By Hennie Pretorius, journalist, Justmoney
Old Mutual launched a 2-in-One Savings Plan, the first of its kind according to Old Mutual marketing actuary for the Mass Foundation Cluster Anele Mbuya: “No other company has done this and we are very proud of [being the first].”
The plan was spurred on after the latest Old Mutual Savings and Investment Monitor (OMSIM) found that South Africans want access to their savings if the need arises:
“We know that our customers want to plan for their future, but find it hard when their everyday needs become more urgent than their long term savings goals,” said Mbuya.
The new savings plans offers two ‘pockets’. A long term pocket with a required minimum investment term of ten years, and a short term pocket with a required one year investment term offering immediate access to funds, with a maximum of two free withdrawals per year.
A minimum of R150 is needed to invest. The invested amount is split into two, 65% for long term savings and 35% for short term savings. According to Mbuya, this savings plan is suited for those earning between R5 000 and R20 000 per month, although it is not limited to the aforementioned salary bracket.
The long term pocket money is invested in the Old Mutual Smoothed Bonus Fund. It earns annual bonuses that get paid into the pocket. The fund consists of local and international investments such as shares and bonds.
Meanwhile, the short term pocket earns interest on a monthly basis and invests in a money market unit trust.
The savings plan also offers investors access to several family support services including health support, trauma, assault and HIV Treatment, emergency medical response and legal support.
How are South African’s saving?
OMSIM was conducted among 1,000 working metropolitan households in the Johannesburg, Pretoria, Cape Town, Durban, Port Elizabeth, East London and Bloemfontein areas, with a household income of less than R3 000 per month to more than R40 000 per month.
The following was revealed:
• 65% of income is spent on consumables and living expenses.
• 38% are saving less than last year.
• 50% believe that death, funeral and disability cover are more important than retirement savings.
• 18% of households have unit trusts, mutual funds, or exchange-related funds (R40000 plus category).
• 31% of parents are saving for children’s education.
• 43% are saving for a rainy day, 37% for retirement, 37% for funeral expenses, 22% for children’s education, 18% to pay off debts, 16% towards home improvements and 13% towards a car/vehicle.
How are South African’s planning for retirement?
Old Mutual has a retirement plan on offer. Their newly launched savings plan is not part of their retirement plan. Mbuya pointed out that each person’s situation is unique and recommends consulting a financial advisor when planning for retirement.
OMSIM revealed the following regarding retirement:
• 63% believe they will need to support family members in the future.
• 39% believe their children should support them in old age.
• 46% of 50-70 year olds believe their children will support them in old age.
• 32% believe the government should support them in old age.
• One in three still do not have any form of retirement savings.
• 23% support their parents as well as their children.
• One in four property owners expect to rely on their home to help fund their retirement.
• 72% are choosing funeral policies, 57% pension/provident funds, 37% life/disability cover, 24% retirement annuities, 19% education policies and 11% endowment policies.
Celebrity partners with Old Mutual
With more than 80% of South Africans admitting they need help when it comes to saving, SA Idols judge Unathi Msengana partnered with Old Mutual in their campaign, for which she will be the ambassador, they hope will encourage and inform South Africans how to improve their savings:
“We were prompted to partner with Unathi on this campaign because we believe she clearly understands the need to get the basics right with her money and set realistic goals,” said John Manyike, head of Financial Education at Old Mutual.
Msengana admits her weakness is not having any self-control when it comes to her credit card. The temptation to spend on credit is too great for her and as a result she has closed her credit card account. Instead she sets goals and budgets accordingly.
“I also work hard in winter to enjoy the summer, which is something my husband and I agree on and we plan our trips and holidays and save to ensure we can enjoy our time off. I have figured out some ‘rules’ that work well for me and my family that enable us to be more thrifty and conscious about our spending and saving habits,” said Msengana.