Every employee should be provided with far more information about their financial journey to retirement, starting with a detailed benefit statement being included with their monthly salary advice, senior executives at Alexander Forbes say.
Anne Cabot-Alletzhauser and John Anderson say a detailed benefit projection statement will make you aware of where you are on your financial journey, what you need to do to ensure you reach your destination, and the impact of and the trade-offs between the provisions for your various needs.
The Benefits Barometer says this information will ensure you do not give up half-way and are not surprised by the outcome of your financial journey.
The Barometer says your benefit statement should not show you large numbers that represent your accumulated savings; instead, it should show you what your savings will convert to as a monthly income in retirement (in today’s terms). By comparing your projected post-retirement income, in today’s values, with your expenses, you can get a sense of whether you are in trouble with your retirement planning.
Retirement fund members are often shown graphs of a fund’s cumulative performance and/or how it has performed relative to a benchmark, but this type of information does little to help you to understand if you are on track to retiring financially secure, the Benefits Barometer says.
Your retirement fund should give you the flexibility to change your financial journey and provide you with information about what will happen if you adjust the variables – for example, contribute more to your retirement fund, increase your life cover or delay your retirement by a few years.
Retirement funds should also provide you with information indicating what will happen if you do not preserve your savings.
The Barometer suggests that if your benefit statement indicates that you are not on track to achieve your desired income in retirement, you should also be given information on how to get back on track to improve your decision-making.