The right umbrella fund helps employees to make smart decisions

By Janice Roberts

Katherine Barker, Head of Momentum FundsAtWork

Saving through their employer’s retirement fund is often the only form of savings many South Africans have. With July marking National Savings Month, Katherine Barker, Head of Momentum FundsAtWork, says it’s the perfect time for employers and their financial advisers to ask some hard questions about how their retirement fund can help employees make smart decisions and save more.

This year the theme for National Savings Month is ‘Employer-Assisted Saving’, and the South African Savings Institute (Sasi) has challenged employers to encourage their employees to save more.

The inherent cost-efficiencies of umbrella funds reduce costs and help channel more money towards retirement savings. However, Barker says the right umbrella fund does a lot more by being highly flexible, offering a range of options to suit employees’ different needs and facilitating decisions that boost retirement savings.

Encouraging employees to stay invested when changing jobs is the single biggest leverage point for boosting retirement savings. This is why members of the FundsAtWork Umbrella Funds have access to a ‘smart exit’ process when they resign from their current employer. The process offers interactive scenario analysis showing alternatives to help them realise the impact on their retirement as well as the impact of taxation if they choose to take their savings as a lump sum and spend it.

Another critical decision-point for employees arrives when retirement is on the horizon. Barker says: “Choosing an annuity is one of the biggest decisions any employee will ever make. When we make important decisions like buying a new car, we test drive various options. An employee’s choice of annuity is a far bigger decision, so why not give them the opportunity to ‘test drive’ different annuities.

“This is why FundsAtWork members have access to a user-friendly, try-before-you-buy digital platform which educates them on the different annuity products and gives them the opportunity to look at the impact different decisions will have on their retirement. Working with their financial adviser, they are then able to choose the annuity product that will best suit their unique retirement needs based on the retirement savings they have accumulated.”

By offering flexibility in terms of retirement contributions and insurance benefits, the right umbrella fund helps direct more money towards retirement savings. Seamless functionality should make it easy for employees to automatically increase their annual contribution rate or make additional voluntary contributions. Furthermore, flexible insurance benefits that can be adjusted based on an employee’s changing needs reduce over-insurance and facilitate the flow of more money to retirement savings.

Umbrella funds offering reward programmes encourage healthier choices, which in turn lead to improved physical health and lower medical expenses and insurance costs. This means more money is available for day-to-day expenses, as well as for future savings. Barker says the real power of these programmes is when they reward employees’ healthy behaviour in such a way that the financial reward generated can be channelled to their retirement savings.

Barker concludes: “Saving through their employer’s retirement arrangement is the most savings many employees will accumulate. It is vital that every lever possible is pulled to maximise these savings. The right umbrella fund can help achieve this.”

Visit the official COVID-19 government website to stay informed: