Sheldon Friedericksen, General Manager of Group Benefits, Fedgroup
One of the main challenges we face in the retirement space is the concept of delayed gratification.
Asking young people, particularly those in their 20s, to save for a distant future they can’t yet visualise is difficult. The aftermath of COVID-19 and the global cost-of-living crisis have compounded this issue, especially in Africa. Many individuals are more concerned with meeting their immediate needs, such as putting food on the table, than thinking about retirement. This creates a disconnect between the benefits offered and the immediate needs of the workforce.
Adapting Group Benefits for Today’s World
The world has changed significantly in the past decade, yet many group benefits packages have not kept pace. We need to ask ourselves if these traditional packages are still fit for purpose. Providers must innovate to create solutions that are relevant to today’s economic realities. A key part of this is ensuring that employees understand the importance of these benefits and how they contribute to their long-term financial security.
Financial literacy in South Africa is alarmingly low, which makes it challenging for individuals to start their savings journey. The national treasury has introduced mechanisms like tax-free savings plans and the upcoming two-pot system to encourage savings. This system allows individuals to save in a group retirement plan while still having access to funds in case of an emergency. However, early access comes with consequences, which need to be clearly communicated.
Building Trust and Simplifying Products
Trust is fundamental in the financial services industry. Over the years, various outcomes have eroded this trust, making it crucial for providers to rebuild it. In South Africa, many individuals rely solely on their employer-provided retirement benefits. Therefore, it is essential to foster a transparent and trusting relationship between employers, employees, and financial advisors.
Simplifying financial products is another critical step. Many existing products are complex and difficult to understand, even for some financial advisors. At Fedgroup, our focus is on making products easy to understand, stripping away unnecessary features, and clearly communicating the benefits and costs. This approach helps individuals make informed decisions about their financial future.
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Fedgroup Financial Holdings (Pty) Limited is a licensed controlling company and companies within the Group are authorised FSPs. Fedgroup Life Ltd is a licensed life insurer. (Reg. No. 2007/018003/06)
The Two-Pot System and Global Mobility
The upcoming two-pot system represents a significant change, balancing the need for retirement savings preservation with the need for accessible funds. However, the broader question remains: Are current benefit packages suitable for everyone? With global mobility on the rise, individuals may not necessarily retire in South Africa. Therefore, it’s essential to consider how we can provide benefits that cater to an increasingly mobile workforce.
Education and access to information are crucial for empowering individuals to make sound financial decisions. At Fedgroup, we support independent financial advisors to ensure that clients receive unbiased advice tailored to their needs. The rise of digital engagement offers new opportunities to reach and educate a broader audience, making financial information more accessible.
Innovative technologies, such as AI and large language models, can play a significant role in this process. These technologies can simplify complex information, making it more understandable for individuals and helping them make informed decisions about their financial futures.
The Future of Group Benefits
The financial services industry must continually challenge the status quo and adapt to changing needs. At Fedgroup, we are committed to taking the first step in this direction. Our goal is to create an ecosystem that supports individuals in achieving their financial outcomes, whether it’s saving for retirement, paying off debts, or investing in their children’s future.
The journey to financial security is unique for everyone, and we must recognise and cater to these differences. By blending personalised financial advice with innovative technologies, we can help people navigate their financial journeys more effectively.
In conclusion, the key to improving financial security in retirement lies in adapting group benefits to meet today’s needs, building trust, simplifying products, and leveraging technology and education. At Fedgroup, we are dedicated to leading this charge and helping individuals achieve their financial goals.