It’s all about the way you finish, and the football analogy isn’t lost on pension and retirement fund trustees who have a fiduciary responsibility to the funds they are responsible for and to the members who are nearing retirement.
Savings and investments business Old Mutual SA was talking to trustees following the release of their most recent retirement fund survey, which highlighted several key issues. Craig Aitchison, head of Old Mutual Actuaries & Consultants, says that trustees need to consider that:
– Members should be saving towards retirement over their entire working careers; and
– Members may only remain in one fund for a relatively short time.
Trustees shouldn’t allow the movement of members in and out of funds to distract them from the fact that saving for retirement is a long-term goal. Instead, Aitchison suggests, trustees can help members reach their retirement goals by educating them about preservation and the need for careful financial planning.
Unfortunately, the lack of verbal or group communication could hamper members’ appreciation of their financial position. This could result in remedial action being left until it is too late.
Aitchison stresses that the trustees cannot give individual members advice but can communicate general principles such as communication and arrange for counselling for exiting members by accredited financial advisors.
What members should know
As a rough rule of thumb, the average member will need around 75% of his or her final monthly salary as a monthly pension in retirement. However, what is adequate for one member may be inadequate for another. Financial planning should include setting a personalised retirement goal and regularly checking that the individual is on track to meet this goal.
Members need to make sure they have all the information that they and their financial planners require to monitor their financial progress. This includes a thorough understanding of the risk benefits available on the fund and the investment strategy the trustees have adopted. What investments are being used and the guarantees on member assets are important for members to know.
The Financial Services Board would prefer the investment policy statement to be made available to all members. Members should approach the principal officer of the fund for more information about the investments, the performance of the investments and the fund benefits.
Members need to be proactive and liaise with the fund and their employer about the options available to them should they find they are not on track for a comfortable retirement. Funds may allow members to make tax-friendly additional voluntary contributions or allow them to work longer to boost their retirement benefits.