Get ready to take control of saving for your golden years
he year is ending with a bang – National Treasury has published the legislation that will establish the much- needed new and stricter structure for regulating the financial services industry.
The Financial Sector Regulation Bill is the first piece of legislation that will create the new “twin peaks” regulatory structure for the financial services sector. In brief, the legislation will place prudential regulation (measures to stop financial institutions from going bankrupt) under the Reserve Bank and market conduct (measures to ensure you are properly treated) under a reconstituted Financial Services Board (FSB). This is great news for all. Last year and earlier this year, National Treasury published five discussion documents on retirement reform, highlighting many of the problems that undermine our savings.
To me, the biggest single cause of the widespread problems in the financial services industry is the fact that too many institutions and senior executives in the industry do not treat us and our hard-earned savings with the respect we deserve.
Too many think that once they get their paws on our money it is theirs to do with as they please. The year has again been marked by a life assurance industry that continues to treat its clients with absolute contempt ( for an example, see “A case of customers still coming last?”, right).
While it is great that government is moving to clean up the broader financial services industry, in the end it is you who must take responsibility for your financial wellbeing.
Key to the reforms is the restructuring of the FSB, which will have a greater responsibility for education – the reason being that the more aware you are of the issues of sound financial planning, the less likely you are to fall prey to buying poorly designed investment products. An example are those sold by the life assurance industry, which have onesided contractual conditions, allow for the confiscation of your savings if you break your contract, impose high costs, and create perverse incentives for product-floggers.
One of the most important areas of financial planning is retirement planning. The chances are that you could spend at least 20 years in retirement – that is, a period equal to half of your working life.
The period you could live as a retiree is increasing because of improved health and medical care. It is this increased longevity that is behind the problems in many developed countries where state-sponsored retirement plans in particular are simply running out of money because retirees require an income for a longer period.
If a government can run out of money to fund the pensions of its citizens, so you can run out of money unless you plan carefully. In simple terms: ◆ You have to save more for retirement by saving more and/ or by working longer;
T◆ You have to take advantage of everything on offer – from superior retirement saving and pension-generating products through to tax incentives – if you want to ensure that the capital you have saved will provide you with a sufficient income flow for life; and
◆ You must not fall prey to poor products that are mis-sold to you.
Successful retirement planning is based on knowledge. Too many people simply do not know what they have saved or what they need for retirement. They often incorrectly assume that because they belong to an occupational retirement fund they will have sufficient savings to retire on.
Many of the problems could be solved if more retirement fund members understood what they have to take into account and what they should and should not do.
The primary aim of Personal Finance over the years has been to educate you, our readers, about all aspects of financial planning, particularly retirement planning because of the large sums of money involved.
As part of this campaign, Personal Finance will join forces next year with the country’s biggest retirement fund administrator, Alexander Forbes, to help you to plan properly for retirement on a comprehensive ongoing basis.
First up, in March, will be an all-day event, the Ready Set Retire conference, on the most important things you need to know about retirement planning. This will be followed by the creation of a retirement planning club, which will meet eight times during the year and will be stitched together through an retirement community website, which will bring club members up-to-date information and research as well as allow for the exchange of ideas.
The conference will be held in Gauteng, the Cape Town area, Durban and Port Elizabeth.
Edward Kieswetter, chief executive of Alexander Forbes, says: “The point of the Ready Set Retire retirement planning environment we are creating is to ensure that people enhance their chances of a financially secure retirement. Alexander Forbes wants to enable and activate people to take the positive steps in self- education and personal planning that will assist in securing their long- term financial wellbeing in retirement.
“Too often, people with the best intentions do not achieve their financial targets. Often, the reason is because they do not have the necessary information and tools available.”
By signing up for the Ready Set Retire conference you will have access to experts in the field of retirement planning in South Africa. Subjects will include: ◆ The changing retirement-planning landscape. This presentation will take account of the many factors that are impacting on retirement, from longevity, the cost of medical care, and government retirement reform through to how much capital you are likely to need.
◆ Explaining economics and why it is important to you.
◆ The importance of understanding investing and the importance of asset classes in providing you with the optimum risk-adjusted returns both before and in retirement.
◆ The changing face of tax in retirement planning and the impact this can have on you. ◆ The risks you face in retirement. ◆ Your product choices before and after retirement.
◆ The psychology of retirement – adapting to a different lifestyle.
The final programme, speakers and booking details will be published in Personal Finance in the new year.
To conclude, my best wishes to all our readers for the festive season and 2014.