Wednesday, 22 February 2012 - 20:00
Retirement Funds ? Thinking Outside the Box
I want to start this newsletter with a riddle:
“Mr Jones drives in his two seated sports car on a stormy, rainy day. He notices three people standing beside the road, Jerry, his very good friend for years, an old lady that needs to go to the hospital, and a beautiful blonde woman. What should he do?”
(The answer is shown at the end of the newsletter)
It is very interesting to talk to private clients and their understanding regarding their retirement fund. Most of the time members of retirement funds don’t understand their benefits and how to maximize them.
So where is the problem?
There are so many stakeholders involved in a retirement fund but ultimately all the stakeholders should be there for the benefit of the members of fund. However, very often that is not the case.
The old retirement funds (i.e. Defined Benefit funds) were quite easy to understand from a member’s point of view. The only thing a member had to do was to work at the same company for 30 to 40 years to secure pension of about 70% of his/her salary at retirement.
The new generation retirement funds (i.e. Defined Contribution funds) are also easy to understand but complicated to manage. It is easy to understand because each member is building his/her own portfolio of assets. It is difficult to manage because members need to make sure that they:
- Contribute enough for retirement,
- Invest in the correct portfolio to ensure retirement, and
- Work long enough to ensure the value of the fund is large enough to finance an ongoing pension for the
next say 30 years after retirement.
My experience shows that members of these new generation retirement funds don’t understand their benefits and risks because it hasn’t been adequately explained by the stakeholders. The stakeholders are the investment consultant to the trustees, the asset manager of the retirement fund, the broker consultant to the fund and the broker consultant to the member.
If the stakeholders can come together and jointly provide a holistic service to the trustees and ultimately the members, then each member of a retirement fund should be able to answer the following basic questions:
- How much do I need to contribute to ensure a comfortable retirement?
- What type of portfolio do I need to invest in to ensure a comfortable retirement?
- How much capital do I need at retirement to be able to retire comfortably?
- How much life cover do I have?
- How much disability cover do I have?
If one can’t answer the questions above then one should probably ask the question whether the stakeholders are really doing their job.
To be able to address the needs of the members of retirement funds the stakeholders will need to think outside the box.
PS: The answer to the “outside the box” riddle is:
“Mr Jones gives his car to his friend Jerry to take the old lady to the hospital so that he can stay behind with the beautiful blonde woman.”
Wed, 22 Feb 2012
South Africa is looking to introduce a carbon tax next year to reduce harmful greenhouse gas emissions, although nearly two-thirds of emissions will be tax-exempt until 2020 to lessen the impact on industry, the treasury said on Wednesday.. . .
Standard Bank, Africa largest bank by assets, signed an agreement with Japan's Mizuho Financial Group on corporate lending in Africa, Standard Bank said on Wednesday, confirming an earlier Reuters report.. . .
World Markets (Spot Prices)
|JSE Top 40||17:00||30288.89||-149.45||-0.49%|
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|Euro / Dollar||19:55||0.7543||-0.0012||-0.16%|
|Dollar / Euro||19:59||1.3246||0.0018||0.13%|
|Pound / Dollar||19:55||0.6379||0.0045||0.71%|
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The JSE Today
* Includes all listed instruments on the JSE
|Index Name||RP||Move||% Move|
|Financial & Ind. 30||34,019.95||-161.30||-0.47%|
|Oil & Gas ||30,345.50||37.84||0.12%|
|Oil & Gas Producers ||16,316.21||20.34||0.12%|
|Basic Materials ||29,650.06||-159.63||-0.54%|
|Forestry & Paper ||13,613.25||180.75||1.35%|
|Industrial Metals ||31,323.30||3.98||0.01%|
|General Industrials ||86,563.25||-934.57||-1.07%|
|Consumer Goods ||31,457.66||-34.62||-0.11%|
|Automobiles & Parts ||4,925.20||11.33||0.23%|
|Health Care ||37,786.62||-200.90||-0.53%|
|Index Name||RP||Move||% Move|
|Food Producers ||56,414.12||-164.13||-0.29%|
|Personal Goods ||459.43||-2.00||-0.43%|
|Consumer Services ||61,886.64||84.66||0.14%|
|General Retailers ||52,012.61||285.98||0.55%|
|Travel & Leisure ||3,727.70||9.18||0.25%|
|Support Services ||2,362.64||13.43||0.57%|
|Non-life Insurance ||36,252.39||92.14||0.25%|
|Life Insurance ||19,284.89||-158.01||-0.81%|
|General Financial ||2,299.83||-18.18||-0.78%|
|SHARIAH TOP40 ||3,199.54||-16||-0.48%|
|FTSE/JSE SHARIAH ALL||3,284.47||-13||-0.40%|
|FTSE JSE Fledgling ||5,227.87||17||0.32%|
|FTSE/JSE Alt X ||1,249.86||13||1.06%|
|SA LISTED PROPERTY ||408.18||-0.32%|
|CAPPED PROPERTY ||331.10||-0.65%|
|FTSE/JSE RAFI 40||7,096.14||-41||-0.58%|
|Capped Top 40||15,947.89||-76||-0.47%|
|Capped All Share||17,191.65||-68||-0.39%|
|JSE TABACO ||4,826.98||-29||-0.59%|
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Latest Consensus Changes**
|CPL||CAPITAL PROPERTY FUND||BUY||17 Feb|
|REM||REMGRO LIMITED||BUY||17 Feb|
|IMP||IMPALA PLATINUM HOLDINGS ...||BUY||17 Feb|
|AGL||ANGLO AMERICAN PLC||BUY||16 Feb|
|EMI||EMIRA PROPERTY FUND||BUY||16 Feb||
|Expected||Company Name||Fin. Date|
|23 Feb 2012||ACCENT||December 2011 (Interim)|
|23 Feb 2012||AFROX||December 2011 (Final)|
|23 Feb 2012||BLACKSTAR||December 2011 (Final)|
|23 Feb 2012||CAPSHOP||December 2011 (Final)|
|23 Feb 2012||CBH||December 2011 (Interim)|
|RDF||Redefine Properties Ltd||22/02/2012||Confirmed|
|CULP||Cullinan Holdings Ltd||23/02/2012||Confirmed|
|CUP2||Cullinan Holdings Ltd||23/02/2012||Confirmed|
|CUL||Cullinan Holdings Ltd||23/02/2012||Confirmed|
|CUP3||Cullinan Holdings Ltd||23/02/2012||Confirmed||
Stock Exchange News Service
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