Our ability to see the bigger picture fully supports your entrepreneurial thinking, because the more meaningful a business becomes to its employees, the more effort employees make to bring about success.

We therefore present you with the first edition of the Old Mutual SME Employee Benefits Monitor for 2015 – insightful and supportive information regarding employee benefits and retirement solutions to guide you towards future success.

Research was conducted by Livingfacts and produced for Old Mutual

01 | INTRODUCTION

02 | RESEARCH OBJECTIVE AND SURVEY SAMPLE

03 | SUMMARY OF FINDINGS

04 | DETAILED FINDINGS

SME OVERVIEWSME confidence in SA economyKey SME challenges

EMPLOYEE BENEFITS OVERVIEWPerceived value of employee benefitsPerceived responsibility for employee benefits provisionProvision of employee benefits by SMEs

RETIREMENT FUNDINGRetirement fund preferences Perceived responsibility for retirement fundingEmployees’ preparedness for retirementUnique SME retirement funding requirements The ideal retirement fund for SMEs Member Level (ML) investment choicePreservation

EMPLOYEE BENEFIT SERVICE PROVIDERSReasons for choosing service providersConfidence in solutions and solution providers

02

04

10

17

20

27

39

CONTENT

Over the past decade, the Old Mutual Retirement Monitor and the Savings Monitor have become trusted indicators of the savings and investment trends of South Africans from all walks of life. This first edition of the Old Mutual SME Employee Benefits Monitor for 2015 expands this trusted suite of annual research documents by including valuable insights into the key trends, issues and challenges of South Africa’s small and medium businesses. Given the unanimous agreement across both public and private sectors that Small and Medium Enterprises (SMEs) hold the key to South Africa’s continued socio-economic development – most notably through the creation of employment opportunities – we believe the findings of this, and future SME Monitors will be invaluable to all stakeholders in our country’s future.

Our intention going forward is to conduct this SME Monitor research at least every two years, alternating it with the research into the other Monitors produced by Old Mutual. As the content and findings of all these studies clearly dovetail with each other, we recommend that all three are read in conjunction to ensure a full view of the savings, retirement and employee benefits situation in all areas of South African business and society. I trust you will find the content of this SME Monitor informative and valuable, particularly if you are involved in business as an owner, manager, investor or employee. If there’s anything further you need to know, visit www.oldmutual.co.za/SMEMonitor DOUG CLOTHIERGENERAL MANAGER: OLD MUTUAL SME SEGMENT

INTRODUCTION

Importantly, while the research that informed the content of this Old Mutual SME Monitor 2015 was conducted with small and medium enterprises and their staff, we firmly believe that the findings are relevant to all businesses that embrace and promote an entrepreneurial spirit and culture within their organisations.

02

RESEARCH OBJECTIVE AND SURVEY SAMPLE02

ABOUT THE RESEARCH

While it is widely accepted that SMEs are a vital component in the development of the South African economy and the empowerment of all its people, little recent research exists into if, and how, SMEs are financially empowering their staff through the provision of employee benefits offerings.

This Old Mutual SME Employee Benefits Monitor 2015 is the first of what is intended to become a biennial publication providing detailed research insights into employee benefits within South African SMEs.

The independent research for this SME Monitor took place, with SME decision makers, employees and brokers, over three months with interviews taking place between July and September 2014. The survey questions were designed to deliver insights into various aspects of SME employee benefits including:

• Attitudes towards employee benefits in SMEs;• Perceptions of the need for, and provision of, employee benefits by SMEs; • Levels of preparedness of retirement amongst SME employees and their staff;• General knowledge and understanding of employee benefits;• Driving factors behind the prevalence (or lack thereof) of employee benefits in SMEs;• Decision drivers regarding the selection of employee benefits and employee benefit

providers

While this SME Monitor is focused on providing the above insights, it forms part of Old Mutual’s series of research monitors, including the Old Mutual Retirement Monitor and the Old Mutual Savings and Investments Monitor.

To derive maximum benefit from the content of these documents, it is recommended that they are read and analysed together. Electronic versions of all the Old Mutual Monitors can be downloaded at www.oldmutual.co.za/corporate

04

SURVEY SAMPLE

The survey comprised two components, namely:

• an investigative, or qualitative, phase, that involved face-to-face interviews with 30 decision makers and 30 brokers; and

• a quantitative phase involving telephonic interviews conducted with 503 employees and 514 decision makers (owners, managers) from SMEs across South Africa.

To qualify for inclusion in the survey, SMEs were required to have an annual turnover of between R2 million and R200 million and employ more than 10 staff members.

The SME sample was controlled by industry sector, using the dti’s Annual Review of Small Businesses (2004-2007) and the Absa SME Index 2012 as a guide.

SME decision makers and staff believe that most people will need between 70% and 89% of their current salary in order to maintain their quality of life once they retire.

05

SAMPLES

DECISION MAKERS IN SMEs

16% Wholesale & Retail Trade

12% Finance, Brokers & Insurance14% Business & Professional Service

15% Construction

17% Manufacturing0,5% Electricity, Gas & Water

0,5% Entertainment

5% Motor Trade & Repair Services

5% Agriculture

1% Mining & Quarrying

1% Catering, Accommodation & other Tourism

1% Communication

7% Transport & Storage

6% Community, Social & Personal Services

Percentage of sample by industry/sector

(as indicated by SME decision makers)

62% Small Businesses (R2m – R31m)

Undisclosed27% Medium Businesses (R31m – R200m)

Percentage of sample by annual business

turnover (as indicated by decision makers)

06

38% are 10 to 20 Employees36% are 21 to 50 Employees17% are 51 to 100 Employees10% are 101 to 200 Employees

63% of the SMEs included in the sample have been in business for more than 15 years. None of the SMEs are younger than 5 years old.

Percentage of sample by number of

employees (as indicated by decision makers)

88% of SME decision makers and staff surveyed agree that the preservation of retirement savings is important. However perceptions by SMEs of likely or actual preservation activity shows a clear gap between this understanding and the incidence of preservation.

07

SAMPLES cont.

STAFF MEMBERS OF SMEs

Percentage of sample by region/sector

Percentage of sample by position/level

in company

55% Gauteng

3% North West3% Mpumalanga

15% KwaZulu-Natal17% Western Cape4% Eastern Cape2% Free State/Central1% Limpompo

2% Executive13% Senior Management22% Middle Management6% Supervisor59% Other Staff in Administration and Sales/Production, Stores and Factories

This SME Monitor outlines the findings of the survey according to the responses by SME decision makers and staff, as well as comments by brokers.

08

SUMMARY OF FINDINGS03

SME CONFIDENCE

• SME decision makers largely feel that their own businesses are sustainable in the long-term.

• Most SMEs have not felt sufficient government support yet.• Legislation does not make it easy for SMEs to do business.• 35% of decision makers feel that SMEs have a higher staff turnover than

larger business.

SME EMPLOYEE CONFIDENCE

Respondents generally believe that most people will need between 70% and 89% of their current salary as income when they retire.

Those who have to rely on others typically say they will need to rely on the government, their children or other family to survive post-retirement – or continue working.

Only 54% of SME staff believe they will be in a position to self-fund retirement.

10

IMPORTANCE OF EMPLOYEE BENEFITS TO SMEs AND THEIR STAFF

The majority of SME decision makers and staff believe that the employee benefits offered by a business play an important part in attracting employees.

DO POTENTIAL STAFF CONSIDER EMPLOYEE BENEFITS?

SHOULD RETIREMENT FUNDING BE A PRIORITY FOR SMEs?

79% 90%DECISION MAKERS BROKERS

64%DECISION MAKERS

69%STAFF

90%STAFF

11

IMPORTANCE OF EMPLOYEE BENEFITS TO SMEs AND THEIR STAFF cont.

IS RETIREMENT FUNDING ON THE AGENDA OF AN SME?

HOW MANY OFFER ANY EMPLOYEE BENEFIT?

HOW MANY OFFER RETIREMENT FUNDING?

72%

60%

DECISION MAKERS

DECISION MAKERS

MOST BROKERS

BELIEVE LESS THAN 50%

OF SMEs OFFER

MOST BROKERS

BELIEVE LESS THAN 50% OFFER ANY

BENEFIT

63%

51%

STAFF

STAFF

YES 53%

NO 47%Staff

YES 34%Decision makers

NO 66%

BrokersYES 48%

NO 52%

12

DRIVERS OF EMPLOYEE BENEFIT

ENGAGEMENT

RESPONSIBILITY FOR EMPLOYEE BENEFITS PROVISION

Most respondents feel that the responsibility for employee benefits should be shared by both the company and its employees:

KEY DRIVERS OF SMEs’ DECISION TO OFFER EMPLOYEE BENEFITS

DECISION MAKERS

EMPLOYEES

20% 50% 30%25% 40% 35%

Staff responsible for own well-being

Both parties responsible for staff well-being

Company responsible for staff well-being

1. Company Cash Flows

2. Mindset of Owners

Social responsibility or a view that

staff leave

3. Need to Attract & Retain

Skilled Staff

4. External Pressure

Legislation or Union

5. Stage of Business

13

SMEs’ KEY DRIVERS OF WHICH EMPLOYEE BENEFITS TO OFFER

DRIVERS OF CHOICE OF BENEFITS:

Typically, companies with 20 or more employees, consider offering a Group retirement Fund.

Who Drives The Decision: Employer vs. staff, Broker influence

Who Drives Appeal to Staff: Employer vs. staff, Broker influence

Knowledge & Education: Decision makers, Broker influence

Simplicity of Implementing and Managing

Legislation or Industry Requirements

Affordability: Lower contribution, Who pays

14

HOW SMEs TYPICALLY CHOOSE AN EMPLOYEE BENEFITS PROVIDER

PROVIDERTrack Record

Brand Reputation

Stable

PRODUCTPerformance

Options Total Solution/Product Range

Flexibility

SERVICEEasy to Deal With Skills/Expertise/Advice

COST

BROKER HAS INFLUENCEExpert Advises

Single Point of Contact Understands You and Products

WHY DON’T SOME SMEs OFFER EMPLOYEE BENEFITS?

The seven main reasons, cited by decision makers, why SMEs in South Africa may not be offering employee benefits are:

1. Affordability – willingness to offer employee benefits depends on turnover, as it is costly

2. The business is too small3. Perception that employees should make their own provision4. Prefer to provide higher salaries5. Perceived to be too administratively intensive6. High staff turnover makes it unviable7. Staff don’t want to contribute

SME CONFIDENCE IN THE SA ECONOMY

Despite economic challenges, decision makers largely feel that their own businesses are still sustainable in the long-term and they have the necessary skills and capacity to deliver on their business objectives and strategies.

However, most also feel that government does not sufficiently support SMEs in South Africa and that legislation in this country does little to make it easier to do business here.

There was strong agreement from respondents that the cost of business has increased significantly in the past year and that the business environment in South Africa is more competitive than before.

KEY SME CHALLENGES

According to the feedback from decision makers who participated in the survey, the following are the main issues and challenges facing SMEs in South Africa at present:

ECONOMIC CHALLENGES• The continued difficult economic situation in the country• Rising expenses versus lower income• Lengthy payment terms resulting in cash flow problems• Increasing competition – particularly from international players and cheap imports

LEGISLATIVE CHALLENGES• Onerous government policies and a lack of government support• Stringent requirements and regulations for SME sector

TALENT CHALLENGES• Lack of skilled labour• Difficulty retaining qualified staff after investing in their training• Increasingly legislated labour environment

17

DETAILED FINDINGS:

OVERVIEW OF SMES IN SOUTH AFRICA

Decision makers in SMEs largely (84%) believe that these businesses attract a different profile of staff member than large corporate organisations and 71% of staff say it is different working in an SME. 35% of decision makers also felt that SMEs have a higher staff turnover than larger business. The primary reasons given for this are:

• SMEs are unable to compete with corporate salary packages (79%)• SMEs are unable to offer large company benefits (73%)

From an SME employee perspective, most are confident that they will keep their jobs for the next year and there was a 77% agreement that it is unlikely that they will be retrenched. However, confidence in their retirement plan is average at 63% and most do not feel that they are in a better position financially than they were one year ago.

There is also not a significant amount of confidence shown by SME employees in the South African economy at present.

81

77

77

63

53

47

Think I will stay in my job for at least the next year

Think it is unlikely I will be retrenched

Confident I am able to make good financial decisions

Confident about my financial retirement plans

Compared to one year ago my personal financial situation is better

Feel confident about the South African economy

% Agreement

0 20 40 60 80 100

18

DETAILED FINDINGS:

SME EMPLOYEE BENEFITS OVERVIEW

PERCEIVED VALUE OF EMPLOYEE BENEFITS

The majority of decision makers (64%) and SME staff (69%) interviewed believe that the employee benefits offered by a business play an important part in attracting employees.

The reasons for this belief include:

• Recognition of the need for retirement saving (particularly among employees older than 35).

• An expectation by skilled staff that employee benefits will be provided by their employer.

• Cost saving – it’s cheaper than if you were to pay for these benefits as an individual• A widespread requirement for funeral benefits.

Respondents who said employee benefits were not important factors of which company to work for, gave the following as the primary reasons:

• Employees need cash more than benefits.• Employees are not educated enough about employee benefits.• Prospective employees are only interested in securing the job, not the extra benefits

it offers.• Most employees do not have a savings mindset.• Many employees believe that the government will take care of them.

Current economic and employment circumstances are having an influence on company selection, with many employees accepting jobs even if these don’t offer them the full benefits they desire.

20

PERCEIVED RESPONSIBILITY FOR EMPLOYEE BENEFITS PROVISION

When asked who has ultimate responsibility for the long-term well-being of SME employees, most respondents felt the responsibility should be shared by both the company and its employees. Responses by decision makers and employees showed relatively close alignment:

Typically, the results pointed to younger and less skilled employees leaning more towards a belief that the provision of employee benefits is primarily the responsibility of the company.

DECISION MAKERS

EMPLOYEES

20% 50% 30%25% 40% 35%

Staff responsible for own well-being

Both parties responsible for staff well-being

Company responsible for staff well-being

One reason why SMEs may not offer employee benefits is the perception that staff should make their own provision.

21

PROVISION OF EMPLOYEE BENEFITS BY SMEs

When asked whether SMEs are, in fact, providing sufficiently for the well-being of their employees, the variance between responses by decision makers and staff members increased:

The percentage of SMEs providing employee benefits increased as the turnover and staff complement of these businesses went up.

DECISION MAKERS

EMPLOYEES

19% 39% 42%29% 34% 37%

Company HAS NOT provided adequately for

employee well-being

Company has made some

provision, but NOT ENOUGH

Company HAS provided adequately for

employee well-being

57

65

76

83

85

87

7 – 13 Million

13 – 31 Million

31 – 51 Million

51 – 101 Million

101 – 200 Million

2 – 7 Million

% Responses

0 20 40 60 80 100

59

78

78

86

21 to 50

51 to 100

101 to 200

10 to 20

% Responses

0 20 40 60 80 100

22

WHY DON’T SOME SMEs OFFER EMPLOYEE BENEFITS?

The seven main reasons, cited by SME decision makers, why SMEs in South Africa may not be offering employee benefits are as follows:

1. Affordability – willingness to offer employee benefits depends on turnover, as it is costly

2. The business is too small3. Perception that employees should make their own provision4. Prefer to provide higher salaries5. Too administratively intensive6. High staff turnover makes it unviable7. Staff don’t want to contribute

SMEs believe themselves to be unable to compete with corporate salary packages and large company benefits.

23

EMPLOYEE BENEFIT PREFERENCES AMONGST STAFF

The employees interviewed showed a clear preference for retirement funding and some type of medical cover as the two most important employee benefits. Funeral cover was the third most sought-after employee benefit.

13

17

82

92

12

4

4

4

2

Disability Cover

Retirement Fund

Medical Aid

Funeral Cover

Life Assurance

Income Protection

Critical Illness

Education Benefit

Special Sick Benefits such as HIV, TB, Cancer

% Responses

0 20 40 60 80 100

Decision makers in SMEs largely believe that these businesses attract a different profile of staff members than large corporate organisations.

24

VALUE OF TOP THREE MOST SOUGHT-AFTER EMPLOYEE BENEFITS FOR STAFF AND COMPANIES

BENEFIT TO COMPANY

BENEFIT TO EMPLOYEE

RETIREMENT FUND MEDICAL AID FUNERAL COVER

• Makes the company more attractive

• Satisfies a moral obligation

• Rewards long service

• Provides security• Forced savings

• Improved healthcare

• Reduces financial burden of funerals

• Makes the company more attractive

• Limits sick leave /increases productivity

• Makes the company more attractive

• Fewer staff loans

• Satisfies a moral obligation

25

PERCEIVED BENEFIT TO SMEs OF OFFERING A RETIREMENT FUND

Forces staff to save

Rewards long service

Provides staff with security

Addresses low government pensions

Fulfil a long-term staff need

Is something all staff need

Fulfils a moral obligation to your staff/ provides you with peace of mind

Makes the company a more attractive option for potential staff

87

80

87

86

89

82

77

76

88

85

83

89

91

87

76

84

COMPANY STAFFRETIREMENT FUND

% Responses

27

DETAILED FINDINGS:

RETIREMENT FUNDING

RETIREMENT FUNDS AND SME SIZE

The research findings among SMEs indicate that access to employee benefits increases proportionately with company size:

• The percentage of SMEs offering some type of group retirement funding differs significantly by turnover. For companies with a turnover of less than R13 million less than 50% offer retirement funds. 70% of companies with a turnover of R50 million and more, offer such retirement funds to their employees.

• Typically, only companies with 20 or more employees consider offering a Group Retirement Fund.

• Group retirement funding also increases with the longevity of the SME. Once companies have been in business for 15 years or more, they appear more likely to offer retirement funds.

Many employee respondents say they will need to rely on the government, their children or other family to survive post-retirement or will have to continue working.

28

RETIREMENT FUNDING AS AN SME PRIORITY

Asked whether SMEs should be making the provision of retirement funding to staff a business priority, 79% of decision makers said that they should, while 90% of staff and 90% of brokers agreed.

The main reasons given by decision makers for saying that retirement funding should be a priority for SMEs were as follows:

SOCIAL CONSCIENCE

• Employees don’t save and so the company must force savings• The “right” thing to do• Protects the family• Staff not adequately educated/aware of retirement planning

BUSINESS DECISION

• Rewards long service/loyalty• Necessary to retain staff• Provides security which is important• Provides peace of mind• Perceived to be more cost effective than if done individually

INADEQUATE GOVERNMENT SUPPORT

• Necessary for retirement as the government pension is not enough• Relieves tax burden of having to support pensioners

29

66% of decision makers, 47% of staff and 52% of brokers believe that retirement funding provision is currently NOT on the business agenda for most SMEs in South Africa.

The reasons given by SME decision makers for this lack of focus by SMEs on retirement funding provision include:

1. Financial constraints in SME businesses

2. The cost is too high

3. SMEs are just trying to survive

4. It’s the individuals’ choice/must look after oneself

5. It’s much of an administrative burden

6. High staff turnover

7. Lack of knowledge of the options available

8. Staff don’t want to pay for it

9. Not incentivised to offer it

10. Too few employees to make it worth their while to do anything

DECISION MAKERS’ REASONS FOR NOT PROVIDING RETIREMENT FUNDING

Most SME decision makers feel that government does not sufficiently support SMEs in South Africa.

30

PERCEIVED RESPONSIBILITY FOR RETIREMENT FUNDING

When asked who has the main responsibility for ensuring that employees are saving towards their retirement, the responses were as follows:

EMPLOYEES’ PREPAREDNESS FOR RETIREMENT

There is generally a fairly good understanding of the typical retirement funding requirement for employees. SME decision makers and staff believe that most people will need between 70% and 89% of their current salary in order to maintain their quality of life once they retire.

Most respondents felt that in order to deliver this level of post-retirement income, employees need to be investing at least 20% of their current salary into a retirement fund of some sort. Despite this understanding, only 54% of SME staff surveyed believed that, based on their current retirement savings, they will eventually be in a position to self-fund their retirement. This perception or preparedness differed vastly according to race, age, gender and current employment position.

In terms of who has the responsibility to pay for such retirement funding, 88% of decision makers felt that this was also shared equally, with 61% of these saying that the payment should be split 50:50 between staff member and employer.

DECISION MAKERS

EMPLOYEES

59% 19% 9%68% 12% 3%

Shared equally between employer

and employeeStaff only Company only

31

PERCENTAGE % OF STAFF WHO BELIEVE THEY CAN SELF-FUND

55

46

62

52

White

Black

Coloured

Indian

% Responses

0 20 40 60 80 100

62

60

33

65

50

27

Middle Management

Senior Management

Executive

Supervisor

Other staff in administration & sales

Other staff in production, stores & factories

% Responses

0 20 40 60 80 100

52

49

57

58

47

25 to 34

18 to 24

35 to 44

45 to 54

55 to 64

% Responses

0 20 40 60 80 100

BY P

OPU

LATI

ON

GRO

UP

BY A

GE

BY L

EVEL

IN T

HE

CO

MPA

NY

32

Decision makers surveyed believe there is a clear trend in terms of certain employees being less prepared than others for retirement. According to them, the less prepared staff are typically:

• Those in lower income brackets – mainly as a result of affordability issues, lack of knowledge, belief that government will provide and low contributions.

• Young employees – who think they still have lots of time to prepare for retirement or have too many other priorities and expenses relative to their income.

• Staff members who change jobs and withdraw benefits. • Staff members who are in debt or living beyond their means.

SME staff who believe they are not adequately prepared for retirement, say they will rely financially on the following people or institutions to support them once retired:

CHILDREN

GOVERNMENT

FAMILY

COMBINATION OF CHILDREN AND GOVERNMENT

CONTINUE TO EARN INCOME

14%

4%

26%

16%

26%

Blue collar staff in the organisation have a stronger reliance on government.

33

PRESERVATION

88% of SME decision makers and staff surveyed agree that preservation of retirement savings is important. However, perceptions by SMEs of likely or actual preservation activity shows a clear gap between this understanding and the incidence of preservation.

• 52% of SMEs believe that less than 20% of staff preserve all their retirement monies when leaving or changing jobs.

• 60% of SMEs believe less than 20% of staff withdraw a small portion in cash and preserve the rest.

• 50% of SMEs believe 80% or more of staff take all or most of their benefit in cash.

The main factors that SMEs believe impact on members not preserving their retirement benefit are as follows:

% Responses Strong influencer not to preserve

Strong influencer to preserve

0 20 40 60 80 100

59

58

57

50

40

81

Withdrawal benefit is too small to preserve

Desire to access cash

A lack of awareness of preservation options

Lack of advice on how to preserve

Fear of making the wrong decision

Cost of transferring to another fund

34

USAGE OF MEMBER LEVEL INVESTMENT CHOICE

39% of SMEs offering retirement funds say these funds include member level investment choice. However, a third of the SMEs offering this choice say that more than 90% of their employees prefer to select the default investment option.

Respondents across staff and decision makers agreed that the main reasons for so many members opting for the default investment option are:

• They are not financially educated or astute to make investment decisions.• They want less risky investments.• They simply do not specify a different preferred investment option.

Based on these responses it becomes apparent that education of staff around the following issues is critical:

• Retirement benefit values and projections.• How investments work and the choices offered.• How to make changes as life circumstances change.

The cost of business has increased significantly in the past year and the business environment in South Africa is more competitive than before.

35

UNIQUE SME RETIREMENT FUNDING REQUIREMENTS

Most of the SME decision makers believe that their businesses have unique requirements in terms of their retirement fund solution.

Unique Requirements11% Don’t know53% Yes36% No

COST

• Lower costs /cheaper (53%)

PRODUCT

• Flexibility in the make-up of the prod-uct (30%)

• Simplicity/ease of un-derstanding the product (23%)

• Being able to add options on when needed/ or afforded (16%)

• Automated or very easy decision making with regard to investment choices (5%)

ADMIN

• Easy to implement (16%)

• Low admin-istration burden (14%)

• Excellent ad-ministration and claims process (11%)

RETURN

• Growth on retirement fund/good growth/ good returns /return on investment (9%)

• Secure/ safe/not too risky/ reliability (5%)

PRESERVATION

• A way to limit withdrawals /taking the cash (7%)

EDUCATION

• Education for staff (17%)

The primary requirements were listed as follows:

GOVERNMENT SUPPORT OF RETIREMENT FUNDING AMONGST SMEs

SME decision makers were asked how they felt the SA government could encourage uptake of retirement funding provision amongst SMEs in the country.

The five areas of government support/intervention receiving the most responses were:

NOTE: % RESPONSES

32%

9%

18%

8%

10%PROVIDE TAX

BENEFIT/ INCREASE TAX

BENEFIT

MAKE RETIREMENT

FUNDING MORE AFFORDABLE

CONTRIBUTE TO PREMIUMS

EDUCATION ON THE

IMPORTANCE OF RETIREMENT

FUNDING

MAKE RETIREMENT FUNDING

COMPULSORY

37

REASONS FOR CHOOSING RETIREMENT FUND PROVIDER

SME decision makers listed the following as their primary reasons for selecting a given retirement fund service provider:

Detailed breakdown of all decision drivers in SME retirement fund provider choice

% Responses

0 20 40 60 80 100

12245788101010

182020

2527

34

Asset classesManagement team

Size of companyEducation/Communication to staff

Investment philosophy

Service provided to companyFlexibility

PerformanceTrack record

ReputationFees charged

Financial stability/Stability

Service provided to staffRange of choice of investment

Skills & expertise

Advice/recommendation of consultants

Ability to provide a total packaged service

39

DETAILED FINDINGS:

EMPLOYEE BENEFIT SERVICE PROVIDERS

Trustworthiness, stability, reliability, good products, and meeting specific needs featured as constant decision drivers for all SMEs when choosing a retirement fund provider.

Broker vs. Direct

There is a fairly even split between SMEs choosing to deal directly with service providers (52%) for their employee benefits requirements and those who choose to work with brokers (48%). Responses reveal that the bigger the SME, the more likely there is to be a broker involved.

The main reasons given for either choice are as follows:

1. More knowledgeable

2. Single point of contact

3. More convenient

4. More likely in businesses with more than 50 employees

5. A bigger % of older businesses deal through brokers

1. Cheaper

2. Quicker problem resolution

3. More likely to be a newer business

4. Where more responsibility is placed on staff to look after themselves

REASONS FOR BROKER REASONS FOR DIRECT

40

CONFIDENCE IN RETIREMENT SOLUTIONS

Those SMEs that offer retirement funds demonstrated fair levels of confidence in those funds and their providers, but not all think they will be adequately provided for:

Staff of SMEs that offer retirement funds largely mirrored these confidence levels, however, there is room for improvement in terms of staff confidence in the ‘adequate provision’ and ‘claims process ease’ indicators.

COMPANY RETIREMENT FUND WILL PROVIDE ADEQUATELY

COMPANY RETIREMENT FUND WILL PROVIDE ADEQUATELY

ADMINISTRATION IS DONE PROPERLY

CLAIMS PROCESS IS EASY

INVESTMENT RETURNS ARE IN LINE WITH EXPECTATIONS

ADMINISTRATION IS DONE PROPERLY

COSTS ARE REASONABLE

FUND IS EASY TO UNDERSTAND

67

65

84

69

78

78

76

75

DECISION MAKERS CONFIDENCE INDICATOR

STAFF CONFIDENCE INDICATOR

PERCENTAGE RATING

PERCENTAGE RATING

41