Do employers have a moral obligation to help their employees save for retirement?

At present, it is not compulsory for an employee to be a member of a pension or provident fund, nor is it compulsory for an employer to contribute to a fund. As a result, the majority of South Africans do not have any formal savings for their retirements and will be reliant on the State Old Age Pension. Even for the few who do contribute to a pension or provident fund, their contributions are often insufficient to ensure that they are comfortable when they reach retirement.
 
Below are four easy ways to help them on their way.
 
1) Educate your employees on how to budget
 
Keeping a monthly budget does not need to be a complex exercise. Encourage your employees to write down all their fixed monthly expenses, such as transport, rent, debt repayments and school fees. Once they have identified their fixed monthly costs, it will be easier for them to see where they can cut back on spending and make space for saving.
 
2) Settle or consolidate outstanding debt
 
The best way to save is to avoid all short-term debt, but this is often easier said than done. If possible, speak to your employees about the costs associated with short-term debt and encourage them to settle these as part of their monthly budget. Debt consolidation may be helpful, but make sure that they know the full contract balance before signing.
 
3) Discuss a savings plan
 
It is not easy to put money away every month without a clear goal in mind. First discuss with your employees what their retirement expectations are and what they would like their monthly retirement income to be. Once you know this, you can roughly calculate the lump sum needed to generate that income. The amount that they will need to save will depend on two primary factors: how early they start saving and what they would like their (inflation-adjusted) retirement income to be. Depending on their circumstances, it may be necessary to take into account any other assets they may own, such as a house or piece of land.
 
4) Choose the correct investment option for your employees
 
If you do choose to contribute to a fund for your employees, try to negotiate the best fees with the fund administrator and ensure that your employees are fully aware of any fees or costs that may be associated with their investments. Finally, make sure that your financial advisor is registered with the FSCA and ask for references of past or existing clients.
 
Contact Candice on caw@jhb.moorestephens.co.za or a Moore Stephens expert in your area.