For most South Africans, their retirement savings is the largest sum of money they will ever have.
As they approach retirement, making a decision on what to do with their entire life savings is a daunting task. Unfortunately, the odds are stacked against them with less than 6% of South African’s being able to retire without financial assistance. This statistic is not new, however, it hasn’t improved in decades despite all the new products, innovations and legislation that has attempted to turn it around.
As a financial industry we are often guilty of developing solutions with a range of experts giving input but without including the retiree themselves and hearing their voice throughout the process. This leads to good solutions but not necessarily the right solution. A fresh approach is needed to solve the retirement dilemma, one that includes the voice of the retiree.
At Nedgroup Investments we have taken a new approach to solve this age-old dilemma. With this approach, the retiree is integrally involved in every step of the journey, giving feedback and guiding the outcome. Using this feedback, Nedgroup Investments developed a solution called the MyRetirement Solution. We chose this name as it was co-created with retirees. The MyRetirement Solution is the first retirement investment planning offering of its kind in South Africa.
During development, every few weeks, we conducted user tests with South Africans from all walks of life who are approaching retirement, or who are already retired. These sessions were conducted one-on-one, with the retiree being taken through the solution that has been developed thus far and they provide their feedback. Such sessions give insight into what retirees understand about a solution, the trade-offs they are willing to make and how their behaviour changes. This feedback is then used to amend the solution and so, the solution evolves into something that retirees understand, leads to positive behavioural changes and meets their needs. In fact, you could say that retirees are solving their own retirement dilemma.
Positive behavioural changes
One of the retirees in our testing, let’s call him John, was adamant that he was going to retire early and had already set a date for his retirement. During his session, John came to the conclusion, of his own accord, that early retirement is not a viable option for him. On the one hand, it was heart breaking to watch the testing as many realised that the income they can sustain is well below what they wanted, but on the other hand, it was truly amazing to see people come to a place where they are empowered to come to the right decisions themselves and change their behaviour. This is when true ownership happens.
What emerged from our findings is that the majority of people share three key needs. The Nedgroup Investments MyRetirement Solution addresses these needs.
Need 1: Human touch
Retirees wanted an actual human to walk them through this decision. They didn’t mind if this engagement happened via a video call, but it must be a person and not a chatbot or tool. This is understandable as it’s a daunting decision to make with significant ramifications.
The MyRetirement solution includes a retirement coach or financial planner, who is with the retiree (physically or via a video call) when they complete the online portal.
Need 2: Advice
Retirees, even the well informed, wanted to be told that
they were making the right decision and needed reassurance. Therefore, it is
important that an actual recommendation is given to retirees as opposed to
presenting them with options and facts.
The MyRetirement Solution includes an online portal which provides advice. The advice includes a recommendation on what cash lump sum to take, how best to use that cash, which annuity is right for the retiree and what a sustainable income is. Retirees are also given an opportunity to ‘play around’ with their plan and compare the outcomes of their edited plan to their recommended plan. This is where we witnessed positive behavioural changes and people taking ownership of their retirement.
The reason that we chose to embed the advice in a tool is that it allows the retiree to instantly see the impact of changing their plan, it frees up the time of the planner or retirement coach to focus on the retiree and the personal aspects of the relationship. It also removes human error and potential miscalculations; thereby ensuring that the advice is accurate, consistent and scalable.
Need 3: Innovative retirement products
Retirees have different needs and so the most suitable annuity varies from person to person. Many retirees want a guaranteed income for life but also wanted to leave an inheritance and have flexibility. A life annuity provides the former and a living annuity the later. Most retirees choose only one of these annuities, which is not a great outcome for their needs.
The MyRetirement portal recommends a life annuity, living annuity or the Nedgroup Investments new innovative solution called the Living Annuity Plus. The type of annuity recommended depends on the retirees needs. The Living Annuity Plus offers retirees the flexibility of a living annuity (i.e. to choose their income and investments) but with an increased probability that their income will last for life. Nedgroup Investments pays extra money (called top-ups) into the retiree’s investment account over and above their investment returns to make their income last longer. The top-up paid depends on the percentage that the retiree elects to leave to their partner and/or dependants on their death. The lower this percentage, the greater the top-ups are.
Nedgroup Investments is really excited to have launched the MyRetirement Solution in May 2020; a solution co-created with retirees, empowering them to solve their own retirement dilemma.
To learn more about the MyRetirement Solution, please visit: https://nww.nedgroupinvestments.co.za/content/NGISingleSiteContent/Local/Institutional/post-retirement---myretirement-solution.html.