Fund employs financial literacy as an instrument of transformation

The Natal Joint Municipal Pension/KwaZulu Natal Joint Municipal Provident Funds (NJMPF), a multi-award winning fund, is constantly looking for ways to improve benefits and retirement outcomes for members by offering a retirement funding service that not only provides sustainable fund incomes and pension increases, but also develops the financial acumen of members, according to Sam Camilleri, chief executive and principal officer at the NJMPF.

The NJMPF has adopted an adage of former president Nelson Mandela: “Education is the most powerful weapon you can use to change the world”. The fund is using financial literacy to improve the low savings and financial literacy rates in South Africa.

But Camilleri is quick to point out that financial literacy challenges are not unique to South Africa; they are an issue throughout the world: “You can go to Australia, the UK or the US, stop someone in the street and ask them a few questions about their pension fund or if they understand the concept of compound interest and the chances are that they will not have ready answers, so it is a global problem that retirement funds need to help resolve.”

The NJMPF’s financial literacy programme was introduced in 2014 as part of its communication strategy, as it is paramount that members understand their pension or provident fund, the importance of saving and what percentage of their salary they will retire on. Since then the fund has facilitated educational sessions during road shows at municipalities, workshops in its offices and pensioner indabas in town halls, which cover the following financial literacy modules:

  • Budgeting;
  • The role of the Financial Sector Conduct Authority;
  • The role of the Pension Fund Adjudicator;
  • Inflation;
  • Wills;
  • The work of the National Credit Regulator and how it affects the man in the street;
  • Net Replacement Ratios; and
  • Tax tips from SARS and the role of SARS in the economy.
  • The NJMPF’s financial literacy programme’s aim is to promote and improve financial awareness to assist all the fund’s stakeholders when dealing with financial matters.

    Camilleri says education is a prerequisite for successful transformation, which is the reason that financial education is a necessary tool to address the savings shortcomings in the current South African landscape.

    “Legislative and regulatory development as well as the wide range and sophistication of financial products is compelling the population to become financially literate, as individuals have to make more decisions regarding retirement and their financial wellbeing.

    “Financial literacy is critical to consumers being able to save enough to provide an income that will sustain the same standard of living as they enjoyed during their working life. Studies have shown that the financially literate are far better prepared for retirement than people with low financial literacy.

    “Basic financial literacy means being able to manage your salary and expenses, save, invest, be responsible with regards to incurring debt, and be prepared for unanticipated or emergency expenses.”

    Camilleri contends that retirement funds have both the opportunity and are duty- bound to play an important role in members’ and their dependants’ financial literacy development.

    “One of our key functions as retirement funds is to build awareness around retirement preparedness, saving, and investing.

    “With South Africa’s low rate of savings it is crucial for retirement funds to contribute to the promotion of financial literacy among members, their spouses and children,” says Camilleri.

    The NJMPF has partnered with a range of organisations such as the National Credit Regulator (NCR) on member road shows and pensioner indabas to develop financial knowledge among members, their families and the broader public.

    “The NCR assisted the NJMPF in promoting education and communication in the areas of debt control, understanding your credit status and combating excessive debt.

    “The South African Revenue Services (SARS) have also partnered with us to explain their role in the economy and to explain the tax status of retirement fund contributions and benefits.

    “The FCSA has assisted with budgeting, inflation and savings presentations. The Office of the Pension Fund Adjudicator has explained their role and the rights of members, and NJMPF’s legal advisors have undertaken extensive work, free of charge, travelling to our road shows to explain the importance of having a will,” says Camilleri.

    He says the fund has undertaken a research study with the purpose and aim of obtaining direct responses and feedback from members, pensioners and employers about NJMPF’s financial literacy programme and the fund’s overall stakeholder engagement and education.

    “The research was conducted to find out what our members have grasped over the past four years and whether the programme offers value to our stakeholders.

    “The research results will assist the NJMPF’s planning and implementation of strategy, because the better our understanding is of our membership, the more value we are able to add through meeting the needs of stakeholders.

    “The preliminary results of the research indicate that the NJMPF’s financial literacy programme has been highly impactful,” says Camilleri.

    The NJMPF has extended its financial literacy programme to children in the belief that introducing financial education to children in a fun and entertaining way will ultimately build inquiring minds.

    This is likely to encourage and create daily discussions and dialogue on financial issues and topics in households of the fund’s stakeholders and influence a change in financial behaviour so that a culture of saving is created within the family. The NJMPF has access to children via parents who work for municipalities.

    “We have implemented some novel methods of bringing children into the decision-making equation of retirement funds and our financial literacy programme by incorporating them into the fund’s communication programmes,” says Camilleri.

    “Examples in our work sample include colouring in competitions, word search quizzes and playing cards with financial literacy slogans. This initiative is also a way to keep members engaged and to become active participants in their retirement savings through the use of competitions and constant communication.

    “The playing cards enhance stakeholder engagement and education through the application of game-design elements and game principles to retirement savings and planning, which is a topic that most people are disinterested in and unaware of,” adds Camilleri.

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