South Africans are feeling the financial stress of stagnant salaries and a rising cost of living. The VAT increase from 14% to 15% and the fuel price increase has put even more strain on consumers, all the while most of us earn a regular salary which does not increase with these price hikes. The real tragedy of the financial pressure, however, is that most of us will not have enough to retire on.
Against a background of a weak social security system, professionals have only their working years and their monthly salary to utilise to build a retirement nest egg. The same applies to areas of risk – disability cover, dread disease and life cover. A person’s salary resources are usually their only means of ensuring their security in an unpredictable world.
However, employees are not alone. Their employers can be a strong partner in securing group deals on risk and insurance products, which can be provided as group benefits to all their employees.
Complicating this is the short-term perspective taken by most South Africans, exacerbated by our tight financial position. Given the choice, we are likely to minimise our salary deductions (such as payments towards disability, dread disease or life insurance) all to free up income for current expenses.
Our advice for companies offering group benefits is that where you do provide choice, one should also offer financial advice. Ideally, employees should have access to a financial planning professional who can offer advice and help plan for retirement.
The fact remains, we need to put away a minimum of 15% of our monthly salaries for at least 35 years as a basic retirement saving, to be able to survive once our working years are over. From a human nature point of view, enforced deductions as part of an employment package are often the only way employees can be encouraged to save enough to mitigate risk and provide for retirement.
We all adapt our lifestyles to fit the cash component of our salaries. A deduction that comes off our salary before it even hits our bank account tends not to be felt. The converse is that whatever cash we do earn is often spent down to the last rand resulting in never getting to our intention to purchase life insurance and retirement products from our take-home pay.
As far as companies are concerned, purchasing prudent group cover, pension and provident funds for their employees shows concern for the wellbeing of their employees and also positions the company as an employer of choice. An employee who knows their employer is looking after them will be able to focus on their job, free of financial stress, which makes for higher morale, greater efficiency and a more productive workforce.
Speak to an Iemas Advisor today to find out more about our various financial products that could benefit your employees. In addition, we also offer free financial training to the employees of participating employer groups. Contact us on 0860 102 383 or visit www.iemasfinancialservices.co.za
Read other related articles here: Iemas members to receive R109 million in member benefits.
Adapted from: BDO South Africa