the 2022 Old Mutual SuperFund Summit was a short video clip of Old Mutual Corporate’s Social Experiment. Eight typical South African families were each asked to fill a trolley with their monthly grocery shop. They didn’t know that the price of the groceries had been inflated to reflect what they would cost when they retired. When each family arrived at the till, their budget had been revised to their projected income at retirement. They had to decide what to keep and what to return to the shelves.

Seeing this play out on film brought home just how unprepared most South Africans are for their retirement, and how unaware they are of how that will affect their standard of living. 

‘The statistics that get mentioned – that only 6% of us can retire comfortably – can be quite abstract,’ says Malusi Ndlovu, Director: Large Enterprise Market at Old Mutual Corporate. ‘When you bring it down to the level of a real family, of a working professional who is 10 or 20 years from retirement who’s looking at a basket of groceries that they cannot afford … that’s when the message really lands.’

The role players determining a retirement fund’s performance

There are a number of parties involved in everyone’s retirement journey. ‘There’s the individual or employee who is contributing to their retirement fund; the employer who has some decision rights around how much is contributed; and the provider of the retirement fund, for instance, Old Mutual Corporate,’ Ndlovu explains. 

‘Our job, as provider of the retirement fund, is to ensure people can replace their incomes when they are ready to retire or no longer able to work. It’s not enough for us to design solutions that can achieve that in theory. We must play an active role in helping people to understand and use the products which will allow them to get the right retirement outcomes.’

Employers play an equally vital role when it comes to maximising their employees’ retirement income. Here Ndlovu points to the six levers that are pivotal to achieving successful retirement outcomes: contributions; the gap between your pensionable salary and cost to company; the investment strategy; preservation; what you do with your savings at retirement; and your retirement age.

In addition to these three role players, the managing committee or trustees too have their part to play in maximising the investment outcomes of a retirement fund. This checklist of nine questions for retirement fund trustees is a handy reminder of what they can do to further boost members’ income in retirement. 

How employers could help to boost workers’ retirement savings

Employers can help by offering employees greater flexibility. ‘In the past, most employers would choose a default contribution category that every employee then contributed to. That meant that everyone contributed the same percentage of their salary each month,’ Ndlovu explains. ‘But that's not enough.’

‘Employers must make the effort to make more contribution categories available. Members can get a tax deduction on up to 27% or a rand cap, and every employer should look at their retirement funding structure to allow them the flexibility to take advantage of this. If someone wants to and is able to make that salary sacrifice and contribute more towards their retirement, they will then be able to do so.’

The next step is educating staff about the different options to help them understand what’s available and how their choices could significantly affect their retirement outcome. For example, if you were to retire at 65, Old Mutual’s actuaries recommend having at least nine times your annual salary invested if you’re a man, and 10 times that amount if you’re a woman. This means that a man earning R100 000 per annum will need R900 000 on the day they retire and a woman R1 million. (Read “What’s Your Number?” in Old Mutual Corporate’s Today magazine for more information on how much you need to save for your retirement.) 

Once fund members understand this, they can make the right choices and ask the right questions of their employer –  and if necessary, ask for changes if the options they need are not available to them. 

For retirement funds and employers alike, empowering and enabling fund members is the first step towards improving South Africans’ quality of life in retirement. ‘Remember those three role players,’ Ndlovu concludes. ‘There’s the fund, the employee and the employer. Through their decisions, each can make the situation better or worse – but ultimately, it’s the employee who has to live with the outcome.’

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