While difficult economic conditions have forced South African consumers to live more frugally, there appears to be a renewed appreciation for employee benefits, which are becoming more holistic in compass.
These themes, among others, emerged in the findings of Sanlam’s 2022 Benchmark Survey, an annual survey of the state of the employee benefits industry. The research found that 55% of retirement fund members had experienced reduced household income as a result of the Covid-19 pandemic, 58% had started living more frugally and cutting out luxury items, and 18.5% had accessed a long-term investment. On the plus side, 30% had reduced their debt levels coming out of the pandemic.
Against this tougher new reality faced by South Africans, the survey sought to establish the changing requirements of South Africans in formal employment who are members of retirement funds and assess how the industry has adapted to meet these needs.
The 2022 survey polled 83 principal officers of stand-alone funds (funds linked to a single employer or employee organisation), 100 participating employers in umbrella funds (large commercial funds housing multiple employers), 15 asset consultants, 15 healthcare consultants, six top umbrella fund sponsors and 500 consumers.
Kanyisa Mkhize, chief executive officer of Sanlam Corporate, said the objective of the 2022 survey was to look ahead and establish how the retirement industry could adapt to a rapidly changing world. “The retirement industry is in a uniquely strong position to impact the lives of South Africans, as it is the largest source of invested assets in the country. We hope the findings will start the right conversations in South Africa to ensure our industry can play a massive role in economic recovery and, ultimately, help kick-start growth.”
Mkhize said that, on balance, the findings definitely suggested a change in behaviour among retirement fund members. “People seem to be placing more value on the role their employee benefits play in their lives, and we think the industry is responding, by introducing more holistic offerings. We hope the focus on benefit counselling and financial education will remain a key focus to help South Africans make the right decisions for their current and future selves.”
Among the key findings in the survey were:
Two-pot system for retirement savings
Regarding Treasury’s proposal that employees’ retirement savings be split into a larger, inaccessible pot and a smaller one accessible in emergencies, industry insiders said they did not believe that implementing the system by March 2023 was realistic.
Just over half of members (consumers) who took the poll were aware of the two-pot system but 56% said they did not agree with it, with 29% saying that if the law was changed they would “definitely not” access their retirement funds early and 20% saying they would “probably not”. In addition, 62% of respondents said, if they could, they would increase their retirement savings. “A lot of the responses in the consumer study suggest a more conservative and financially conscious South African has emerged from the pandemic,” said Mkhize.
Healthcare and holistic solutions
The survey put renewed focus on healthcare and, for the first time, included healthcare consultants in the study.
Communication and financial education
The consumer study showed some progress in terms of effective communication and financial education, showing that employees leaving their jobs who had received retirement benefits counselling were less likely to cash in their retirement savings than those who hadn’t. However, of the members who had withdrawn their retirement funds when changing jobs, 63% had received no counselling from their human resources team and had been given a withdrawal form to sign without the implications being explained.
PERSONAL FINANCE