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Q4 | 2023
The word balance has taken on a new dimension in recent years. With every corner of our social circle – real life or media – screaming at us to seek this nirvana state of no tension. The phrase work life balance remains in the spotlight long after the pandemic, encouraging people with flexible work arrangements and flexible life goals to try to live these out in a way that suits their unique selves.
Whilst editing this quarter’s issue, it struck me that our industry is also seeking balance. Balance between seemingly conflicting goals and objectives.
I would wager that every person reading this is affected by the two-pot retirement system in some way. Moreover, whilst we all feel anxious about what the final system will look like and whether our tech and people will be able to operate this new framework by 1 March next year, we cannot deny that at its heart the two-pot system is a step forward for the industry and our members. It’s really about balancing today’s financial needs with tomorrow’s financial goals. In this issue, you will see that South Africa is not the only country having to deal with these conflicting needs.
Another topical debate right now is the Regulation 28 offshore limits. Whilst the increased allowance to take portfolios up to 45% offshore has been around for over 18 months now, there remains much debate on whether to invest the maximum overseas or to seek inflation beating returns and opportunities in our local market. This requires deft balance.
While we’re on the subject of investments, net zero and ESG are both important imperatives on the world agenda, with transformation specifically on the South African table. These require asset owners to deliberate diverse perspectives and seemingly conflicting objectives. A delicate balancing act is needed to achieve meaningful returns today, whilst investing in the world of the future.
Even our healthcare system is not exempt from disruption and change. There remains the ongoing topic of the National Health Insurance (NHI) working in tandem with private medical care. And, as we go into the new year, medical aid providers are seeking the sweet spot between medical aid increases to pass on to their members versus the cost increases their suppliers are passing on to the schemes.
Finally, when all is said and done, households are simply trying to balance their budgets. To say that consumers are experiencing constrained finances is probably the biggest understatement of 2023. Increased interest rates, petrol prices, political conflict and, in South Africa, load shedding all put pressure on the consumer’s pocket.
Whilst all these topics seem to be distinct and separate, they do all intersect in financial wellness for all in our industry. The trick as we go into 2024 is to have the agility to balance these in a way that works.
As always, I trust the articles in this issue of Pensions World SA challenge your thinking, and we wish all our readers a happy and healthy new year.
Q3 | 2023
Growth happens outside of your comfort zone is a phrase often quoted as evidence of the upside to challenges that one faces. No one can argue that we are facing an inordinately challenging time in our country. The question is: do these challenges present opportunity for growth in our industry?
Close to home, the average South African household budget remains tight given, amongst other things, the increases in interest rates over the last 18 or so months. This leaves less money for discretionary spending generally, and savings and investments specifically. In fact, many households are accessing their savings to make ends meet at the end of every month.
The two-pot system, arguably one of the biggest industry changes of our time, is specifically intended to alleviate some of this financial stress, whilst at the same time forcing preservation to build retirement savings. As I write this, we are waiting for some of the details to be ironed out, but I think it would be naïve to expect that this change is simply going to “go away”.
What the two-pot system does, I believe, is bring the realms of retirement funds and personal financial planning closer to each other. Historically, these have been two very separate fields – the retirement fund being a forced saving by virtue of an individual’s employment and any other savings and investments done voluntarily “in a separate place”. Now, the worlds collide where an individual will have access to a portion of their retirement fund every year. What they do with this option needs to be considered in the context of their unique, and possibly immediate, financial needs and overall longer term financial plan.
And so with the two-pot system we find individual financial planners and employee benefit consultants getting a glimpse into each other’s worlds. And some might say it’s about time.
Whilst we hold our collective breath in anticipation of how many retirement fund members will be accessing their retirement funds, it does present an opportunity to communicate better with our customers. Uplifting general financial literacy on the long term implications of spending this money on the “wrong” things has to be one of our key objectives.
I trust the articles in this issue of Pensions World SA challenge you to explore the end of you comfort zones and provoke your thinking.
Q2 | 2023
To think about where the world is right now is possibly an exercise in hope at best and hopelessness at worst. This will not be the first time you have read the sentence: The Covid-19 global pandemic changed our world irrevocably. And for me, as I reflect on these changes, the one thing that sticks with me about the pandemic is that everyone had an opinion, and everyone was convinced that their opinion was truth.
But who or what formed these opinions?
The news. Family members. Your mentors. Social media. Work colleagues. Experts.
We live in a time when messages of “truth” come at us relentlessly. Some messages are credible, coming from informed experts and some are quite simply fake news. But to discern between the two is becoming increasingly difficult. And both influence the world around us, so you need to pay attention. You just need to ask your teenager about how a thumb up or thumb down can decide the truth of last weekend’s party.
So how do we, as an industry, and as individuals, make sure that we remain informed, that we know the facts, to make sure that we make sound decisions to ensure sustainability of the financial and social systems within which we work?
To me the answer lies in something that is deeply ingrained in us as South Africans. Diversity and inclusion is the foundation of the solution. By really listening to and respecting another’s views, experiences and opinions, we enrich our own perspective and broadens everyone’s horizons. The brutal reality is we’re not going to fix this world’s current problems with last decade’s or last century’s thinking. Outdated, stubborn, inflexible mindsets are simply not going to cut it.
So when next you find yourself despairing in a sense of hopelessness or you’re unable to shake a negative thought pattern, have a cup of coffee with someone who has a different perspective to you, who has followed a different path to yours. Read an article on a topic that you typically in the past would have not considered. Try something new. Talk to the world around you.
No one person is the custodian of ultimate truth. But perhaps, as a collective, the sum of our thinking is greater than each of us individually.
I hope you find this issue as thought provoking as always.
Q1 | 2023
A throwback to high school physics and Newton’s third law where for every action there is an equal and opposite reaction. Whilst this is undeniably true in the science lab, it strikes me as equally relevant to one’s mindset, views and thoughts about the world right now.
If I were to ask you to write a list of words to describe our current world reality, I am sure your list would include words like volatoile, uncertain, unprecedented, war, instability, unsustainable, insecurity. Permacrisis was the Collins Dictionary word of the year for 2022. A series of catastrophic events, feeling like one crisis, is followed by another, and then another, in unrelenting waves of upheaval. You just about catch your breath and steady yourself, and there is another issue to deal with. And you put your head down and take care of the issues you face, both personally and professionally.
But what if there’s a different perspective? What about the equal and opposite reaction?
As our worlds change so unrelentingly, is there not the commensurate opportunity brought about by the unknown, the never been experienced before? Could a change of mindset bring about a powerful new narrative for us each individually, and for the industry collectively as a whole?
We all know that normal simply isn’t any more. Now more than ever the world needs open minds, positive creative thinkers who colour outside the lines of normal to reimagine a different future. We can’t simply keep doing more of the same and expecting a different result.
Our role as an industry is critical to the financial wellbeing of many in this country. People who save and invest consistently deserve inspired problem solvers, who link these savings to sustainable, society building initiatives for a betier country.
How do we do that? Perhaps the answer to that question lies in the equal and opposite reaction. Where others see problems, perhaps open your mind to see an opportunity or a solution. Where there is much negativity, what about looking for the prospects for positivity?
Back to the science lab. It is a proven fact that the mind is a powerful influencer of our realities. If we are able to reshape or reframe our realities to look for the positive, we may be taking a very real step in the right direction. And perhaps your word list for 2023 will include words like abundance, meaning, joy and growth.
I hope you find this issue as thought provoking as always.
David Weil, CEO ICTS Group of Companies
David is Chairman and CEO of the ICTS Group of Companies. A stalwart of the retirement funds industry, having started his own business in 1995 called Investment Consulting and Training which he sold to the Alexander Forbes Group in 1999 where he occupied a Senior Director position for just over 3 years, before restarting ICTS in 2002. ICTS has the mission statement “to support retirement funds and their members, in collaboration with the fund’s mainstream service providers, by specializing in niche services that complement and enhance the overall retirement funding experience.” David and his team have achieved this in the fields of tracing, death benefit services, training, legal services, EBnet, Pensions World SA, and Motswedi Economic Transformation Specialists. David holds a BA in Economics and Law from Wits, and serves as an independent trustee on a number of retirement fund trustee boards.