The latest Sanlam Employee Benefits Survey, in which 188 funds participated, reveals interesting trends in retirement saving.
- Only 44 percent of retirement funds have a policy on trustees receiving gifts. Of the funds that do have a policy, 54 percent do not allow trustees to accept gifts, while 10 percent allow trustees to accept gifts as long as they are disclosed.
- 60 percent of men who belong to a retirement fund retire at age 65, 20 percent retire at 63 and 10 percent at 60. Fifty percent of women retire at 65, 18 percent at 63 and 25 percent at 60.
- The average employers' contribution to employees' retirement savings dropped in 2005 to 9.95 percent of the payroll from 10.17 percent two years ago. The average employer contribution in 2006 is 5.95 percent of payroll.
- The average cost of administering a retirement fund is 1.2 percent of payroll, which is down from 1.4 percent in 2004.
- Only 18 percent of retirement funds allow members who leave employment to keep their savings in the fund as a deferred pension.
- The number of funds that allow their members to choose whether they want death risk benefits increased from nine percent in 2002, to 15 percent in 2005. The average cost of providing risk benefits is about 1.9 percent of salaries (employer payroll) for death benefits and 1.4 percent of salaries for disability benefits. More than 40 percent of funds cap the cost of providing risk benefits. Where capping is applied, death benefits are capped on average at 2.7 percent of a member's gross annual salary; disability benefits are capped at 2.3 percent of salary.
- In the 2004 survey, 60 percent of respondents believed that the cost to their fund of providing risk benefits had increased in the previous two years due to HIV/Aids. This figure has now dropped to only 26 percent. Fewer respondents believe that the cost of providing risk benefits will increase during the next two years due to HIV/Aids. In the 2004 survey, 72 percent of respondents believed that their group risk rates would increase because of HIV/Aids. In the latest survey, only 46 percent of respondents feel the same way.
- Of the defined contribution benefits funds surveyed, 44 percent offer their members a choice of investments, compared with 28 percent in 2004 (and 30 percent in 2002). Of the funds that do not offer their members investment options, 11 percent are planning to do so, 18 percent are considering giving their members a choice of investments, and 20 percent are uncertain whether to do so.
The moderate market-linked profile (78 percent, down from 91 percent in 2004) is the risk profile that is most offered. The aggressive market-linked profile has moved from third to second place, and is offered by 75 percent of retirement funds. The smoothed bonus (or "with-profit") option dropped from second place in 2002, to fourth place in 2004 and has now slipped down to fifth place in 2006 (64 percent).
There is a nine-percent increase in the number of member-choice funds offering an absolute return risk profile, and an 11 percent decrease in member-choice funds offering a cash risk profile. Eighty-two percent of funds charge a flat fee (down from 86 percent in 2004), whether members exercise investment choice or not.
- The number of funds that have adopted investment policy statements has increased from 44 percent in 2004 to 67 percent.
- 95 percent of funds issue their members with an annual benefit statement, 44 percent provide an annual trustee report, 35 percent provide a membership certificate, and 64 percent provide members with a booklet outlining the fund's rules.
- 30 percent of funds employ good general housekeeping to reduce costs; 22 percent of funds negotiate costs with consultants; and 20 percent regularly rebroker services and products, such as administration and risk benefits.