Townsend adds that this is becoming even more apparent as the financial stress of an under-performing economy and mass joblessness piles the pressure on individuals and families.
Brand Atlas data, used to compile 10X Investments’ recent 2019 Retirement Reality Report (RRR19), found that 72% of South Africans across all demographics considered themselves to be doing badly financially or felt uncertain about their predicament. The data further confirmed that economic pressure was building on ordinary South Africans, with 58% of survey respondents saying they were struggling to afford their monthly living expenses.
Rising living costs and spiralling debt among South Africans on the back of a contracting economy saw consumer repayment defaults increase by 10% year-on-year from Q1 2018 to Q1 2019, according to the Transunion SA Consumer Credit Index.
“The financial pressure is all too real for many South Africans, and worries can very quickly build up and spill over into physical sickness and absenteeism,” said Townsend.
Businesses, especially small and medium-sized ones – the lifeblood of the SA economy, are taking strain too. This is made worse when stressed-out employees take additional time off, anything from days off here and there to being booked off for weeks and months at a time, coupled with reduced productivity even when they are at work.
Townsend noted that helping employees access such benefits as medical aid, employee share schemes and retirement funds is one way that employers can help them to get their finances on to a more stable footing but over and above this they often needed help understanding the policies in order to maximise their benefits.
“Often, stressed-out employees don’t have the time or energy to engage with these benefits and end up missing out. Ignorance certainly is not bliss and the modern-day ‘illness’ of being too busy can result in employees failing to benefit from their employers’ efforts to help them and make their lives less stressful,” she said.
“Retirement planning is a good example where providing access to a fund alone is often not enough. Just a little extra effort on the employers’ part, educating staff and ensuring that policies are clear and easy-to-understand, and that benefits are simple to access, can really unlock a lot of potential,” says Townsend, who is a CFA charterholder and an expert in corporate retirement funds.
“Furthermore, these benefits are significantly cheaper for employees to access via their company than if they tried to replicate any of these in their individual capacity. This is an extra bonus that is often overlooked by many members.”
The RRR19 showed that many South Africans are first introduced to retirement saving as members of employee-sponsored funds, but most of these fund members know dangerously little about them. “Money is deducted from their salary before they get paid and that is the last they know of it,” says Townsend.
More than half of those surveyed who had belonged to a corporate retirement savings scheme at some time admitted to knowing little to nothing about their policies.
Townsend cautioned: “Making the minimum contribution to an employee-sponsored retirement savings fund is a step in the right direction, but it certainly doesn’t mean that a worker’s retirement is sorted, especially if they cash in their savings and go back to zero when they change jobs; something that the vast majority of members do.”
A corporate fund member should, at the very least, understand the basics of how much they are saving, if the company is making a contribution, what they are losing to fees and if the fund allows them to top up their savings with additional voluntary contributions, says Townsend. “They should know where they can go to interact with their fund and to engage with their employer if they do not think that they are getting the best solution for their needs.”
She noted that there are also usually a variety of risk benefits attached to membership of a corporate fund, such as life cover for the member’s beneficiaries should the member die, and disability cover should they be unable to continue working. Many policies also include education cover and funeral cover. These benefits could all be very reassuring in today’s tough times but, of course, says Townsend, “there is no feel-good factor if one is not even aware the cover exists”.
She adds that ignorance of even the basics is a big hindrance in retirement planning because, as with all journeys, it is hard to stay on track if you don’t have a destination in mind. Townsend recommends that every individual start by making a retirement plan in order to start tracking towards their desired destination. “That surely will give people a lot of peace of mind and vastly improve their odds of meeting their individual goals.
The good news is that making a retirement plan is not complicated or onerous at all. Individuals can simply log on to 10X Investments’ retirement saving calculator, input a few details about themselves and generate a unique retirement plan. “Education is the first step to greater empowerment.”
Townsend adds that the retirement savings industry likes to blame savers for the fact that very few South Africans are on track for a decent retirement, “but the industry and employers must surely take some of the blame for the continuing ignorance of so many fund members”.
She adds: “Policies tend to be overly complex, and stressed out, time-poor workers can be forgiven for not being able to work out how to maximise the benefits of membership, never mind working out if they are on track to a comfortable retirement.”
10X Investments is an innovative fin-tech company with a mission to take the mystery and confusion out of retirement saving, disrupting the retirement savings space by keeping things simple.