Loyalty programme membership is incentivising people to save more towards their retirement, making loyalty schemes a ‘new age’ problem-solver to an age-old problem. This important finding was shared at the 2019 International Actuarial Association (IAA) Colloquium by Nathea Nicolay, Head of Product at Sanlam Reality.
She says, “Our research into retirement savings by Sanlam Reality loyalty members shows South African loyalty programme members save, on average, 33% more towards their retirement than clients who are not linked to a loyalty program. This is significant, given that just 18,9% of South African retirement fund members will be able to maintain their standard of living in retirement – the lowest figure in five years.”
Nicolay says Sanlam Reality’s findings show that loyalty members, typically, save 16% of their salaries towards retirement, versus 12% saved by non-loyalty members. She argues that loyalty programmes use modern technology and behavioural science to achieve improved retirement savings in a world where traditional methods (government regulations, employer sponsored pension funds and trustees’ oversight) are not getting enough traction.
These kinds of new solutions are imperative. While the issue of saving sufficiently for retirement is not new, it is, arguably, more challenging than ever before. “Retirement is not a problem. Hardship in old age is a problem. Social dependency on state resources is a problem – SA has 18.6-million social grants beneficiaries, with state pensioners receiving just R1780 pm. Then there’s the risk of outliving our savings as we live longer. And the fact that retirement savings are all-too-often used as emergency funds due to our country’s high accidental risk rate and the rising unemployment rate currently at 27.1%.”
Nicolay elaborates, “Not only do we find that Sanlam Reality loyalty members save more of their salaries towards retirement, we also see that they save for longer periods and they actively grow their contributions towards retirement. Across three years, all our measured premium and age brackets showed the same result: loyalty members were less likely to stop or cash-out their retirement savings.”