Business Development Manager at 10X Investments, Mica Townsend.

There is a growing awareness that South Africa is in the midst of an escalating retirement savings crisis. As the effects of this on families, charitable organisations, wider civil society and government start to become clear, we should not underestimate the more immediate toll that a highly stressed, perhaps even panicked, workforce is having on business.

One of the country’s largest retirement fund providers has just reported that only 5.17% of those who had retired this year from funds it administers were able to maintain their standard of living.

This statistic resonates with the National Treasury statement that only 6% of South Africans were on track for a decent retirement.

This 6% figure from Treasury was also recently corroborated by a new report by 10X Investments, which was based on data from a nationwide survey that sampled the universe of 11.9 million economically active South Africans. The inaugural annual 10X Investments South African Retirement Reality Report, which was released in September, found that only 7% of people were executing a retirement plan that had been well thought-through.

This national retirement savings disaster will affect all spheres of life, particularly by increasing pressure on families who must support the older generation as they struggle with the costs of raising their own families. The burden on the state, and ultimately the taxpayer, will also increase in the near future due to increased pressure on social and healthcare services and much more.

Companies are no doubt already feeling the negative effect of the looming crisis, with consequences including:

  •  Financial stress causing health issues among workers, which leads to absenteeism
  • Employees who are distracted by financial worries being less productive and more prone to making mistakes and having accidents
  • Employers risking losing their most talented employees to other employers who offer better retirement benefits
  • Workers potentially being forced to take on additional work/second jobs to improve their financial situation.

PricewaterhouseCoopers’ 2018 Employee Financial Wellness Survey , which tracks the financial and retirement well-being of working adults in the United States, found that close to half of all employees feel stressed about their finances.

When asked what causes them the most stress in their lives, nearly twice as many say financial matters as compared with job stress. In fact, more employees say financial stress than health concerns and relationships combined.

With increased longevity in the U.S. and South Africa, these challenges are likely to continue to increase. Many South African companies are already taking action to mitigate the effect of the crisis, in particular by starting corporate retirement savings funds and selecting the manager carefully, or by scrutinising and potentially reconsidering the fund manager they are with if they are no longer providing them with the best option.

In its 10 years in existence, 10X Investments has disrupted the retirement saving environment with a stated mission of “helping more people retire with dignity”. The bulk of the established industry offer a large and expensive array of retirement savings products, which are difficult to understand and increasingly being shown to have undershot expectations.

Just on a cost comparison basis, a cost saving of one percent in fees on a corporate umbrella pension or provident fund can add up over the course of a savings lifetime to add 30% to the retirement savers’ pension income.

10X Investments offers businesses a free, no obligation benchmark comparison of what they are paying with their current provider versus what they would pay with 10X. To receive a call to discuss a comparison for your business, provide your details here.

Investments offers one simple, low-cost product to all retirement savers both on an individual basis and at a corporate level. This means that everyone gets access to 10X’s best investment view, which gives them the best possible chance of retiring with dignity; testament to this is the fact that more than 30% of corporate members are currently on track to meet their retirement goals.

Contrary to popular belief, making a retirement plan is not as complicated as it might seem. In fact, it takes less than 10 minutes to create a personalised retirement plan using 10X Investments’ online retirement planner.

Anyone who can access the internet on a computer or a cell phone can input their personal details, such as how much they earn, how old they are and how much of their salary they are saving for retirement, to one of the 10X retirement calculators and a plan will be created for them immediately.

If they are not happy with their outcomes, which are presented in a variety of simple user friendly formats – from a giraffe whose neck grows the closer he gets to reaching his goal of eating green shoots at the top of trees to a simple
graph – they can adjust the inputs, such as retirement age or percentage of salary saved, to change the outcomes.

Only once individuals have a defined target can they start to take the required steps in order to meet their goal and to better align their present and future realities. As members of a 10X pension or provident fund, not only will employees get a retirement plan, they will receive regular updates and tips via email and sms to ensure they stay on track to meet their goals.

Also, 10X Employee Benefit Consultants provide in-house financial wellness training to all corporate clients and their employees.

Providing employees access to a simple, low cost (and high performing) retirement fund will do more for employers than to just help them and their staff to retire with dignity. It has been shown that staff feel a lot more connected to a company that cares enough about them to help them get the best possible chance of retirement success; this inspires greater loyalty; ultimately feeding into greater productivity and company alignment.

The benefit to a company of reducing the burden of employees constantly worrying about the future cannot really be immediately measured, but it can certainly be felt.

Mica Townsend is Business Development Manager at 10X Investments. She is a CFA Charterholder. DM

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