“A key thing that emerged across the 2020 Sanlam Benchmark research was that the focus of institutional retirement funding will shift from engaging members themselves. This is consistent with the Mega trend of Individualisation that emerged from the 2019 Sanlam Benchmark,” Viresh Maharaj, Managing Executive: Sanlam Corporate Distribution stresses at a virtual version of the annual symposium event releasing the Sanlam 2020 Benchmark Survey. The survey is a comprehensive body of retirement industry research conducted by the group since 1981. In a media release Sanlam mentions that the state of retirement savings in South Africa directly impacting the economy and prosperity of citizens, trends and findings from the research have been instrumental in driving seminal and urgently needed change in retirement regulation over the past four decades.
This year’s findings also included a close look at the impact of the COVID-19 crisis on retirement funds. Unsurprisingly, key findings included a marked rise in requests for funds and suspension of contributions over the past few months as well as sharp rise in queries around investment performance.
Empowering insights – impact of lockdown
Sanlam found that over 25% of retirement funds have members who queried or complained about their investment performance or fund values; 16% have members who requested access to their retirement funds; between 8% have members who requested financial advice and about 5% have members who implemented investment switches, among other activities. The downgrade and resultant impact on returns no doubt also played a role in this.
Suspension of retirement fund contributions – exploring the role of retirement funds
The most popular view was that a temporary suspension of retirement fund contributions was the best measure to take. 26% of employers/funds indicated that they had suspended retirement fund contributions and 91% of consultants had at least one client who had already done so. It is anticipated that these figures would have increased since the survey was conducted.
Impact on group insurance
On the issue of suspensions, very few had suspended group risk premiums given the amplified importance of appropriate coverage during a pandemic. “Regarding group risk, the industry has undergone significant disruption over the past few years due to a deterioration in claims experience, resulting in a sustained pricing cycle of significant year-on-year rate increases. With the subsequent dual shocks of the healthcare impact of the pandemic and the contraction in the economy, claims and insurance premiums are most likely going to increase soon, adding further pressure to already constrained fund members,” Maharaj reports.
According to him such increases are likely to be felt most acutely in the arena of disability income protection, which has been one of the product categories most aligned to the economic experience of the country. “Encouragingly, almost no respondents indicated that they would terminate their benefits due to price increases, demonstrating the critical role that such coverage plays in the lives of employees.”
Key trends consultants anticipate over the next five years
|Technological Innovation across various dimensions, Member Focus and moves towards providing Integrated Product Suites and Flexibility of benefits speak to the unlocking of value for members by enabling greater individualisation.
|The top three advice themes: costs remains a key advice point, but the member focus emerged once again as financial advice to members was ranked second, with Member Education ranked fifth.
|When asked on the changing nature of advice, the top-ranked items all pointed in a singular direction – engaging members. This speaks to the opportunity to individualise the member’s experience of retirement funding, enabling better decisions informed by data and engagement. Furthermore, the shift is towards where consultants are empowered by boards to deepen their consulting reach to members themselves.
“Implementation of the ‘default regulations’ in 2019 would have played a key role in informing this shift as the nature of paid-up members, retirement benefits counselling and trustee-endorsed annuity strategies all lend themselves to a greater focus on individuals,” Maharaj emphasises.
“As an industry, we have a limited window of opportunity to reconnect with, engage and become more relevant to members. The risk we face is that an outdated status quo persists … we cannot waste this crisis and we call on all decision makers to apply ourselves, to move out of our comfort zones and to actively review our choices, structures and assumptions. Now is the time to act,” he concludes.
The 2020 Sanlam Benchmark researched polled views amongst 140 professional employee benefits consultants and 230 representatives from employers and retirement funds during the lockdown to explore their experiences of the pandemic and their expectations of the future. This research was supplemented by a poll of 106 professional employee benefits consultants and focus groups of fund members and retirees conducted prior to the lockdown.
Click here to download the SANLAM media release.