Fo­cus on the in­di­vid­ual mem­ber

‘We’ve de­vel­oped a con­tri­bu­tion ma­trix that will fa­cil­i­tate re­tire­ment as­pi­ra­tions’

Finweek English Edition - - Verso financial services -

THE PAST TWO YEARS have not been a great time for re­tire­ment fund ad­min­is­tra­tors. Rul­ings by Pen­sion Funds’ Ad­ju­di­ca­tor Vuyani Ngal­wana rocked the in­dus­try, ul­ti­mately re­sult­ing in a “State­ment of In­tent” that saw ad­min­is­tra­tors re­turn roughly R3bn to clients.

One in­trigu­ing fea­ture in the en­tire “bulk­ing” and se­cret prof­its af­fair was who said what. SA’s ma­jor ad­min­is­tra­tors had lit­tle op­tion; many rul­ings had gone against them and they had to con­fess. And the rest? A few put for­ward vague state­ment about when and how bulk­ing was ac­cept­able – with­out ac­tu­ally spell­ing out what they’d done.

How­ever, a deaf­en­ing si­lence came from the ma­jor­ity – which could only leave the im­pres­sion that they’d been bulk­ing but had not (yet) been caught out.

To its credit, the Verso Group went on record at the height of the scan­dal and said they didn’t bulk re­tire­ment fund clients’ money to­gether to ne­go­ti­ate bet­ter in­ter­est rates from banks and that the prac­tice wasn’t ac­cept­able if clients weren’t fully in­formed and had not agreed to bulk­ing.

But what also seems to dis­tin­guish the group’s re­tire­ment fund ad­min­is­tra­tion com­pany – Verso Fi­nan­cial Ser­vices – from other ad­min­is­tra­tors is its fo­cus on mem­bers and not only the trustees that ap­point it.

MD Ed­ward Thom­son makes no bones about the fact that Verso sees it as es­sen­tial to serve the board of trustees. “They ap­point us, and keep us ap­pointed. We just want to take ser­vice to a level fur­ther.”

That means that in­cluded in its com­pre­hen­sive fund ad­min­is­tra­tion ser­vice is a fo­cus not only on the fund and the trustees but also the mem­bers as in­di­vid­u­als with dif­fer­ent needs. “The goal of all re­tire­ment funds is to pro­vide re­tire­ment ben­e­fits,” Thom­son says. “Most mem­bers as­sume that im­plies their re­tire­ment plan­ning needs are catered for. The re­al­ity is that most funds won’t pro­vide re­tire­ment ben­e­fits that will en­able mem­bers to en­joy the same qual­ity of life as that ex­pe­ri­enced prior to re­tire­ment.”

He says most ad­min­is­tra­tors only look at the board of trustees and roll out ad­min­is­tra­tion ac­cord­ing to them. “We say we should be look­ing at the in­di­vid­ual mem­bers. We can of­fer so much more.”

With only about 8% of re­tire­ment fund mem­bers re­tir­ing with monthly in­come equal to their last salary cheque while still work­ing, Thom­son says mem­bers should be pro­vided with their fund in­for­ma­tion and ad­vice that will en­able them to take early ac­tion to en­sure that their re­tire­ment needs are on track.

Verso Fi­nan­cial Ser­vices has ac­cord­ingly de­vel­oped what it calls Mem­ber Fi­nan­cial Man­age­ment, a value-added ser­vice that makes mem­bers aware of what their likely re­tire­ment ben­e­fit level will be and if nec­es­sary – as it is in most in­stances – how they can plug the re­tire­ment gap.

“On join­ing a fund mem­bers are in­formed of their re­tire­ment ex­pec­ta­tion as it re­lates to their cur­rent in­come. That’s fol­lowed up an­nu­ally in the ben­e­fit state­ment with an anal­y­sis, pre­sent­ing the mem­ber with a course of ac­tion to achieve ei­ther a 75% or 100% re­place­ment of salary on re­tire­ment. By in­form­ing mem­bers of their re­tire­ment gap and track­ing their progress, mem­bers have a clear un­der­stand­ing of their fund re­tire­ment ex­pec­ta­tion,” Thom­son says.

Mem­bers of­ten only re­alise re­tire­ment ben­e­fits won’t match the fi­nal cheque when they ac­tu­ally re­tire, or a few years be­fore re­tire­ment – when it’s too late to do any­thing about it. But do mem­bers heed Verso’s ad­vice?

“There’s some ap­a­thy,” says Thom­son. “We can ap­pre­ci­ate the po­si­tion of some mem­bers – they need the money for day-to­day liv­ing and can’t af­ford to catch up. But at least by do­ing our an­nual anal­y­sis mem­bers know their po­si­tion, so it won’t come as a shock to them on re­tire­ment.”

And by be­ing aware that they face a re­tire­ment sav­ings deficit at least mem­bers can try and im­prove their po­si­tion if their fi­nan­cial po­si­tion im­proves. Any­body about to blow a large in­crease or bonus on lux­u­ries might think twice if they’re con­stantly re­minded that their fi­nal re­tire­ment ben­e­fit is go­ing to fall short.

Thom­son adds that some mem­bers take the an­nual anal­y­sis ex­tremely se­ri­ously and make sure they take steps to close any gap. He says Verso Fi­nan­cial Ser­vices will approach a board if nec­es­sary to try and im­prove the fund’s level of ben­e­fits, per­haps by putting mem­bers into a higher risk in­vest­ment.

“Mem­ber Fi­nan­cial Man­age­ment also en­cour­ages trustees to pro­vide for flexible con­tri­bu­tion rates,” says Thom­son. “As mem­bers join the fund at dif­fer­ent life stages, the num­ber of years to re­tire­ment will vary from mem­ber to mem­ber.

“As only the mem­ber has ac­cess to his true fi­nan­cial po­si­tion it would be log­i­cal to al­low the mem­ber to con­trib­ute at suf­fi­cient lev­els to achieve a 75% or 100% re­place­ment of salary. We’ve de­vel­oped a con­tri­bu­tion ma­trix that to­gether with the fund’s in­vest­ment strat­egy will fa­cil­i­tate the mem­ber’s re­tire­ment as­pi­ra­tions.”

Verso sees it as es­sen­tial to serve the board of trustees. Ed­ward Thom­son

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