NJMPF: financial literacy key to developing robust savings culture

Pension funds often form the basis of an individual’s savings plan. This is especially true in South Africa, where a robust savings culture has yet to fully develop

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Durban, KwaZulu-Natal. The NJMPF provides retirement benefits to 30,000 municipal employees spread across 10 districts of KwaZulu-Natal, South Africa

While South Africa is home to the second-largest economy in Africa, the country has continually failed to build a comprehensive savings base. With higher savings allowing capital to be employed more productively – fostering economic growth and job creation in the process – the development of a savings culture is vital to improving individual fortunes and boosting a country’s growth prospects. If South African citizens are to be encouraged to put more money aside in the future, though, they will need to have access to the right savings plans and develop a greater understanding of the products on offer.

Comprising two defined benefit funds with guaranteed predictable benefits and a defined contribution provident fund that has provided excellent investment performance for the past decade, the KwaZulu-Natal Joint Municipal Pension/Provident Funds (NJMPF) has been striving to foster this type of culture in South Africa for more than 76 years.

During this time, the NJMPF has kept pace with the latest technological developments in the financial services arena, providing retirement benefits to 30,000 municipal employees spread across 10 districts of KwaZulu-Natal, South Africa. Pensioners, including dependants and beneficiaries, currently account for 33 percent of the funds’ total membership.

If South African citizens are to be encouraged to put more money aside in the future, they will need to have access to the right savings plans

As a result of its work, the NJMPF has been honoured 26 times by the Institute of Retirement Funds Africa across a number of categories, including financial reporting, investment practice, governance, trustee development, transformation and communication. While we are extremely grateful to have received such recognition, we will not allow complacency to creep into our operations – our vision, mission and values continue to push us towards higher standards.

Educating a nation
At the NJMPF, we are aware of the social issues that continue to affect our local communities, such as low financial literacy, dependence on credit, a lack of savings culture and growing unemployment. As one of the leading retirement funds in South Africa, we want to transform the fortunes of all the country’s citizens. After all, the government cannot work in isolation, and a successful South Africa will depend on an improved quality of life for everyone.

Stakeholder engagement and member education are essential responsibilities of the NJMPF. As such, we focus on projects that are relevant to the funds’ members, pensioners and beneficiaries, as well as society at large. Boosting financial literacy is of particular concern, as it presents an opportunity to improve retirement outcomes and empower individuals.

As part of the NJMPF’s latest financial literacy project, we produced a pack of informative playing cards with a different educational message on the back of each. The cards, which are available in both English and Zulu, challenge members to ask the right questions when it comes to financial fitness, giving them an opportunity to educate family and friends about savings and retirement.

What’s more, by using playing cards, holding colouring-in competitions and creating word search quizzes, we have helped members introduce their children and grandchildren to real-world economics. This echoes the sentiment of former South African President Nelson Mandela, who said: “Education is the most powerful weapon which you can use to change the world.” The NJMPF has long adopted this mentality.

Rethinking retirement
The Fourth Industrial Revolution (Industry 4.0) is set to disrupt business processes across all sectors, distorting the boundaries between the physical and digital spheres through the modernisation of technology. The retirement industry will not be exempt from such disruption, nor from the macro and micro trends set to follow it. Financial crises are already reshaping the retirement investment ecosystem – in order to survive the demands of Industry 4.0, companies will need to adapt to new technologies.

The NJMPF has and will continue to keep up with the latest developments, especially when it comes to internet communication networks and the methods used to link members, pensioners and stakeholders. The NJMPF’s interactive website (presented in both English and Zulu) and the NJMPF mobile app are prime examples of this. When you also consider our presence on social media and barcoded ballot system, which allows for electronic voting and video/audio sharing, it’s clear to see how the NJMPF has secured its status as a leader in global retirement funding.

Newer systems and methods of communication allow us to get our message across in a faster, more cost-efficient and effective manner. The NJMPF has adopted these systems to help promote seamless communication solutions and enhance retirement engagement, while also increasing outputs and decreasing communication and administration costs.

A penny saved
In recent years, analyses of fund data have allowed us to better understand which of our members possess lower-than-acceptable net replacement ratios (NRRs). This in turn has permitted us to build direct and pinpointed solutions that help members improve their retirement outcomes. It is widely accepted that an NRR of at least 70 percent is required to maintain your lifestyle following retirement.

The majority of NJMPF members are currently sitting above this figure, but more needs to be done to help those who have not yet reached this level. The NJMPF benefit statement – the primary information document for each member – has a built-in NRR barometer that helps NJMPF members understand their future savings prospects.

Of course, an appropriate NRR ultimately depends on what sort of lifestyle the individual intends to lead once retired, but there are a number of ways to ensure members have enough money put aside for the future. Most importantly, members need to start saving early in order to achieve a positive NRR. They should also ensure their investment portfolio is appropriate and that they analyse their projected pension at regular intervals to keep track of their progress.

At the NJMPF, our mission is to provide the best possible retirement service to our members so that they can enjoy financial security in their post-work life. As well as offering a great deal of information through our website, we allow members to take control of their own funds via our online pensioner portal. We are trying to lead the way in an era of digitalisation by giving members the opportunity to receive communications electronically and view their funds’ performance 24/7.

Through our website, mobile app and other technological developments, we hope to keep our members abreast of important financial developments and products, no matter their age.