Dear reader

In this newsletter, we provide feedback from the 2nd annual employee benefits conference recently staged in Johannesburg. The conference provided interesting insights on the field of employee benefits, but showed how similar the environments in Southern Africa can be.

Although this may seem like a good reason to choose any pension administrator, the difference lies in the local legislation and local accountability. At Retirement Fund Solutions and the Benchmark Pension Fund, we specialise in local that work within the administrative framework of local legislation. We also hold ourselves accountable to you, so you can always call us with your queries.

For more on similarities, and trends which may impact your fund or investments, take a look at the item below .

We hope that you find this newsletter interesting reading, once again. And please feel free to comment: tell us what you value and how we can improve the content.

Regards

Tilman Friedrich

Tilman Friedrich's Industry Forum

2ND ANNUAL EMPLOYEE BENEFITS CONFERENCE

I recently attended a two day conference in Johannesburg on latest developments in the employee benefits arena. For us who are actively engaged in this field, it was reassuring to establish that the wheel has not been reinvented. At the same time, various speakers shared very interesting information that should be of relevance to business in general.

• As a trustee, you should be wary of the pitfalls posed by human nature when taking investment decisions. You need to protect yourself by applying good governance principles, as pointed out by Craig Aitchison, managing director Old Mutual Actuaries and Consultants, in his talk on “Five Key Lessons for Trustees and Investors”.
• Are you aware that any type of investment that intends to attract investment from the general public is most likely regulated by law? Shahid Suleiman, partner at Bowman Gilfillan Attorneys, provides an overview on “The Legal Framework for Investments in SA”. The situation in Namibia will of course not be much different.
• HIV Aids has a material impact on death and disablement experience. However, the improvement of anti-retroviral treatment take up rates can reduce costs significantly, as Manus Theron, actuary Metropolitan Foundation points out in “Health and Welfare – HIV and Aids Current environment”.
• Have you come across the phenomenon of ‘presenteesim’, as opposed to the more common concept of absenteeism and do you realize the importance of staff wellness, as Peter Jordan channel marketing executive, Fedhealth emphasizes in “Revisiting Medical Aid Schemes in the light of the National Health Insurance Fund”?
• Average life expectancy was 68 in the 1950’s. This increased to 75 in 2000 and is expected to increase further. How will this impact on retirement provision and what should be done about it? Karen de Kock-Wenzel, head of annuities, Sanlam Employee Benefits gives some guidance in “Retirement Contribution Trends: Post Retirement Reality Checks: Short Sighted Planning vs. Long-term Living”.
• Retirement funds have a major gap in terms of risk cover provided, providing on average only around 4 times annual salary in the event of death, vs members’ risk needs of around 8 times, as Graham Thomas, Head of corporate product innovation, Liberty Life explains in “Death & Disability Before Retirement”.
• Consumer protection has been legislated in many countries across the globe and is due to be introduced in SA this year still. Even if Namibia does not have this on its radar screen yet, if you do business with a country that has such legislation and you exchange personal information, it is a good time to understand what this legislation entails. Kris Budnik, director of Deloittes gives an insight in “Consumer Protection Act – Implications for the Employee Benefits Sector”.
• Trustees have a tall order in meeting their fiduciary duties. Often they have to distinguish between sound advice and sales talk, ending up with an arrangement that does not achieve the fund’s objectives, is inappropriate relative to their own resources, skill and time and introduces unnecessary complexity and cost. Andrew Davison, head of institutional asset consulting, Acsis provides some sound advice in “The Changing Role of Trustees and Responsibilities”.
• Some key principles for instituting sound governance on boards of trustees are reviewed by Marius de Kock, Managing Director 4D Employee Benefits “Current Fiduciary Issues in Investments”.
• An employee benefits programme should ascertain that staff appreciates its value, that it offers a solution tailored to the needs of the employees, that it is flexible within reason and that it supports talent retention, as suggested by Duduza Khosana, executive principal officer, Medishield Medical Scheme in “Maintaining an up to date Employee Benefits Programme”.
• A rewards programme must recognize level of contribution, skills, competence and value and must be sustainable. It typically comprises of financial and non-financial rewards and guidance on how to get the package right is provided by Lindy Kramer, joint managing member, Counterstrike Consulting, in “Managing Employee Rewards”.

Charlotte Drayer's Administration Forum

PENSIONS PURCHASED OUTSIDE THE FUND

On retirement a member has the option to purchase a pension outside the fund. Many funds provide only this option as they do not provide for pensioners within the fund. Pensions have to be purchased from approved funds that provide pensions such as retirement annuity funds offered by insurance companies or umbrella funds like the Benchmark Retirement Fund.

There are various products in the market offering a large variety of pension options. For example:

• Guarantee period: The period for which the full pension will continue to be paid to a spouse or other dependant should the pensioner die before the guarantee period has expired. The shorter the guarantee period, the higher the pension will be.
• Joint pensions: This is a pension that provides for a spouse’s or dependant’s pension as well upon death of the pensioner. Joint pensions are lower than single life pensions.
• Regular increases: Pensioners can choose the level of future increases. The lower the increase, the higher will be the initial pension.
• Living annuity pension: The member usually has a variety of options as to where and how the capital is to be invested. The product provider manages the pensioner’s pension account by accounting for monthly investment returns, where positive returns are added and negative returns and the monthly pension payment are deducted. The minimum pension that may be drawn is 5% of the capital per annum and the maximum is 20%. The pensioner can decide on the level of his pension withdrawals within these parameters.

It is important to be informed about the all the options available to ensure that the product chosen meets the individual’s requirements as the decision often cannot be reversed once the pension purchase has been finalised.