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    Retirement Fund Survey

    The retirement industry in South Africa is exceptionally large at an estimated R3 trillion in assets. Sanlam Employee Benefits, as a large participant in this industry, produce an annual survey of retirement funds and members, known as the Benchmark Survey.

    It is a comprehensive survey interviewing 200 principal officers of sand alone retirement funds, 100 interviews with the participating employees of umbrella funds and 600 interviews with retirement fund members.

    The report covers various detailed questions on these and other issues pertaining to retirement funds:

    • Administration
    • Popularity of investment choices
    • Details on feedback
    • Risk and disability benefits attached to investment
    • Trustees
    • AIDS strategies
    • Contribution details
    • Preservation and withdrawal from funds

    For most members of a retirement fund, be it a defined contribution or a defined benefit fund, they will not save sufficient capital to replace their final salary in full. The ratio of starting pension or annuity that a lump sum can buy as a percentage of final salary is known as the replacement ratio.

    The difference between expectations of this pension and what is actually achieved remains high. The report indicated that 75% of people surveyed are targeting a replacement ratio of between 80 and 100%. They note that this is in stark contrast to the observed replacement ratio of 30%.

    At the same time many South Africans do not feel that they are ready for retirement, with some 30% indicating that they would delay retirement while 54% plan to work for a wage or salary in their retirement. At the same time the report indicated that the observed average retirement age has dropped slightly from 63,2 years to 62,87 years in 2009.

    What was interesting, but not necessarily surprising, was the percentage of questions, especially on the investment section, that were answered “don’t know”.

    Unfortunately for a multitude of reasons, investors generally have poor visibility and understanding of, in the case of defined contribution funds, their own assets. Their assumptions regarding future contributions, returns, inflation and ability to retire is also typically not based on a concrete model. The hope that the retirement fund will be largely sufficient, can lead to inadequate planning on discretionary funds.

    All investors with 10 years and less to retirement should start to update their projections and plan accordingly. If you find yourself in this position, visit www.seedinvestments.co.za to determine if we can assist you, or contact us as per details below.

    Kind regards

    Ian de Lange
    info@seedinvestments.co.za
    www.seedinvestments.co.za
    021 9144 966


    Permalink2009-09-28, 18:29:47, by ian Email , Leave a comment
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