member communication cost of poor member decisions
Post on 23-Dec-2015
239 Views
Preview:
TRANSCRIPT
Member CommunicationCost of Poor Member Decisions
COST OF MEMBER DECISIONS
3
• Meet Joe Bloggs
– Age 35; salary R5,000; accumulated credit R100,000; NRA 65
• Conservative Investment Strategy (CPI + 2%)
– Replacement Ratio: 44%
– R2,199 per month in today’s money
• Moderate/Aggressive Investment Strategy (CPI + 5%)
– Replacement Ratio: 78%
– R3,904 per month in today’s money
Impact of Poor Choices
4
• Meet Joe Bloggs
– Age 35; salary R5,000; accumulated credit R100,000; NRA 65
• Keep the assumption of 5% real return
– Replacement Ratio: 78%
– R3,904 per month in today’s money
• What if his accumulated credit was 0 at age 35?
– Replacement Ratio: 57%
– R2,857 per month in today’s money
Impact of Poor Choices
Retirement Destruction
What is the going Replacement Ratio in the industry?
AverageFund
80%
Reality
28%
65%
SURVEY KEY FINDINGS
Survey overview • Objective: To understand changes in the retirement fund market, to
evaluate retirement fund investments and examine attitudes and perceptions among members and non-members on all issues relating to retirement.
• Field work conducted last quarter of 2010 – Cape Town, Durban, Johannesburg
• 1 005 face-to-face interviews– Full-time metropolitan dwellers between 18 - 64 years of age– Demographically representative sample – Split approx. half members of retirement funds– Statistically relevant sample
Key findings• Many South Africans are struggling and are prioritising other
obligations such as children’s education ahead of retirement• Many South Africans don’t see themselves living long into
retirement, thus they don’t identify with the need for retirement savings
• General satisfaction levels with the individual’s current state of retirement provision remains low
• Contribution levels remain too low to create sufficient retirement funding
• People are unlikely to preserve unless there is some form of compulsion
• People remain uninformed and uneducated about their retirement funds; current fund communication efforts fall short of improving this
Member of a pension/provident fund?
Of whom: 30% (42%) also have a Private RA.
3% (7%) also have funds in a Preservation Fund from a previous
employer.
Of whom: 1% have funds
in a Preservation Fund from a
previous employer
Of whom: 17% (25%)
have RAs
16% (10%) work foran employer who does
in fact offer a retirement fund*
* Of those whose employers do not offer a retirement fund option, 58% (50%) would
definitely participate if it was on offer (80% (76%) Definitely + Probably)
Of whom: 56% (45%)
Pension Fund43% (47%)
Provident Fund2% (8%) Don’t know/hybrid
vs. 57% in 2010
(Last year’s results in brackets)
• Being a member of a retirement fund increases the likelihood of other savings: members of retirement funds hold significantly broader basket of savings and investment policies
Satisfaction with current state of retirement provision Younger respondents less satisfied with current state of retirement
provision Satisfaction increases with income
Age that want to retire vs. age will be able to retire
Average desired retirement age is 60
Average perceived actual retirement age
is 64
Despite low levels of awareness fund members report being fairly satisfied with fund communication
Effectiveness of retirement fund communication
Influences on perceived effectiveness of retirement fund communication
Fund communication is most effective for higher income people, more educated people and those more comfortable with English
Methods of communication
• Schemes favour printed material when communicating with members• However, the most desired forms of communication among members
are email, telephonic, cellphone and face-to-face. Provision of these forms of communication remains low.
Only 31% of members read the member guide thoroughly on joining
One third find communication
difficult to understand
Content of communication
• Content of communication does not inform members of the value of savings and underlying investments, general retirement information, and information that allows them to make informed choices
• In spite of frequency of communication, very low levels of informedness prevail among members
• Focus of communication not in line with member needs
The information gap
• Current fund communication focuses on factual information and does not enable members to make good decisions
• Members need to receive more information around adequacy of retirement provision and planning, risk benefits, rules and underlying investments
5
15
19
20
22
25
38
49
57
66
0 20 40 60 80 100
NONE
Info that allows me to make educated choices as to what/where my fund invests
Info on underlying investments, what these are
Info that allows me to make educated choices as to what to do with my retirement savings when I retire
Info on my retirement needs vs. what I have saved
Costs involved in administration & management
Current value of your savings in the fund
Risk benefits offered by fund e.g. death & disability
Fund rules generally
Basic info, name of fund, contact info etc
%
Confidence in trustees, retirement fund adequacy and administration
• High levels of trust and confidence in trustees despite members’ lack of involvement
• Confidence levels across all attributes increases with income
7
7.3
7.5
7.6
7.6
7.3
7.4
7.6
7.6
7.7
7.7
1 3 5 7 9
Will take care of me if I resign/amretrenched
Will take care of me if I am unable towork due to ill health or injury
Costs of admin and management are wellcontrolled and reasonable*
Administration of find is done properly
Invests my money to give me the bestbenefit/return
Will provide adequately for me when I retire
%
2010 2011
COMMUNICATION GOVERNANCE
Working after formal retirement
• 58% expect to work for pay after formal retirement• Of those who expect to work for pay after formal retirement:
78% say that this is due to financial reasons 27% say that this is because they enjoy working and want to
remain engaged and stimulated
58% expect to work for pay after formal retirement. Bias:
White, non-members
42% don’t expect to work. Bias: Indian and current fund members
How long will your retirement savings need to last?
43% do not see themselves living long
after retirement
Retirement provisions need to last for an
average of 14.2 years
Anticipated reliance on state pension
• Growing anticipated reliance on a state pension and/or post-retirement employment
• Reliance on state pension and proportion of retirement income that will be provided by state pension is significantly higher among lower income group (earning < R3 000)
– 48% who earn less than R3 000 think they will rely on a state pension– 23% who earn R3 000 – R11 999 think they will rely on a state pension– 10% who earn R12 000 – 19 999 think they will rely on state pension– Respondents earning < R3 000 say state pension will provide 28% of
retirement income– Respondents earning R3 000 – R 11 999 say state pension will provide
8% of retirement income
Salary contributions
• 88% report contributions below 10% of salary, whilst on average most people should target 15% of salary
• 97% have never made any additional contributions into their retirement funds
% of Salary Contributed % of RespondentsUp to 5 % 18
6 - 10% 70
11 - 15% 11
16 - 20% 1
More than 20% 1
70% contributions ‘about right’
15% contributing
too little
12% not sure
3% contributing too much
73% have a good idea of % contribution
27% don’t know/unsure of % contribution
Awareness of members
• Only 23% of respondents knew approx. value of their retirement fund
• 64% of respondents don’t know who manages the investments in their fund
• 67% don’t know where these funds are invested
Member level investment choice• Individuals remain uninformed about investment choices and tend to
remain in the default investment option
51% (50% in 2010) don’t know or are unsure
whether their fund offers member level investment
choice
13% (18% in 2010) have memberlevel investment choice
36% (32% in 2010) not offered
Of whom: 63% (58%) very confident exercising that
choice35% (35%) fairly confident2% (6%) not very confident
None (1%) not at all confident
Of whom: 62% (66% in 2010) selected the default option (49%
(41%) because they really thought it was the right option and 13% (25%) because they did not know what else to
choose)9% (11%) made a different choice
29% (22%) can’t remember
Awareness of pension reforms
• Low awareness of pension reform across the board; 76% do not know what the pension reforms are
• Amongst those who do have some awareness, attitudes towards reforms are mixed
• Awareness of pension reforms increases with income• Fund members more aware of pension reforms than non-fund members
Aware of key issues
Heard a bit about it
Little or no awareness at all
Pensioner Survey
• Pensioners mildly satisfied with retirement provision (6.5 out of 10)
• Strong evidence that pension adequacy is under pressure
• Nearly half do not think they have sufficient funds to last them through retirement
• Majority of pensioners displaying a drop in living standards after retirement
• When re-investing cash portion, most favour conservative savings vehicles
• 56% received no pre-retirement advice or counselling
Summary
• Members are disengaged from their funds• Current communication not effective• Retirement benefits diminishing to a fraction of
their potential• Financial security weak
Effective Communication and Education programs will reduce the cost!
THANK YOU
top related