Put the ‘benefit’ back into employee benefits

The saying “the road to hell is paved with good intentions” could serve as a warning to employers who casually commit to setting up a retirement fund for their employees without considering the responsibilities and complexities.

“Unfortunately, that’s true,” says Cedrick Pila, Business Development Manager at 10X Investments, “good intentions are not usually enough when entering in to the world of long-term investing.

“An employer enrolling staff in a retirement fund has, at the very least, a moral obligation to ensure that the employees’ investment has a fair chance of earning a decent return, that they don’t lose too much of their money to costs, and that they are able to easily access all the information they need about the fund.”

That said, however, good intentions are definitely a great place to start, says Pila. “As long as the funds are invested wisely and not decimated by fees, the pot of savings each person has will be a huge benefit come retirement.”

Employers who help their staff save for retirement by setting up a fund, even sometimes contributing to it, are often seen as a cut above the rest, as employers of choice. Even if they don’t make any additional contributions to the retirement savings funds, employers will help their staff benefit from corporate pricing, which shaves a significant proportion off the fees they pay.

Fees are one of the biggest predictors of retirement savings success, with an apparently small saving in fees compounding to make a significant difference over a savings lifetime.

Pila says that employers should bear in mind that the money workers accumulate in their retirement pot over the course of their careers will be the biggest investment many of them ever make.

“Choosing a fund for employees can be a complicated and confusing process, and human resources departments don’t necessarily have the skills to understand and interpret the investment options provided by the numerous umbrella retirement funds available,” says Pila.

He adds that the knowledge gaps can result in bewilderment among workers and distrust of their employers, especially when they are auto-enrolled in funds.

“In my experience, few companies take enough of an interest in their employees’ retirement journey,” says Pila. “And if their employees are enrolled in a fund of the employer’s choice they really do have an obligation to ensure that the money is invested in the best possible fund for their needs,” says Pila. “They should also take an interest in helping their employees understand their options.”

In order to do this properly, human resources departments, trustees, principal officers and the management committee members really need to understand the choices properly themselves, he says.

Pila says that the majority of employers he has encountered outsource the responsibility of provision and access to information about retirement funds to the fund provider or a third-party investment consultant. He says they tend to assume that their employees are being taken care of by these external parties, “which is often not the case”.

“When you outsource that decision-making you tend to lose sight of whether the decisions are right or wrong. You put all your trust in someone who is giving you advice, yet you are not certain whether that advice is right for your employees, collectively or individually.”

Having identified this gap in knowledge and communication, 10X Investments has been providing training to employers, principal officers, trustees and fiduciaries. This training is part of 10X’s commitment to providing transparent financial education and assistance to South African companies and investors.

“The training and information we have been providing has empowered companies to choose the retirement fund that is right for their employees,” Pila says. “It also equips employers with the skills to educate their workforce and help to empower employees with the information they need to make the best choices possible about their retirement savings.”

10X also provides training seminars to educate fund trustees about the retirement savings environment. Topics covered range from current legislation to the basics of retirement savings success, such as how high costs can decimate retirement savings funds.

“The training helps employers to better communicate the options with their employees, thus instilling greater confidence within their workforce, and helping them to retire better, which is in everyone’s interest”, says Pila.

“This is how 10X is assisting employers put the word ‘benefit’ back into ‘employee benefits’.”

If you want to know more about enhancing your company retirement fund benefits mail us at corporate@10x.co.za