In this section we look at a new take on retirement financial advice in a world where retirement is as long as pre-retirement. We try to provide a more realistic picture of what an individual is looking at when they hit a date the employer has defined as ‘retirement’. In planning for a better ending, we reflect on how little we know about what that period holds, why certain trajectories may be likely, and how one could go about preparing for them. We look at the reality of post-retirement careers, options for continued income generation, and how we need to start thinking about our inevitable winding down.
The issue of increasing longevity – or, more correctly, an increase in our health-related quality of life before death – is a ‘disruptor’ of signifi cant proportions that is quietly stealing its way into our lives in South Africa.
The issue of increasing longevity and whether retirement ages have been set too low would seem like a low priority issue for South African employers and policymakers. Surely addressing the crisis of youth unemployment warrants greater attention? The problem here comes when we see these two concerns as mutually exclusive. By promoting the needs of youth at the expense of the aged, we ignore the interconnectedness of intergenerational dynamics.
This is important because in a world where a rigid regulatory framework often dominates product design thinking, there is a serious risk of losing sight of the most critical issue: How to create solutions that address the critical pain points for clients? By turning the lens of analysis around to the perspective of clients, we have quickly appreciated how easily the retirement industry could be missing the mark.
This is probably not going to change overnight. But it will happen at some point in the future. The question is, how could employers help their employees to better navigate this transitional phase?
The problem is, old conventions are hard to change. Most pension funds provide exiting employees with financial advisers who tend to guide the discussion to which annuity product you wish to purchase as you exit the fund. This is expected to address all your funding requirements during retirement. The exercise makes sense – after all, the money needs to go somewhere. But making this decision correctly means we need to carefully consider what it is that’s being funded.
The problem with this current model is that it doesn’t thoroughly allow for the true economics of what you might need to address during this second long phase of your adult life. Nor does the advice framework begin to address the extraordinarily complex set of decisions that lie ahead for those wading into waters of uncertainty. There is so much more that we now understand about this transitional period of one’s life that there is no question we need to reconsider both the savings model that funds this period as well as the advice framework that accompanies it.
Time for a serious revamp.