The end of the year is a good time to examine your finances, but this year take some time to review your domestic worker’s retirement plan.
For many households domestic workers form the backbone of the support structure and it’s important to ensure they are provided for when they retire.
Both Old Mutual and Absa offer retirement products specifically for domestic workers and Santam recently launched an insurance product you can take out for your domestic worker.
Absa has a Home Employees’ Plan and a Home Employees’ Provident Fund. The Employees’ Plan focuses more on risk, with cover for accidents and hospitalisation, while the provident fund provides for retirement savings.
The Home Employees’ Plan provides two options. For R60 you purchase personal accident cover and funeral cover and Absa facilitates the payment of UIF to the department of labour. In the case of accidental death or disability, the employee receives R25 000. For R115 a month your employee also receives a lump sum on retirement. For example, if your employee is 35 years old, he or she would receive about R152 000 on retirement.
The Absa Home Employee Provident Fund provides for retirement and funeral cover of R5 000. As it is not a retirement annuity, the member can withdraw the funds before retirement. If your employee leaves their job before retirement, his or her new employer would have to sign up with the provident fund for the employee to continue to be a member.
The monthly contributions start at R80 and you can opt to have a pure savings investment or to include death and disability cover. Monthly contributions can go as high as R1 020 and include death and disability benefits up to R200 000, depending on the contribution.
There is a minimum administration fee of R7, which as a percentage of R80 works out at 7,5%. If you are investing R500 a month the percentage falls to 1,4%. If you go through an intermediary it can charge up to R4 a month.
The retirement fund is managed by a board of trustees and the investment choice is conservative, with 50% in Sanlam Absolute Return and 50% in Old Mutual Symmetry CPIX 5% fund.
Old Mutual launched its product in conjunction with the Presidential Working Group on Women. This plan differs from Absa’s in that it works as a retirement annuity, so it is in the worker’s name and, if he or she leaves for another job, he or she can continue to contribute without the new employer needing to sign up.
This fund provides a retirement savings portion, which can be accessed only on retirement or after death or disability.
It includes funeral cover for the member and his or her direct family, as well as family support services such as emergency assistance, emergency HIV treatment, a help line and legal support in the case of debt collection.
After six instalments, the member can skip up to six contributions. This allows for maternity leave or periods of unemployment. The member will still be covered for the funeral policy during this time. The monthly premiums range from R85 to R200 a month and the money cannot be accessed before the age of 55. As with Absa’s plan, there is a monthly fee of R7.
Some employers might prefer the Old Mutual product because the funds cannot be accessed before retirement and the investment can continue without a new employer having to sign up. But people save for different reasons and you need to speak to your employee before deciding on the option you might think is best.
Given the migratory nature of domestic workers, many prefer to save by investing in a home in the area to which they will one day retire. You need to discuss a reasonable balance between investing in a home and a lump sum for your worker’s retirement.
Funeral cover is cost-effective through these plans. With Absa, a premium of about R11 secures R5 000 funeral cover. But you might find your domestic worker prefers to continue to contribute to his or her burial society, as this might be an important part of his or her social infrastructure.
The Absa Home Employees’ Plan is something you might wish to take out for your worker in conjunction with his or her retirement investment because it provides accident cover.
If your employee is injured or dies as a result of an accident on your premises, he or she will have financial support. It also pays out R1 000 if your employee is hospitalised for three or more days because of illness.
To qualify for any of the options your employee has to be a South African citizen.
Providing home insurance
Santam has introduced a new product that enables clients to sponsor a home and household policy on behalf of his or her domestic worker, gardener, child minder or any other person employed — either on a full-time or part-time basis — in the home.
The premium starts from R15 a month and sponsorship does not affect the sponsor’s risk status or no-claims bonus in any way.
The policy provides comprehensive cover for home workers’ own homes and belongings and also includes cover for natural disasters, fire and theft.
It also covers damage caused during riots and strikes. Personal liability cover up to R100 000 is included free of charge with all policies.
To qualify for the product the home worker needs to be the legal owner of the house to be insured and the house needs to have brick walls and either a tiled, asbestos or corrugated-iron roof. — Maya Fisher-French