Gary Fisher
Alexforbes Head: Member Education Services
Alexforbes
Understanding the value of Retirement Benefits Counselling for retirement fund members
Clock5 minutes

By Gary Fisher, Alexander Forbes Head: Member Education Services 

New laws governing Retirement Benefits Counselling (RBC) became effective last month, with the legislation aiming to improve the chances of retirement fund members retiring comfortably.

The reality is that the majority of South Africans do not retire comfortably - the 2018 Alexander Forbes Member Watch™ survey showed that the average retirement fund member would only receive R2 880 as a pension on retirement for every R10 000 that they were earning before retirement. This is mainly as a result of cashing in retirement fund savings instead of preserving when changing jobs, which results in a small pool of funds at retirement. In many instances members have very little information available to them before making these critical decisions and an RBC session at the right time could make all the difference.

The new legislation can be seen as a genuine effort to help turn the tide for so many individuals by providing them with advice when it counts, to guide them into making the right decisions which will bring about better outcomes for their retirement years.

The regulations require that RBC must be made available to members before any benefits are taken in cash or transferred and at least three months before a member’s normal retirement age This counselling needs to include explanations of investment portfolios, annuity strategies, rules about preserved benefits and other fund options.

RBC does not include dispensing of advice, unless the person providing the advice is a registered financial adviser. The regulations further state that the counselling may be done in person or in writing, and that funds must keep records of the counselling provided. Information shared during RBC should be in a clear, easy to understand language, including an explanation of potential risks, costs, fees, and charges.

Striking a balance between providing accurate RBC and ensuring that members understand what their options are when joining, exiting or retiring from their funds, and then following up with professional advice could change the status quo for retirement fund members in the following ways: 

  • More needs met - the probability of employees meeting their needs over a lifetime significantly increases. 
  • Increased contributions – Increasing contributions lead to increased likelihood of employees staying on track for a comfortable, sustained retirement.
  • Increased preservation – Increased preservation leads to employees having improved prospects of a more comfortable retirement. 
  • Member decision support – having the right information and guidance at the right time enables employees to make better decisions. 
  • Financial capability – meaningful engagement improves employees’ ability to manage money.
  • Increased annuitisation – access to counselling and advice and the right solutions at retirement leads to employees making more informed choices.
The knock-on effect of better outcomes for members is that employers also benefit through improved employee productivity and peace of mind. Similarly, trustees now have support in fulfilling their fiduciary duties and have access to meaningful reporting on the RBC process.
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Retirement