“It’s a combination of what 10X Investments is saying, and also what the National Treasury has picked up very heavily in their retirement reform, where they’ve been very critical of the industry practices and they’ve highlighted almost verbatim exactly the same issues that we at 10X Investments have highlighted,” Steven Nathan, CEO of financial services provider 10X Investments, told CNBC Africa.
“The bottom line here is that the retirement saver is getting a poor deal in most instances, and that poor deal means that they fail to retire with enough money. There are simple ways for them to improve their outcomes, and that’s the message we’re trying to get across.”
(WATCH VIDEO: The importance of retirement savings)
Nathan added that part of the problem lies in the fact that current retirement savings services are not always in the interest of the individual, resulting in the inefficient allocation of capital, and a poor means of minimising fees. The retirement saver’s saving habits are ultimately the core of the entire system.
“You have to do simple things well, and we break it down into two main components: the first is you have to be a diligent saver. We’re entering Savings Month and we know that South Africans aren’t great savers, so we need to stress to people [that] for retirement, you should be saving 15 per cent from your first pay check to your last pay check, for 40 years,” Nathan explained.
The second component is earning an optimal return on the savings, which, according to Nathan, is the responsibility of the industry, which should provide a low risk path that is likely to deliver high returns.
The appropriate path depends on where one invests their money for the long-term period and what fees will be paid.
(READ MORE: S.Africa’s retirement fund system in need of saving)
“You have to get the right portfolio, and you’ve got to get that at the right fee. If you do those things correctly – save sensibly, invest sensibly, minimise fees – your chance of success is dramatically higher. You should actually almost guarantee that you’re going to have enough money,” said Nathan.
“We know that in South Africa, nine out of 10 people fail and they’re doing one or two things wrong: either not saving appropriately or they’re not earning the optimal return.”