Last year, at the height of the pandemic, many businesses were forced to make remuneration cuts to salaries of employees, with the first casualty often having been occupational retirement savings vehicles. This resulted in many people having to pause their retirement contributions. Now, as 2021 kicks off, the trend is shifting, with many employers resuming retirement savings on behalf of their employees.
According to Saleem Sonday, head of group savings at Allan Gray, there are “pockets of hope” in the group retirement savings space, which are indicative of employers feeling a little more upbeat despite the ongoing uncertainty. “During last year we saw a range of different experiences across the country reflected in our group retirement offering and, importantly, not all of them signalled ‘doom and gloom’,” says Sonday.
Many employers take their responsibility to employees seriously and are very aware of the setbacks experienced in 2020. “There is a balance that needs to be struck between the long-term survival of the business and its responsibility to its employees. Our regulator has done a good job in helping employers strike that balance with contribution holidays,” explains Sonday.
He emphasises that employers are an important element in the mix to help employees rebuild their retirement savings pots post-pandemic and get back on the savings track.
“Currently, Allan Gray is receiving more requests from employers to un-pause accounts to resume retirement savings contributions, showing a favourable trend to return to savings. Initially, 15% of all employers suspended contributions; most of these employers have now resumed contributions,” Sonday confirms.
Lastly, Sonday mentions that the pandemic also highlighted the importance of having an emergency savings fund. “The financial hardship and trauma of 2020 has placed a spotlight on the genuine need for emergency savings, which is an old financial planning construct, but the lived experience has driven this home more acutely,” he concludes.
Click here to read the Allan Gray media release.