According to Karabo Morule, GM of Member Solutions at Old Mutual Corporate, The results revealed that pre-retirees are feeling less well-informed than younger members, probably because they are realising how little they know about their retirement fund now that they are approaching retirement age.
Karabo Morule, GM of Member Solutions at Old Mutual Corporate says of major concern is the fact that about half of the respondents said they do not know how much they have saved and do not know anything about annuity options. "Approximately 46% of respondents in the pre-retiree group indicated that they do not know how much they have saved for their retirement. Less than 20% of respondents in the pre-retiree group have never heard of an annuity, and 28% have heard only a bit about them," says Morule.
After the different annuities were explained to this group, they were then asked about their preferred annuity structure. 49% said they would prefer an income on retirement that would keep up with inflation even if that meant it was lower, while 29% would prefer to decide on a monthly income, even if it meant it could run out if they lived a long time. The remaining 22% wanted a reasonable income on retirement, even if it might not keep up with inflation in the long term. Their responses do not concur with what many people actually do.
Because retirement savings are often inadequate in relation to their pre-retirement income, most people choose the annuity that provides the highest immediate income. They tend to prioritise maintaining their pre-retirement lifestyles over enabling their income to grow with inflation and lasting longer. The reality is that this choice can mean that they run out of money quite quickly. Adequate retirement savings over a long period would allow members to ensure they make better choices at retirement.
"In spite of the apparent lack of knowledge about annuities, just less than 80% of respondents indicated that they would feel positive about a default annuity. Only 5% would have no interest in a default option at all. The vast majority would find it useful, even if just as a benchmark. This is encouraging for Old Mutual, which has advised trustees to provide an annuity default for members," says Morule.
The data also revealed that only 43% of pensioners indicated that they received pre-retirement advice from their fund or employer. "Given the lack of knowledge of pre-retirees in terms of their options and financial position in retirement, this figure is a major concern. It is clear that members need to be supported by both the fund and their employer when it comes to financial decisions on retirement," Morule concludes.
