Sanlam : Benchmark 2021 – Impact of COVID-19

The 2000s saw increased legislation and enhanced fund governance to protect members, as well as a focus on driving down administration costs. To achieve economies of scale in our fragmented industry, smaller retirement funds increasingly moved into umbrella fund arrangements, standardising the benefits and allowing more efficient administration of these funds.

With half of members admitting they were not on track to meet their financial goals, this has been largely attributed to poor member decisions such as taking retirement funds in cash when changing jobs rather than preserving them. 71% of funds estimate that members who withdraw, take their full fund value in cash. The industry responded by focusing on communication and education, with 56% of funds polled this year having a formal advice strategy and 76% providing pre-retirement counselling.

However, this doesn't seem to have made a significant difference. The 2011 survey showed that 76% of members who did not preserve their retirement savings when changing jobs understood the tax consequences of taking retirement funds in cash and a further 85% understood that they may not reach their retirement goals as a result. Hardly surprising then that 71% of these members do not believe they are on track for retirement.

It is becoming increasingly evident that this breakdown between knowledge and action is no longer just a case of poor education, but a result of behavioural issues. There is a global culture that tends to encourage consumption and immediate gratification rather than long-term saving. There are also certain behavioural biases such as the fact that the South African youth often discount the future, especially as many are not expected to survive until retirement given our country's low life expectancy rate.