Alan Finlay
Benefit and retirement funds for low-income earners – like domestic workers and taxi drivers – are catching on in South Africa. But while a group like Fedsure Life Assurance receives as many as 150 applications a day, others are battling to keep in the running.
There are three main players in the industry offering specifically tailored packages for low-income earners: Fedsure, Metropolitan Life and Absa.
Fedsure’s General Workers Fund (formerly the Domestic Pension Fund) has been operating since 1994 and appears to have the market cornered. Nadine Thorn, a fund administrator, says 15 people now work in her department on the one fund alone. Those signing up include domestic workers, security guards, taxi drivers, as well as larger companies looking to get their workers covered.
Rumour has it that chicken chain Nando’s might be considering the fund’s options. Thorn maintains that the fund offers such good benefits that even employees have begun taking out policies.
The fund offers several different plans for low-income earners over the age of 16. The minimum contribution is R30 a month, which pays out R3E000 in the event of death, as well as R2E000 to cover funeral expenses for the employee, should his or her spouse – or spouses if there is more than one – dies. Should the employee’s child die, the fund pays out R1E250 to cover funeral costs. For the R30, you also get a lump sum retirement pay-out, which, if you join the fund at 30, will be nearly R220E000 at age 65. The ceiling on the fund is R700 which pays, among other things, death and disability benefits of R15E000.
In comparison, the Absa Workers Fund, with 3E000 members, is a minnow. “It’s a difficult market to break into,” said Martyn Nottingham, the national marketing manager.
The fund was launched two years ago and re-launched last month. Nottingham blames the lukewarm response to the fact that it wasn’t aggressively advertised in the media.
“The added difficulty is that you’re actually preying on people’s consciences, [for instance, the employers of domestic workers] and I don’t know how conscientious people are.”
However, Nottingham remains confident that his fund will in the long run survive monoliths like the Fedsure product. “The market is young. Fedsure has only been in it for about four years. There’s a substantial market in Gauteng alone, where we estimate there are about 30E000 domestic employees.”
But pure figures are where the real differences in the two funds lie. While the Absa Workers Fund offers the standard death, disability and funeral benefits, as well as lump sum retirement pay-outs, its lowest contribution rate is R43. This pays out R2E000 to cover the funeral expenses of a member or spouse, R2E000 for a child over 12, R1E000 for a child aged between six and 12 and R500 for a child under five.
Although employers seem to be offering the funds to their workers when their annual pay packages are revised, the R13 difference in premium for low-income earners is substantial.
However, the excess is being invested, and where the Absa package does score is in its retirement benefit. If you join at 35, with the lowest contribution, you will be paid out R276E000 when you retire. Considering inflation, currently hovering around the 8% mark, the sacrifice now may be worth the wait.
Metropolitan Life’s Domestic Care Policy offers a gold and silver plan. The premium on the silver plan is R35, which pays out R3E000 funeral expenses for the employee, and if any of his or her dependants die. It doesn’t cover spouses, however. Of that R35, R9 goes towards the funeral cover and the rest is invested in unit trusts.
The gold plan, at R50 a month, offers R5E000 funeral benefits. Of that R33,50 is invested in unit trusts every month.