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You deserve decent retirement too!

The Pensions Funds Act 1956 governs all Pension/Provident Funds in South Africa, although it’s 50 years old. Traditionally, most companies have, in good faith, gone to Life Insurers for their Pension/Provident fund solutions. However this model is as antiquated as the Act it was designed around.

Over time PF circulars have made allowances for providers to offer pension/provident solutions that are far more effective and value adding than the “good old fashioned” insurance company ones.

I believe that the “Private Fund” model is substantially better, for all companies. Obviously this depends on the quality of advice and service the company receives from its Financial Advisor.

The main differences between “insured” funds and “private” funds include the following:

  • Insured funds have until now been audit exempt.

  • Most insured funds fear the loss of business, and ensure that they don’t loose revenue when this happens by charging penalties should a fund leave in the first 5 years

  • Insurance companies use commission earning brokers to sell, sell, sell their funds

  • Brokers only act as conduits of information between the insurance company and the client, having very little control and access to accurate information about the fund

  • The insurance company with whom the fund is placed, houses all aspects of the funds including; the administration, group life cover and the investment. This often causes conflicts of interests between departments, due to performance differentials.

  • Insurance companies are excellent at life insurance. They also have Employee Benefits departments.

  • Private funds have to be audited

  • Most private funds are confident of keeping their funds on their books, and don’t charge penalties should a fund leave.

  • Private funds usually have fee charging, professional financial advisors managing all aspects of the fund in detail

  • Financial Advisors should be intricately involved in all aspects of the fund, with a clear understanding of all cost implications, group life commitments, investment strategies and fund allocations.

  • Private funds can split the aspects of the funds so that no such conflict of interest occurs. Furthermore should any one service provider perform inadequately, the company can find a new one without prejudicing the members of the fund, nor losing the good aspects of the fund.

  • The service providers of private funds usually focus on a specific aspect of retirement funding. Hence the service providers are masters in their trade!

As business owners and members of funds, we must be aware of the type of fund structure we’re in. Thus we can play a pro-active role in ensuring we get the “Retirement we deserve”.
It’s exciting knowing that fantastic pension/provident funds exist, and that they can be tailored for every individual company. It’s also reassuring that passionate Financial Advisors guide their clients to get the retirement that they deserve!

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