By Thesin Vandeyar, Employee Benefits Adviser, PSG Wealth
Employee benefits are one of the most effective ways to ensure a financially successful retirement. With changing employee needs, regulatory requirements, and the broader socio-economic environment, how can organisations align their employee benefits programmes to meet these changes, what innovative solutions are needed and how do we get the smaller businesses to participate?
Employee benefits for economic development
Retirement funding forms the cornerstone of an employees’ retirement planning. Understanding the South African landscape, we know most people only benefit from savings, risk cover and medical scheme benefits through what their employers provide. Stokvels illustrate that a large population of South Africans have the desire to save even if they are struggling financially. Retirement funding acts as an enabler to this savings culture and is one of the most disciplined savings vehicles. There has been a trend in South Africa of people accessing their retirement monies prematurely when changing job, which creates a significant gap towards ensuring financial stability upon retirement.
On 1 September 2024, South Africa implemented the Two-Pot Retirement System. This change is aimed at helping to preserve retirement savings while offering controlled access to funds during financial hardship. The retirement world has become more complex, and given this, it has become crucial for advisers to consider their clients retirement and risk options in the context of the clients overall financial planning. This necessitates having a clear understanding of a client’s overall goals and objectives, which incorporates considering investing to achieve these goals, insuring your everyday and specialist risks, optimally structuring your estate, making smart investment choices, structuring your portfolio and implementing employee benefit solutions for yourself and your business.
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Advisers, insurers, investment professionals and product houses have a social and moral obligation to ensure that members of retirement funding are provided with the best possible solutions that are also affordable. Importantly, these solutions need to live up to the product promises and ensure that the members’ contributions grow and materially outperform inflation consistently. In terms of financial inclusion, providers need to remove barriers of entry into the retirement industry. SMEs are still accountable for more than half the employment in South Africa and form the backbone of our economy. As such, SMEs have a role to play in economic development by providing retirement benefits for their staff. While the banking sector has done well, the financial services sector as a whole could look into zero admin fees for SMEs and other solutions to create an easy entry point into retirement funding.
The Employee Benefits ecosystem
Employee benefit solutions that are geared toward the employee and their ability to retire with financial stability and dignity provides a solid employer value proposition and helps grow and retain talent. It remains the most cost-effective way to save and if you look at Additional Voluntary Contributions or “AVC’s” to boost savings, these amounts accrue little to no admin and consulting fees.
There are various synergies between group risk, wellness and healthcare. We see employee benefits as one ecosystem, and we need to help members traverse through the various pillars of employee benefits and financial services.
Technology, like in any environment, will play a crucial role in financial services. We have already seen the impact of Fintech branching into new territories. We have also seen how machine learning and AI have positively influenced the healthcare and medical aid environment. The landscape of opportunity for retirement funding is therefore massive.
From a generational perspective, having a fully customizable benefit solution will be crucial for our Gen Z’s and what they are now referring to as Generation Alpha.
Everyone deserves access to financial advice, retiring with dignity and peace of mind that in the event of death, that your family is looked after.