Pension funds industry can lower fees, says Alexander Forbes CEO
The CEO of SA's biggest pension funds administrator believes industry can do more to help South Africans
The new CEO of SA’s biggest pension funds administrator says the industry can do more to lower fees and improve the lives of many struggling South Africans.
Alexander Forbes CEO Dawie De Villiers, who was appointed in November, said there are many things the industry needed to “get right” to provide security to more people.
“We must get more people in the net. Get more people educated about what it means to save appropriately. At the moment, it’s only the wealthy part of the population that earns an income in retirement. The rest takes cash to cover debt every time they switch jobs.
“I’m not saying ‘fees must fall’ is the only thing. If you look at the type of solutions we can do on holistic institutional basis for individuals, it will mean low fees, it will mean more value for money and more benefits for members,” he said.
De Villiers, who spent 25 years at Sanlam and headed the insurer’s employee benefits unit for five years, said the industry has not been transparent in the past and if it can improve this it will become easier for more people to save and keep their retirement savings invested.
The latest retirement savings surveys by different retirement fund administrators show that less than 10% of people who were members of retirement funds in SA are able to retire comfortably. Alexander Forbes’s own Member Watch survey which was released in November shows that only 5.17% of retired pension fund members were able to get 80% or more of their last salary at retirement. A different study by 10X’s shows that 41% of 11.9-million economically active South Africans had no retirement plan in place at all.
The national treasury has introduced a number of retirement reforms to reduce costs and improve fee disclosure, among other things. One of the regulatory changes that all pension funds will have to comply with from March 1 2019 is providing cost-effective annuity strategies for their members inside the fund. In the past, retirement fund members had to buy an annuity from retail providers when they reach retirement.
De Villiers said these changes made the employee benefits industry the place to be and Alexander Forbes expected to make a success of it. Alexander Forbes is the largest retirement benefits administrator in SA with about 1.4-million members under administration.
“We are better placed to use those changes to make a success of this business. The upside is phenomenal. We are fortunate that we have diverse staff and robust systems that allow us to cater for funds with complex benefits and needs, but we can also cater for umbrella funds as well.
De Villiers said the industry also needed to improve the way it communicated to its clients. He said when people use a bank account for savings, they know where their money is and how much they have. But in the retirement fund space, rarely do people know where their money is saved or what their options are when they change jobs.
“What I want to get right is that more people can say ‘I was looking at my pension fund yesterday and it went up 10% year on year'. We must make it more sexy. If we can get that right over time, then I think we’d have arrived.”