“No more business as usual for (SA) employee-benefits” is the headline of an article that appears below. The message of this article is that “The one-size-fits-all model of offering employee benefits to large groups of employees was simply no longer appropriate.”

It is a well-known statistical phenomenon that in any population, let’s talk about pension fund membership and members’ needs in this case, the bulk of experiences in the population are concentrated around the centre of the curve with a steep decline in experiences on either side of the curve. In terms of cost effectiveness the further any fund tries to move to the outer ends of the needs curve, the more costly it will become to provide for the need and the less value the fund will add in providing for a particular need relative to the greater membership of the fund.

To satisfy every need of every member in a group arrangement is certainly nice to have but will not be affordable and not in the interest of the bulk of members. That is not the purpose of a group scheme!

Retail products in contrast are built around and for the needs on the individual. But the individual has to weigh up the cost of providing for each of his needs against the benefit this presents to him and will take a rational economic decision. In a group scheme everyone will have to contribute towards the cost of the scheme providing for my unique needs.

A group scheme aims to cover the bulk of members’ common needs at an affordable cost!

Having said this, RFS will now have the capability through its new MIP administration platform to offer extensive individual choice and flexibility adding every extent of complexity that one can think of. However, our business purpose is to provide appropriate solutions rather than deliberately increasing complexity for the sake of building our revenue streams.

Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.