• Editor

The best Workers’ Day gift – that won’t cost a cent!

Helping employees get on track for a dignified retirement is a ‘gift’ that will keep giving, says Mica Townsend, Head of Business Development and Employee Benefits Consultant at 10X Investments.

It is for a very good reason that employers who are seen as employers of choice are those interested in helping their employees even after their working life has come to an end.

Whether or not an employer is in a position to make contributions on the workers’ behalf, making a corporate retirement savings fund available is a big step in the right direction. Membership of a corporate fund gives workers structure for planning and saving, and they will benefit from corporate pricing, which reduces the fees they pay. Having their contribution deducted upfront from their salary is another benefit, as is having the tax benefits applied every month rather than having to apply for a refund once a year.

Employers should know that setting up a company retirement savings fund for workers is a big plus – but making sure the fund delivers the best possible outcome for members takes it to another level. Retirement fund savings will be the biggest investment that many workers make, which is why it is so important that the fund be chosen carefully. Poor performance or high fees can dilute the benefits or, in the worst case, wipe them out altogether.

Bosses who really want to make sure they are doing the right thing for their staff would be well-advised to interrogate whether they have signed them up with the best possible retirement fund provider.

Having good intentions is not enough when entering the world of long-term investing on behalf of your workers. Enrolling staff in a retirement fund carries a moral obligation to ensure that your employees’ investment has a solid chance of earning a decent return, that too much money isn’t lost in fees, and that employees have access to all the information they need about the fund. The more engaged with the fund that members are, the better their choices and their eventual retirement outcomes.

However, choosing the right fund for employees can be a complicated and confusing process, especially for human resources personnel, who won’t necessarily have the know-how to understand and interpret the numerous investment options provided by funds. It is critical to opt for a provider that is willing and able to educate employers, not only about the policies they offer, but also how to communicate them properly to their employees.

To be honest, too few companies take a proper interest in their employees’ retirement journey. Enrolling them in a fund and not making it possible – imperative even – that they understand and engage with their retirement savings’ journey will give them a false sense of confidence and could end up being a disservice to them.

10X Investments’ Retirement Reality Report 2020 found that membership of corporate retirement savings schemes was widespread in South Africa, but most members admitted they had a poor understanding of the scheme they belonged to. Just 40% of corporate members surveyed said they had a good understanding of their fund, while more than a third said they wished they knew more and another 11% said they simply weren’t interested or trusted that the best choices were being made on their behalf.

Taking the time to conduct a full analysis of your prospective or existing corporate retirement fund, including an evaluation of all associated fees, is a good place to start. Fees are the biggest predictor of retirement saving success, with an apparently small saving in fees compounding to make a surprisingly significant difference over the lifetime of savings.

As an employer, it’s important to ensure you understand what it is you are signing your employees up for and then make sure they have the best possible chance to understand it and maximise the benefits. If anything is unclear, ask questions and don’t settle until you have a satisfactory answer from your service provider.

Having your team feel confident and empowered regarding their retirement plans is in everyone’s interest. Making the pledge to do your bit to achieve this would be a Workers’ Day gift that costs nothing and delivers a lot of value over the years.

Make the best choice for your employees by applying for a free comparative analysis here.