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Retirement Benefit Counselling and the Digital Era

Recent events, such as the Covid-19 pandemic, have shown companies across the globe the importance flexibility and adaptation. The ability to conduct business remotely can be a matter of life or death for certain businesses. Pension Funds across South Africa are still required to serve their members and provide retirement benefit counselling. In today’s digital age – is it possible to do this in an innovative and impactful way?

Retirement Benefit Counselling?

The majority of South Africans choose to withdraw their retirement savings when they resign or get retrenched. This translates into only a small percentage of South Africans that are able to retire comfortably. This is due to several reasons such as a lack of understanding and education of their retirement benefits.

From September 1st, 2017 the default regulations to the Pensions Funds Act requires pensions funds to provide retirement benefit counselling to their members, in order to promote understanding and informed decisions. Retirement funds across the country had to comply by March 1st, 2019.

But what does retirement benefit counselling actually entail?

Simply put, retirement benefit counselling is helping the members of the fund understand the available investment portfolios, the terms of the fund’s annuity strategy, the terms and processes by which a fund handles preserved benefits in terms of regulation 38, and any other options made available to members in a clear and understandable language.

In a country with eleven official languages one could think of the cost and time implications there is using traditional communication methods to fulfill the regulations that have been imposed on the pension funds in South Africa. Let alone the financial knowledge that is required to clearly understand the information being presented. Pension funds would be required to think creatively and innovate a way that can communicate effectively and clearly to all members of their funds.

Retro Vs Digital

Retirement benefit counselling may look differently for every fund however the minimum requirement is at least written communication.

Traditionally, pension funds would use print media and other dated methods of communicating with the members of the fund. Long winded letters, jargon filled flyers and information pamphlets leave members feeling overwhelmed with little to no understanding. This information often does not reach members at all.

In an age where people are spending more and more time on electronic devices, we ask – surely there is a better way of communicating with the members of the fund? A way that could engage members and provide insight, education and understanding.

There has been a shift in the relationship from employer - employee to retirement fund – employee, the ideal situation would be to have a digital platform that enables the retirement funds to communicate in real time with their members.

This type of innovation would change the retirement benefit counselling sphere by disrupting the traditional communication methods and empowering members of the fund.

Ideally, one should be able to provide members with education on all their options at all stages of their retirement journey, including a scenario planner that allows members to explore the future impact of different options. Members would then be in a position to understand the implications of the decisions they make, and they can share this information with their spouse, family, counsellor or financial advisor.

The implication of a real time digital tool enables members of the funds to stay up-to date and informed with their fund benefits and savings whilst providing financial education in their efforts to improve the financial wellbeing of South Africans.

This will improve communication between the fund and the member, because members engage with the fund through the platform and gain real-time information regarding their retirement fund. Members will be able to access their information anytime from anywhere using what is already in their hands – their phones or computers. The ability to see detailed information, by the click of a button, means human resource departments and pension fund front offices will be less congested and able to serve the members better.

The digital platform should make use of infographics and interactive graphs that communicate the members unique information in an understandable and captivating way. If members understand their information better – they will take ownership of their retirement savings and feel empowered to share that information with financial advisors who could assist them further.

Digital platforms could also allow members to use a chat function that allows members to ask questions and further examine their information.

Using a digital platform provides flexibility for the retirement funds. Whatever the trustees of a fund decide around default investment strategies, preservation strategies, or default annuities will be incorporated into the counselling tool and allows the funds to communicate quickly and effectively with their members.

A digital disruption in the pension fund space is giving members control and ownership of their information whilst providing the funds with flexibility and compliance in an innovative way.

The ultimate goal is for members to be empowered, have increased understanding and have better retirement in the pursuit of improving their financial wellbeing.

By Hayden Naidoo