An over­view of this quar­ter’s

Finweek English Edition - - COLLECTIVE INSIGHT - Forbes Re­search In­sti­tute. is head of the Alexan­der

We start this edi­tion with an ar­ti­cle by Danie van Zyl from San­lam Em­ployee Ben­e­fits that in­tro­duces the con­cept of de­faults and specif­i­cally high­lights why trus­tees need to be par­tic­u­larly cir­cum­spect in how they for­mu­late the de­faults for their spe­cific mem­bers.

Farai Muronda from Stan­lib pro­vides us with a brief write-up of what de­ci­sion tree should be fol­lowed to get the best re­sults and what the pros and cons of de­fault so­lu­tions might be.

The great ap­peal of de­faults re­ally hinges on the whole is­sue of what hap­pens to in­di­vid­u­als when they are con­fronted with choice. Fran Troskie from RisCura cuts right to the heart of this dy­namic in a dis­cus­sion of the ap­peal − and lim­its − of de­faults when it comes to man­ag­ing the choice around the com­plex de­ter­mi­na­tion of the ap­pro­pri­ate in­vest­ment strate­gies to meet the fund­ing re­quire­ments of re­tire­ment.

In the next sec­tion of this edi­tion, Natalie van Zyl asks the al­limpor­tant ques­tion as to why peo­ple glob­ally seem to re­sist the no­tion of an­nuiti­sa­tion − full stop. In any num­ber of coun­tries, South Africa, the UK, US, and Sin­ga­pore to name just a few, get­ting peo­ple to pur­chase a postre­tire­ment in­come stream through an an­nu­ity seems to meet re­sis­tance. We need to un­der­stand what the psy­cho­log­i­cal block is, and ad­dress it, if we are go­ing to pur­sue ei­ther a manda­tory an­nuiti­sa­tion strat­egy as a coun­try or a de­fault so­lu­tion as is cur­rently be­ing posed by Na­tional Trea­sury to ex­ist­ing re­tire­ment funds.

What fol­lows on nat­u­rally from this dis­cus­sion is the ques­tion of what ex­actly these an­nu­ity so­lu­tions should look like if they are go­ing to re­ally meet this all-im­por­tant in­come need. This is an area that has re­ceived far too lit­tle at­ten­tion from the in­vest­ment world. The prob­lem is that the op­ti­mal an­swer is hugely de­pen­dent on an in­di­vid­ual’s spe­cific cir­cum­stances.

This raises some in­ter­est­ing chal­lenges as to how de­fault so­lu­tions could pos­si­bly fill this gap. John An­der­son from Syg­nia pro­vides an in­ter­est­ing frame­work for fa­cil­i­tat­ing that dis­cus­sion with his ar­ti­cle on the Re­tire­ment In­come Fron­tier. We have part­nered his ar­ti­cle with a brief ex­pla­na­tion by Karen Wen­zel, also from San­lam Em­ployee Ben­e­fits, as to what Na­tional Trea­sury was re­quest­ing in ref­er­ence to these de­fault an­nu­ities.

Fi­nally, we wrap up this edi­tion on de­faults with an ar­ti­cle by Kelsy Mood­ley of Alexan­der Forbes, which re­ally gets to the nub of the mat­ter: how ef­fec­tive are de­fault so­lu­tions at ad­dress­ing the fact that mem­bers ac­tu­ally re­flect highly dif­fer­en­ti­ated needs and goals? And if de­faults are in­deed sim­ply too crude a so­lu­tion, what could pro­vide a bet­ter an­swer?

Mood­ley dis­cusses the con­cept of “smart de­faults”, which are able to pro­vide slightly bet­ter tai­lor­ing in the so­lu­tions, but sug­gests that per­haps even these don’t re­ally go far enough.

She em­ploys an ex­am­ple from the world of short-term in­sur­ance to il­lus­trate how tech­no­log­i­cal ad­vances are now al­low­ing some ar­eas of fi­nan­cial prod­uct choice to cre­ate far more tai­lored so­lu­tions to meet an in­di­vid­ual’s spe­cific needs. Could this pro­vide a bet­ter way for­ward?

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.