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South Africa: Most Workers Clueless About Pensions - Survey
All Africa
July 30, 2010
South
Africa
A MAJORITY of employees seem to have no idea who will pay for their medical bills once they retire, according to the results of this year's benchmark survey by Sanlam Employee Benefits.
The annual survey - one of the most comprehensive retirement research studies undertaken in SA to date - also found out that an equally high number were not concerned about how their retirement funds were being invested.
On the other of end the scale, the survey found that young people who changed jobs preferred to cash in their pension rather than to transfer it to the next employer, spending the money on luxuries or holiday trips.
"From the employer pension fund side, there is need for more information and awareness in a plain language that members understand, while members should become more involved rather than start thinking about pension funds five years from retirement," said Danie van Zyl, head of guaranteed investments at Sanlam Structured Solutions.
"There is also the tendency of young people who change jobs to cash their pension ... The honest truth is that it will catch up with you when you retire," Mr van Zyl said. The survey highlighted the debate whether the authorities should force those switching jobs - especially when they are young - to preserve their retirement fund savings.
In the survey of about 200 principal officers from the pension fund industry, it was found that some members did not know what was happening with their retirement savings, and simply did not care.
"Member indifference is a concern. For example, 69% of active members could not name a trustee of their fund. Also, 43% don't care where their funds are invested as long as the savings are growing."
Mr van Zyl said people had no emotional connection to their retirement savings and they did not see the immediate value to it.
"So people really don't take ownership of their investment, which is sad because this is the nest egg they'll have to retire on one day.
"More than half (55%) of members did not know how market movements would impact on the value of their retirement savings, while one in four members do not even understand their benefit statement.
"Despite that, most reckon they could manage their own funds - with nearly 60% believing they have sufficient knowledge to make their own investment decisions," he said.
Equally alarming was that many had very little idea who would pay their medical bills once they had retired, he said.
And those who had discovered they would have to pay for their bills after retirement were not saving enough to cover future medical expenses.
Nearly half of those whose medical schemes were currently paid for by their employer believed that they would continue to be covered once they had retired.
"In the 1980s, companies used to pay your medical aid contributions after you retire, but many have stopped doing that. Members still assume that they will be covered when they leave employment, which is not the case and is very unfortunate," he said.
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