Member Watch: Summary

Preservation by age

The graph shows the preservation rates at different age groups by number of members.

Preservation rates increase with age. This may be due to members more aware and focused on their retirement savings and understanding the importance of preserving their benefits.

Preservation rates have decreased on average by 0.36% for members between the ages of 18 and 30 years when compared to the previous analysis. While members who are 65 years and older have increased by 1.82%.

Low preservation rates are one of the main reasons for replacement ratios being lower than the target replacement ratio, between 75% and 100% of pensionable salary.

Expected replacement ratio at different ages

The impact of retiring at various ages is illustrated below for a new member aged 25 contributing at 11.75% of salary. Deciding to retire at the age of 65 rather than the age of 55 can almost double a member’s replacement ratio.

Exit rates

In the year to 31 March 2019, approximately 134 000 members left the funds surveyed. Of these, 103 700 were resignations, retrenchments or dismissals; 7 230 were retirements and 3 400 were deaths. The remaining exits transferred to their employers’ new funds.

Resignations or dismissals by age

The average exit rates for the year to 31 March 2019 are shown in this graph.

Exit rates have decreased on average since 2018 in the number of resignations. The rate of exits declines as members get older. Most exits are between the ages of 20 to 30 years. There were similar findings in the previous analysis and general industry research.

Even after age 55, approximately 4.05% of members resigned instead of retiring, which may have a significant tax implication for them. This may be as a result of pension fund members choosing to resign rather than retire in order to take their full benefit in cash.

Fund credit as a multiple of salary at different ages

The graph shows the required fund credit as a multiple of salary to achieve a replacement ratio of 75% at retirement, and the actual average fund credit as a multiple of salary that members currently have at each age.

The required fund credit as a multiple of salary to achieve a replacement ratio of 75% at retirement is 12.22, and the actual average fund credit as a multiple of salary at age 65 is 3.7.

Shortfall

The graph shows the average shortfall in Rands between the required fund credit as a multiple of salary and the actual average fund credit as a multiple of salary at each age. The average shortfall for all the members administered by Alexander Forbes is R1 222 410.56.

The graph shows the total shortfall in Rands (R) between the required fund credit as a multiple of salary and the actual average fund credit as a multiple of salary for different age groups.

The total shortfall for all the members we administer is R558 billion.

Tool for trustees

The LifeGauge Comprehensive analysis can assist trustees in reviewing the results of their LifeGauge outcome compared to various sectors. It also provides detail within the industry to give guidance to trustees on the fund’s potential outcomes and to support appropriate advice with regards to design.

The LifeGauge Comprehensive provides a comparative overview of the following statistics:

• Number of members
• Replacement ratio
• Number of funds in the sector
• Average gross contribution
• Percentage membership gender split
• Average retirement age
• Generational split and outcomes
• Industry comparison
• Preservation index

Conclusion

In conclusion, the Member WatchTM provides a high level overview of the trends and, importantly, provides a clear indication of member behaviour. Using the LifeGauge Comprehensive tool, trustees can benchmark their own funds to better understand what levers can be used to improve member outcomes.

In addition, the results highlight how important it is for members to have access to communication and advice to make better decisions over their lifetime to improve their long-term financial well-being.