The ‘two-pot’ system

In our August 2022 issue, entitled The proposed ‘two-pot’ system’, we discussed the National Treasury’s proposal to allow members of retirement funds access to a portion of their retirement savings. The proposal essentially comprised ‘two pots’, a ‘savings pot’, to which members could have access with qualifying criteria, and a ‘retirement pot’, which could only be accessed at retirement. Note, there is a third pot, the vested amount (comprising the member’s accumulated amount as at 1 March 2023 plus investment returns) at implementation date. The intended implementation date was to be 1 March 2023; however, as expected, the date had to be moved, with the new date for implementation being 1 March 2024. Following comments from industry and the public, Joon Chong, partner and legal specialist, Webber Wentzel, lists the following amendments/clarifications to the initial proposal:

• The implementation date will be postponed from 1 March 2023 to 1 March 2024, (industry is of the opinion that this date, too, may still be optimistic).
• Members must contribute one-third to the savings pot and do not have the ability to contribute less.
• The 12-month period in which one withdrawal will be allowed will be a rolling 12 months.
• The minimum withdrawal amount of R2 000 per rolling 12-month period is gross, not net.
• Members exiting a fund with less than R2 000 in the savings pot will be allowed to withdraw that sum or ask for it to be transferred into their retirement pot.
• The R165 000 de minimis will apply on a cumulative basis to amounts that are subject to annuitisation, i.e., full withdrawal is possible if the total of (i) two-thirds of the vested pot value; and (ii) value in the retirement pot, is less than R165 000.
• Seed funding from the implementation date into the savings pot is possible, with further consultation required on the risks and benefits of this approach, methods to minimise the adverse impact on liquidity, and possible trade-offs on vested rights.
• There will be more consultation with the public sector defined benefit funds stakeholders to explore how the new regime will affect these funds and their members, given that members’ benefits are based on a defined formula without reference to contributions and investment performance.
• Section 37D of the Pension Funds Act (relating to deductions for pension-backed housing loans, divorce settlements, etc.) will have to be amended to cater for the two-pot system and to provide that such deductions must be made from the vested and retirement pots.
• The two-pot system will be mandatory for all retirement funds, although Treasury is still considering a request to exempt certain legacy retirement annuity fund products.
• The scope and nature of charges levied on transfers from another fund and fund values will be clarified, as the draft bill provided for costs to be deducted from contributions, and fund values arising from transfers from another fund have no contributions by members.
• In the event of a member’s retrenchment, the government will allow limited income-based withdrawals, subject to conditions, from the retirement pot.

Keystone Actuarial Solutions (Pty) Ltd made the following observation: The proposed changes have many hurdles to overcome, and it may be some time before retirement funds can make cash payments as:

• The implementation date of the Bill may be delayed.
• There are likely to be changes required to the Pension Funds Act, and these have not yet been drafted and circulated for comment.
• Retirement Funds will need to amend their rules appropriately.
• Members will need to accumulate sufficient assets in their savings pot after the implementation date before they can request a cash withdrawal.

Conduct Standard on “Requirements related to the payment of pension fund contributions”.

Previously section 13A and Regulation 33 of the PFA set out the requirements relating to the payment of contributions by employers to funds. Regulation 33 has now been repealed with effect from 27 January 2023 and replaced by the Conduct Standard (Alexander Forbes). The Financial Sector Conduct Authority (FSCA) identified several challenges with the current legislation, which resulted in the issuing of the Conduct Standard.

The Conduct Standard, which will become mandatory for all retirement funds from 20 February 2023, specifies the following:

• The minimum fund and member information that must be provided by the employer to the fund each month. The required information includes each member’s contact details and must highlight any changes in the member’s salary, contributions, and personal information from the previous month.
• Onerous reporting requirements to the Board, affected members and the FSCA if the contributions are not paid timeously or if the contributions do not reconcile to the contribution schedule.
• Material contraventions that persist for more than 90 days must be reported to the South African Police Service.
• Late payment interest must be charged on late contributions at a prescribed rate of the prime rate plus 2%.
• Various requirements where the trustee board outsources the recovery of arrear contributions to an attorney, for example, conflicts of interest.

Laws are important. But they can only be effective if the people know about the particular laws (Waris Dirie)

As the start of the new year rolls in, I find myself more contemplative than usual. Yes, we can make changes at any time of year, and I do, but there is something about the start of a new year that aligns with the sense of new beginnings. We often set resolutions, goals, and aspirations at this time of year.

One of the things with aspirations and goals is you need to measure them, which is a crucial part of tracking your progress. It is at this check-in point that I like to ask myself some simple yet introspective questions: What to change? What to keep the same? What to maintain? What to let go of?

All these questions are used as part of the journey to honour a standing aspiration of mine, ‘be a better version of yourself than you were last year’. I use this overarching theme as a kinder lens to view and gauge my progress through the different facets of life.

The underlying element that continues to intrigue me, is that resolution, goal, aspiration setting, and forming new habits all require change and often behavioural change.

I found some valuable resources on change which may be helpful as we embark on the new year.

TIP: Book read recommendation: James Clear- Atomic Habits – Click here to read my last year’s note on aspirations and goal setting

Change is the only constant in life

Heraclitus, a Greek philosopher, said, ‘Change is the only constant in life’. We and the things around us are constantly changing and adapting. Some changes occur naturally over a period of time, some changes are made by others, and sometimes we notice them when looking back at our experiences.

While looking into the behaviour of change, I came across The Transtheoretical Model, also referred to as the Stages of Change Model, developed by Prochaska and DiClemente in the late 1970s and further developed over the years.

The model posits that changes in behaviour occur through stages rather than instantly. According to the model, there are six stages of change. A publication by LaMorte WW, The transtheoretical model (Stages of Change), Boston University School of Public Health, explains the model; a summary of the six stages follows below:

Pre-contemplation – In this stage, one is not considering making a change. There is an unawareness that their current behaviour has negative consequences.

Contemplation – There is an intention to start a healthy behaviour, and they are assessing the pros and cons of changing the behaviour.

Preparation – In this stage, the person is ready to take action and begins taking small steps toward the behaviour change.

Action – At this stage, a person has changed their behaviour and intends to continue with this new behaviour going forward.

Maintenance – In the maintenance stage, a person would have maintained this new behaviour for a while and will avoid moving back to earlier stages/ prior behaviours.

Termination– There is no intention or desire to return to unhealthy behaviours, and they are sure they will not relapse.

TIP: Spend some time thinking about what stage of change you are at; it will help form your next steps.

How to change anyone’s mind? (Including your own)

I came across my current read, The Catalyst: How to Change Anyone’s Mind, when reading a Harvard Business Review article by author Jonah Berger a few years ago. I find the book’s contents can be applied to oneself and useful for anyone who wants to bring about change in corporate or other aspects of life. Jonah explores inciting change not by pushing harder or providing more reasons for the change, but rather by identifying the barriers to change and mitigating them.

Jonah shares his REDUCE framework on his website, which identifies five barriers to change. You can access his helpful resources by clicking here.

Fall seven times, stand up eight

As the year progresses and we move through our daily lives, change will happen all around us and likely within us. Remember to check in on your resolutions, goals, and aspirations. The Chinese proverb ‘fall seven times, stand up eight’ comes to mind as a reminder to keep at it!

What is the end goal?

The sad and non-improving statistic is that only 6% of South Africans can afford to retire comfortably with a pension income equal to or greater than their last salary.

The end goal is not only reaching retirement age and retiring but having enough money to provide an adequate income as a pensioner for the rest of your life.

The main reasons for not having adequate retirement provisions are:

1. Not starting retirement savings early enough from when you first start working.
2. Taking a taxed cash lump sum when you change jobs.
3. Not contributing enough.
4. Investing in a too-conservative investment portfolio.

Not starting retirement savings from when you first start working:

If you work for 40 years, you will enjoy 480 paydays during your working career. If you are on pension for 20 years thereafter, you will have 240 pension paydays.

So, if you start contributing to a company retirement fund or an individual retirement annuity when you start working, you will have 480 working paydays to fund 240 pensioner paydays.

If you only start contributing to a retirement fund or retirement annuity halfway through your working career, you will only have 240 working paydays to fund 240 pensioner paydays. Therefore, you would have to invest far more each month to achieve a meaningful retirement amount.

From this, you can see that the longer you delay providing for your retirement, the more difficult it gets. You have also lost out on the compounding effects of compound interest over time. Compound interest is often referred to as the eighth wonder of the world.

Taking a taxed cash lump sum when you change jobs:

Many people have been retrenched due to the adverse economic conditions, while others are resigning to take another job or are starting their own businesses.

The decision as to what to do with your retrenchment/resignation benefit is one of the most important decisions of your life, as it has far-reaching implications on your future financial security.

By taking a taxed cash lump sum before retirement and not preserving their benefit, a person could be destroying their retirement provision and future financial security, as this would have to be made up in the reduced time before retirement.

The National Treasury (NT) proposed a “two-pot system” legislation promoting the preservation of retirement funds, due to be introduced on 1 March 2024. This will potentially go a long way to improve retirement outcomes for many people over the long term.

But while fund members still have access to their vested benefits if they resign, this still allows leakage from the retirement fund system.

Not contributing enough:

Other factors affecting your retirement benefit are the amount you contribute each month and the net growth on investments after inflation. A 15% monthly contribution over your entire working career of 40 years, with your investments beating inflation by 5% – 6%, should provide a replacement ratio pension of 75% of your last salary.

There are some funds with low retirement fund contribution rates. This gives members a false sense of security that they have retirement provisions, but they don’t realise this could be inadequate. They don’t make additional contributions within the fund or in a separate policy.

Current legislation allows fund members to contribute up to 27.5% of their salary to a fund and get tax relief on this. This is a powerful and tax-efficient way to boost your retirement savings.

Longevity is also becoming a financial consideration as your pension will have to last longer. This means increasing your contribution to provide for this.

Investing in a too-conservative investment portfolio:

Most people are risk-averse, and where they have individual investment choices within a fund, they often choose a conservative investment portfolio, especially in adverse economic conditions and when markets fall. Your retirement fund investment horizon is long-term, and you need to be invested in investment portfolios that beat inflation over the long term.

Education and Preservation

Member education is becoming more critical so that well-informed decisions can be made during your working career and on exit from a fund. The funds are responsible for communicating directly with fund members, which is a positive development. Fund consultants are also very active in this regard.

It is encouraging to see that the number of people preserving their retirement benefit on exit is increasing as they start to understand the implications and advantages of doing this.

The end goal is simple: don’t run out of money before you run out of life.

Back in the day, our university lecturers used to warn us that the arrival of the purple-clad trees in the suburbs of Johannesburg should trigger some planning and effort to prepare for our final examinations in November. I am not sure if this arboreal analogy is still prevalent, but as we hurtle towards the end of the year, the jacarandas have arrived, and they prompted me to recall researching Reaganomics which is suddenly back in vogue.

Britain’s market-rocking tax cuts have been compared to Reaganomics, and the comparisons between the ideology of Liz Truss, who recently became UK prime minister, and Ronald Reagan have come thick and fast.

We will take a brief look at some of the similarities and key differences between Truss and the US president sworn in over 40 years before her.

Sweeping Tax Cuts

Truss made it clear on the campaign trail this English summer that her tax cuts would be the platform she ran on. She has, in the past, tweeted about the Laffer Curve- the 1974 bell-curve analysis that has been used to argue that cutting taxes can lead to greater tax revenues.

As Britain panicked over an upcoming massive rise in energy bills, Truss insisted that lowering taxes would be a key way to cushion households and businesses from the blow. She has also repeatedly stressed that her priority as a leader would be boosting UK economic growth, which has been sluggish for decades.

In hindsight, Reagan’s trickle-down effect by reducing taxes failed. The tax savings he offered to the rich did not lead to job creation. The savings were accumulated, and the rich became richer.

A Time of Interest Rate Hikes

There are certainly parallels between Reagan’s time and now. When the 40th president was sworn in on 20 January 1981, US year-on-year inflation was 11.83%. In the UK today, it is slightly lower but still an eye-watering 9.9%. An energy crisis was a key driver in both instances.

Rocketing inflation also meant the leaders entered office at a time when their countries’ central banks had begun raising interest rates, though on very different scales. At the time of writing, the Bank of England had so far pushed up its key rate from 0.1% to 2.25% over the course of seven meetings since December 2021, and it is expected to go higher.

The Federal Reserve’s Paul Volcker began a famous rate hike cycle in 1979 that, by Reagan’s first day, had taken the federal funds rate to a record high of 19-20%.

Speed

Both Truss and Reagan quickly moved to enact policies driven by their ideology. Reagan had passed the Economic Recovery Tax Act by August 1981, slashing taxes on federal income, taking the top rate from 70 to 50%, and cutting capital gains, inheritance, and corporation tax. Meanwhile, within a month of coming to power, Truss announced the biggest tax cuts programme – including for the UK’s earners- and the scrapping of a planned rise in corporation tax from 19p to 25p.

Market Reaction

The aftermath of Reagan’s tax bill saw a drop in stock and bond markets and concerns over government debt and inflation, but the reaction to the UK government’s economic plan has been extreme.

Truss and her Finance Minister Kwasi Kwarteng’s so-called mini-budget has been slammed by various think tanks, billionaire hedge fund managers, and politicians within their own Conservative Party. Polls show the opposition Labour Party rising to a level of popularity not seen since the 1990s. In a rare statement, even the International Monetary Fund said it was not the right time for such a fiscal pivot.

Truss has already U-turned on a key part of her plan, scrapping plans to reduce tax for the highest earners despite insisting that she was committed to the cut.

It begs the question, if by the time the jacarandas bloom next year, will Truss’ sweeping programme of tax cuts and investment incentives have benefitted the UK?

LCBO Framework Report and Risk Assessment Drafts

The past two months have been eventful in the private healthcare industry, with the Constantia Insurance Company Limited (CILC) being placed under provisional curatorship; Health Squared Medical Scheme’s liquidation debacle and the Board of Healthcare Funders (BHF) taking the Council for Medical Schemes (CMS) to court over delays in reviewing Low-Cost Benefit Options(LCBO) guidelines.

This seems to be the push CMS needed, because on 15 September 2022, they issued Circular 55 of 2022, inviting the public to comment on the LCBO Framework Report and Risk Assessment Drafts.

We finally got some insight into the potential solution of providing affordable access to private healthcare cover to the majority of households in South Africa who currently face financial constraints as an entry barrier to the private healthcare sector.

Understanding the Role of Low-Cost Benefit Options

By improving access to affordable healthcare, it is envisioned that progress in the implementation of NHI will be accelerated, as LCBOs will alleviate pressure in the public healthcare system.

The current drafts have been formulated through three work streams – Benefit and Pricing; Market and Affordability and Compliance and Legal governance. These work streams have been put together to form a proposed benefit package.

The shared data from the General Household Survey(GHS), and FinScope Survey indicates that the estimated target market is 2.5 – 4 million people. The recommended contribution range is between R150 – R300 per beneficiary per month; these figures fall below the current medical scheme tax credit applicable to members who earn above the tax threshold. The current proposed minimum product benefit design for LCBOs will focus on primary and preventative healthcare, to include the following benefits:

• Nurse referral system as a minimum requirement
• GP Network consultations
• Acute and chronic medication, subject to an Essential Medical List
• Basic blood tests and x-rays based on formulary
• Ambulatory services
• Chronic Disease Management at a primary care level

Based on the current draft, Private Hospital Cover, Prescribed Minimum Benefits, Accidental and Emergency cover, Dental and Optical Benefits will be excluded as they would render LCBO products unaffordable for the target market. However, in the future, these benefits may be included in more comprehensive LCBO products.

Regulatory and Legislative Consideration

There are three possible transitory arrangements in the implementation of the LCBO framework:

• Setting up LCBOs as separate medical schemes
• Establishing LCBOs under the short term insurance
• LCBOs are set up within medical schemes but using strict underwriting criteria to restrict selective movement from traditional options to LCBOs and vice versa

Each of the above arrangements will have regulatory implications, which may require amendments to the Medical Scheme Act, Financial Service Providers Regulations, Demarcation of Insurance Products (short-term and long-term), Governance Framework, etc.

Risk Assessment

Through the consultative process, industry stakeholders and the advisory committee have identified risks and mitigating measures associated with each of the above-mentioned transitionary arrangements. The risk factors associated with implementing LCBOs have been classified based on the level of impact they will have on the current South African Healthcare Insurance structure. Some of the high-impact risk factors identified were:

• Solvency – a proposal has been tabled for LCBOs solvency requirements to be lowered to 10% compared to 25% for medical schemes
• Reserves – to avoid insolvency or liquidation, medical schemes need to build reserves during the transitional period to guarantee a strong financial position against the inherent risk of potential claims following the additional lives covered
• Regulatory – transitioning from Insurance to Medial scheme will affect the governance framework, and administration will need to be implemented effectively
• Minimum Product Benefit – a baseline plan will need to be established to ensure that regulations related to customers are adhered to and maintained

LCBOs could be the pathway between public and private healthcare sectors

It is interesting to note that proposed timelines and implementation dates have been outlined in this report, one of them being the set date for Phase 1 of the implementation of LCBOs as January 2024.

It remains to be seen whether the LCBOs will be implemented and, if so, for how long, taking into consideration that the National Health Insurance(NHI) Bill mentions that once NHI has been fully implemented, medical schemes may only offer complementary cover to services not reimbursable by the Fund. Interestingly, the current LCBO proposed benefit structure is similar to the primary care services that will be included in the NHI offering.

Some may consider this a band-aid solution until NHI is implemented. However, considering that only 16.1% of South Africans are currently insured through medical schemes, and approximately 500 000 individuals are covered through primary health insurance policies, the introduction of LCBOs is a critical need for the rest of the country’s population. It could be a building block for NHI and a pathway between the public and private healthcare sectors.

On 29 July 2022, National Treasury (NT) issued draft amendments to the previously proposed “two-pot system” legislation promoting the preservation of retirement funds, with consideration for members to access a portion of their savings while still employed and before retirement. The previous draft was published in 2021, with the additional amendments hoping to provide greater clarity on the initial proposal.

The intended implementation date is 1 March 2023. However, NT agrees with the notion that this is somewhat optimistic, considering the immense preparation required for such an overhaul to the existing pension fund system. This includes consultations with industry stakeholders, from retirement funds, administrators, fund managers, SARS (to all align their systems) and of utmost importance – the actual members. This inclusive exercise, therefore, deems the implementation date rather unlikely.

The call to access retirement savings whilst employed is long existing amongst fund members, despite the current and immense pressure that the value of accumulated assets are under in order to meet the need of most retirees. Even with the proposed changes, members have voiced their need for immediate access to their existing savings, but this has not been allowed. This would place the members’ retirement outcomes and the stability of the retirement fund industry in jeopardy.

The proposed system composes of “two-pots”, namely a “savings pot” and a “retirement pot”, where contributions post-implementation date will be split into one-third and two-thirds, respectively. It is from the savings pot that members will be allowed to take part or whole withdrawals, limited to one per annum of at least R2000 (to encourage long-term savings), without having to terminate their employment, and at the approval of fund trustees. This newly granted right will be subject to the marginal tax rates applicable to that member’s income, resulting in favourable tax rates for low-income earners. The amount will be deemed as taxable income for that specific tax year. The proposed changes will not apply to existing savings before the implementation date of 1 March 2023. These savings will be ring-fenced for the sustenance or preservation of the current legislation that governs them. It will be known as the “vested pot.”

The second component, which is the retirement pot – where two-thirds of contributions will be allocated, will remain inaccessible. This pot will be preserved, allowing no withdrawals prior to retirement. Members will be able to transfer to another retirement fund upon resignation, which will have to be in conjunction with the savings pot – as these may not be transferred separately. Upon retirement, it will be compulsory for the total value of this pot to be used to purchase an annuity to provide post-retirement income. The savings pot may be utilised to top up this purchase. A minimum amount of R165 000 will be required to purchase an annuity; anything less may be withdrawn as a lump-sum subject to the retirement tax tables applicable at the time.

As an example, in an instance where a member resigns to take up alternative employment and has accumulated savings in the new pots (retirement and savings), they will have the following options:

• Transfer both pots to the new employer’s fund, maintaining the current split into the new fund, accessibility to the savings pot will not be forfeited in the process. These two pots remain separate when transferred into the new fund.
• Keep the separate pots in the current fund with the initial employer.
• Transfer to a retirement annuity (RA) in accordance with the current split, as is the case for institutional funds.

As for the vested pot concerning the same scenario, the member may:

• Withdraw this portion, subject to the applicable withdrawal tax tables at the time.
• Transfer to another vested pot within a preservation fund (pension or provident), with its vested rights carried along with it.
• Transfer this portion to a retirement pot for consolidation of retirement interests, foregoing the right for a once-off withdrawal (allowed with preservation funds), again, with no tax consequences.
• Transfer to a new employer’s fund, provided they have an existing vested pot.

In the case of retirement, a member:

• May commute all monies in the savings pot, or transfer into the retirement pot for the purpose of purchasing a compulsory annuity.
• May not commute monies in the retirement pot, as the entire content in the retirement pot will be obliged to purchase a compulsory annuity for post-retirement income.

As vested rights will be maintained, members will still be permitted to withdraw from this vested pot, subject to the retirement fund withdrawal tax tables – even post-implementation date, with the one-third, two-third rule applicable to pension funds at retirement, still applicable, as well as the de minimus rule that any capital below R247,500 can be withdrawn as a lump sum. With this proposed change in the industry, investment consultants will have to consider the most appropriate investment portfolios for each of these corresponding pots.

It is advisable that the concession to access these retirement savings should be a last resort to protect the financial well-being and maximise the savings of retirement fund capital to be utilised to purchase an annuity at retirement. All members are encouraged to consult a registered financial planner when considering whether to access funds from the “savings pot”.

As I sit at my desk, contemplating what to address in the latest edition of the Chartered Employee Benefits X-Press newsletter, it is hard to comprehend that we are already halfway through the year. What a six months it has been, with numerous market and economic records being broken, unfortunately not in a good way. In many ways it has felt as uncertain and volatile as the first half of 2020, albeit for slightly different reasons.

February saw the start of the war between Russia and Ukraine, resulting in increased geopolitical tensions. With the war still ongoing, many European countries are left to make alternative plans for the supply of wheat and oil. This year has also brought a rapid increase in the price of oil and energy, which has exacerbated the already increasing inflation.

In an attempt to curb inflation, central banks around the world have hiked interest rates, some of which have been by record increments. We have not been left unscathed in South Africa, having experienced major volatility in our local markets and the Rand. We have also seen loadshedding escalate to new levels, further straining the economy. Believe it or not, our South African market has been somewhat more stable than other global markets, and the Rand’s depreciation has helped cushion some of the blow for local investors.

The result of all of this is that the first half of the year has been recorded as the worst return for global equities in history. To add to this, bonds, which normally experience positive returns in an equity market downturn, have experienced equity-like drawdowns, leaving us with nowhere to hide. With benefit statements currently being distributed, in both the second and third quarter, to all our clients and members, it will become apparent, in most cases, that the investment values are lower than at the same time last year. This will undoubtedly result in members questioning the ability of the investment managers as well as their emotions encouraging them to move away from equity investments into more conservative interest-bearing investments. We are aware of the stress and anxiety that this may cause; however, we urge members not to make irrational short-term investment decisions, which will negatively impact on longer-term returns. May I remind you that in March 2020, when Covid announced its presence worldwide, the investment markets dropped by 30%. Many people made immediate emotional decisions and changed their investment strategies. Three months later, by the end of June, the market had recovered the full 30%, prejudicing many members who had reacted hastily in March.

The reality is that we have been here before and will be here again. At all member education sessions, we constantly remind our members that investing is a marathon and not a sprint. Retirement savings are long-term savings and focusing on short-term volatility distracts from the long-term objective. It is critical that members stick to the investment strategies and remain invested in the market.

It is often during these uncertain times that it feels like this environment could last a very long time, or we tell ourselves that “this time is different”. However, the reality is that every market crash in history has been different, with a different catalyst, length in time, magnitude, and recovery period. In a bear market (when equity prices are declining), it feels like a lifetime, but markets spend far more time in a state of positive momentum than they do in a negative. The chart below depicts this well. The blue shading represents the periods over which the S&P 500 was in a bull market (when equity prices are rising), and the red shows the times during which it was in a bear market since 1956. The shaded parts are the periods during which we experienced a recession. You can see that the red portions are far shorter than the blue.

In closing, I recently read a great saying that “you cannot eliminate risk; you can only manage it”. While extremely simple in its meaning, it hits the nail on the head. Please rest assured that the Fund Investment Consultants are all focused on the long-term investment objectives to ensure they do the best for all the members during these uncertain times.

If you have any questions, please feel welcome to contact your Fund Consultant.

Source: Reporting from the Helm – July 2022

What South Africans have to say

I have been reading two interesting reports on the state of mental health around the world. The first was published by the World Health Organisation (WHO), ‘World Mental Health Report’ and the second, ‘The Mental State of the World’ by Sapien Labs.

There certainly have been more conversations around the topic in my circles. More calls, coffees with friends and family, more drives, and more concrete discussions with clients. I hope that you will agree with me; that mental health is so much more than a classified mental health diagnosis.

In the 2021 Sapien report, of the 223 087 internet-enabled respondents, 11 887 were South Africans who participated in a Mental Health Quotient (MHQ) assessment which captures a comprehensive spectrum of emotional, social, and cognitive attributes that encompass both problems (or symptoms) across ten different mental health disorders, as well as positive mental health attributes.

South Africa was one of 34 countries that participated, and we ranked the lowest, along with the United Kingdom, in terms of the weighted average score.

What is mental health?

The World Health Organisation described mental health as:
A state of mental well-being that enables people to cope with the stresses of life, realise their abilities, learn well and work well, and contribute to their community. It is an integral component of health and well-being that underpins our individual and collective abilities to make decisions, build relationships and shape the world we live in. Mental health is a basic human right, and it is crucial to personal, community and socio-economic development.

There are nearly one billion people worldwide who already live with a mental health disorder. Rates of common conditions such as depression and anxiety went up by more than 25% in the first year of the pandemic.

“Everyone’s life touches someone with a mental health condition. Good mental health translates to good physical health, and this new report makes a compelling case for change. The inextricable links between mental health and public health, human rights and socio-economic development mean that transforming policy and practice in mental health can deliver real, substantive benefits for individuals, communities, and countries everywhere. Investment into mental health is an investment into a better life and future for all.” – Dr Tedros Adhanom Ghebreyesus, WHO Director-General

The world is working toward breaking down stigmas and misconceptions associated with matters of mental health conditions. The ‘World Mental Health Report’ is aimed at decision-makers in the health sector tasked with transformation, developing mental health policies and delivering mental health systems and services. It also includes narratives from individuals across the world (three from South Africa) who shared their own lived experiences with mental health.
Below, I put together some practical information on accessing benefits that may be available to you here in South Africa:

Accessing Mental Health Benefits through your medical scheme membership

Prescribed Minimum Benefits (PMBs) are a set of defined benefits to ensure that all medical scheme members have access to certain minimum health services, regardless of the benefit option they have selected. The aim is to provide people with continuous care to improve their health and well-being and to make healthcare more affordable.

PMBs are a feature of the Medical Schemes Act, in terms of which medical schemes must cover the costs related to the diagnosis, treatment and care of:

• any emergency medical condition.
• a limited set of 271 medical conditions (defined in the Diagnosis Treatment Pairs); and
• 26 chronic conditions (defined in the Chronic Disease List).

Based on the above, your plan option includes cover for Chronic Conditions and Prescribed Minimum Benefits. Typically, your scheme will list these as separate benefits; however, there are instances where these conditions may be covered by one or both of these benefits.

The above set of conditions includes certain mental health conditions in the Chronic Disease List as well as emergency mental health events under PMBs. I have provided links to the conditions and codes, quite complex for medical scheme members; however, your treating specialist should be comfortable with these. It is important that you explore all possibilities for funding your treatment so that you are maximising your access to mental health benefits available to you.

Your scheme will have an application process, as well as an appeals process that you can gain access to through your healthcare financial advisor or scheme directly.

Employee Assistance Programmes

Your employer may offer an Employee Assistance Programme benefit, which will give you access to telephonic counselling for a range of events. If you do have access to this benefit, I encourage you to make use of and engage with the programme.

Toll-Free Helplines

If you are not sure where to start, try contacting the South African Depression and Anxiety Group (SADAG), SADAG is a Non-Profit Organisation that has on its board a team of patients, psychiatrists, psychologists, and general practitioners. SADAG was established twenty years ago to serve as a support network for the thousands of South Africans who live with mental health problems. Their toll-free number is 0800 567 567. To find out more, visit their website at https://www.sadag.org/

Healthy Mind

There are many books and mobile APPs centred around mindfulness that share numerous techniques you can employ to reach/maintain a healthier state of mind. For me, the thing we do most naturally has been the most helpful, breathing. We see breathing come up so frequently in coaching sessions in the corporate environment; so simple, yet effective.

Breathe in for three seconds, hold for four, and… exhale.

In this month’s edition, John Chikoki, Senior retirement fund consultant at Chartered Employee Benefits, shares extracts from the 2022 FSCA- Financial Sector Outlook Study relating to the Retirement Fund industry.

Under-saving for retirement remains a significant challenge in South Africa today. Most workers cannot afford to retire, let alone retire financially comfortable. Comfortable in this context, meaning being able to support their desired quality of life when they eventually retire.

The study conducted in April 2022, by Genesis Analytics and the Financial Sector Conduct Authority (FSCA) revealed the following:

• Genesis Analytics noted that only 12% of the 3.6 million individuals within the retired people group received some form of income in 2020. Over 90% of retirees are unable to maintain their standard of living prior to retirement, and two-thirds of members have less than R50 000 in retirement savings, and that is usually their only savings.
• The study indicated that since 2017, the average value of benefits paid out has slightly increased in real terms, averaging approximately R39,000 per month. However, the average contribution to pension funds has remained comparatively stable at around R900 per month in real terms.
• Notably, South Africa’s pension fund coverage looks vastly different within the public sector compared to the private sector. Within the public sector, 92% of workers have a retirement product, while in the private sector, 50% and in certain instances, less, have a retirement product. The proportion of people with a retirement product is particularly low for people earning below R14,000 per month.
• The study also revealed that there is limited demand for pension products within the lowest income groups, as they rely on the government’s pension support. The government old age grant pays R1,890 per month, to eligible pensioners, who satisfy the means test criteria. There are between eight and ten million South Africans who earn approximately R1,300 to R3,000 per month. They have little incentive to contribute to private pension funds, due to affordability challenges and the knowledge that they will be eligible for the old age state pension.
• Many experts propose using the 75% rule as a general benchmark for what one would need to cover monthly expenses once they eventually retire in South Africa. For example, if an individual presently earns R10,000 per month, applying the 80% rule, such an individual would need a minimum of R8,000 per month towards expenses when they eventually retire to be still able to maintain their current lifestyle.

Widening retirement gap

The retirement gap has truly widened due to the COVID-19 pandemic, which has caused a reduction in salaries of some workers and retirement fund contributions that had to be placed on hold for a period of time due to companies’ cash flow pressures. Furthermore, numerous households also faced additional financial burdens of supporting family members who lost their jobs.

Despite the recent financial setbacks, chiefly caused by the COVID-19 pandemic, it is advisable to consider working longer than you would have wished before, if your health, family responsibilities, and job status allow. The additional working time allows you to save more and for the markets to continue to recover from past losses. Most importantly, delay accessing your retirement savings for as long as possible so you can hopefully have a larger, inflation-protected benefit when you eventually access your retirement savings.

To access the full report, please click here

It’s always hard to let go of summer, but what makes that goodbye a little easier is the fact that autumn is on the other side, ready to embrace us with open, jersey-clad arms. After the fun-filled craze of summer, autumn is a time to slow down, get cosy, and take a deep breath. Each season has its novelties and delicacies, but the autumn months are a carnival for the senses. Aside from the autumn holidays, there are crisp breezes and even crisper apples, golden light and painted trees.

We have reached the end of a tumultuous quarter that has seen the world go mad. War in Europe (my British marine grandfather must be turning in his grave), ridiculous petrol prices, lengthy electricity cuts, violence at the Oscars and that dreaded albatross around South Africa’s neck, high levels of unemployment.

And lest we forget, the pandemic is still around.

Those who remain full of hope and even patriotic towards our beloved land are often accused of wearing rose-tinted glasses, but let’s take a breath and focus on some of the more uplifting events that have happened of late.

Yes, we will continue to wear masks, but hey, after 750 days, the National State of Disaster was lifted. It is an absolute privilege to watch my son play rugby again on weekends, and a trip to Ellis Park to watch the Lions is now in the calendar.

Black Coffee became the first African to win a Grammy award in the category, Best Dance/Electronic Album for his album, Subconsciously.

“The main reason I do what I do is to carry the flag of my country. To be recognised in this way outside of a ‘World Music’ category makes all of the hard work worth it,” said Black Coffee. Now he wants to use his music, which he describes as “home-brewed but future-focused”, to help more African musicians get recognition on the global stage.

Both the South African women’s and men’s national cricket teams have entertained us over the last few weeks. Despite the ongoing challenges that this sport faces in our country, we continue to defy the odds and produce some incredible performances.

On the business front, one can only applaud the rise of Roelof Botha.

The son of the Minister of Foreign Affairs from way back when, Botha has blazed a trail in Silicone Valley and has been on Forbes’ list of best venture capital investors no fewer than 13 times. On 5 July, he will take over as Senior Steward (lead partner in our parlance) of the world’s most celebrated private equity firm, Sequoia Capital. What I find more endearing is that he is not known for outrageous tweets, opinionated podcasts or anything that draws unnecessary attention to himself.

Botha studied actuarial science at the University of Cape Town, becoming South Africa’s youngest licensed actuary at 22. He moved to the US with McKinsey and enrolled at Stanford’s Graduate School of Business, where he met Elon Musk. He famously declined Musk’s invitation to join PayPal’s finance team, not once, but twice, before relenting and agreeing to join the firm in March 2000. (As an aside, he also declined the CFO role at Facebook in the early 2000s).

There is no doubt that the next few months will be as eventful and concerning as the last three, but we will leave you with a thought to ponder over as the evenings become cooler,
“There is something so special in the early leaves drifting from the trees–as if we are all to be allowed a chance to peel, to refresh, to start again.” – Ruth Ahmed

Enjoy the Easter break!