Achieving better retirement outcomes for members
A combination of lower costs and superior investment returns achieved at lower risk will result in better retirement outcomes for members.
This is what the Jigsaw Umbrella Retirement Fund (previously known as the Ensimini Umbrella Provident Fund) has achieved.
The Jigsaw Umbrella Retirement Fund is an open architecture commercial umbrella fund that has a standard default offering at its core, but also allows each Participating Employer to structure bespoke benefits and investment options for their employees whilst enjoying the economic benefits of being in an umbrella fund.
The total cost of participation in an umbrella fund is regarded by most advisors and participants as one of the critical factors when selecting the appropriate umbrella fund.
While we at Ensimini agree that cost is one of the critical factors that must be considered, we believe it is not cost in isolation, but the combination of cost and investment returns, that should be the primary consideration when selecting the most suitable umbrella retirement fund.
It is commendable that, if the total cost of participating in an umbrella fund is less than 1% of a member’s fund credit, but if this is combined with underlying investments that are underperforming its objective, benchmark or peers by as little as 1%, the benefit gained through the lower fees means absolutely nothing. The graph in Example 1 on the right provides an illustration of the impact of a mere 1% investment return differential on the member’s final retirement benefit over a 30-year period.
While we used an asset-based fee as the basis in Example 1 on the right, we do not believe it is fair to charge an asset-based fee to perform administrative services.
The Jigsaw Umbrella Retirement Fund charges a flat administration fee per member to avoid the cross subsidisation associated with asset and payroll-based fees.
Investment returns will not be used to cross-subsidise the cost of administration or any other costs, ensuring that members earn their full return on the underlying investments.
For these reasons, the fee structure on the Jigsaw Umbrella Retirement Fund is currently as follows:
- Administration costs: a maximum fee of R57.50 per member per month (inclusive of VAT) *
- Consulting costs: As agreed with your accredited consultant
- Investment costs: Total Investment Charge of 0.74% for the Fund’s Default Investment Strategy (a medium-high risk-profiled portfolio targeting a net return ofCPI+5% per annum).
- Operational cost (audit fees, FSCA (formerly FSB) levies, independent trustee costs, bank charges etc): R3.00 per member per month.
* A reduced fee will apply for employers with more than 200 members on the Fund.
All fees are disclosed transparently in member statements.
The graph in Example 2 on the right provides an indication of the comparative retirement outcomes between Fund X and our Fund where the Ensimini Umbrella Provident Fund standard investment management and administration fees are used (with the latter increasing at CPI annually) and Fund X’s fees are set at 1% of assets per annum (inclusive of investment management and administrative costs). The same investment returns have been used for both.
The result is a significantly better retirement outcome for the members of the Jigsaw Umbrella Retirement Fund than in funds where asset or payroll-based administration fees are levied.
If the Jigsaw Umbrella Retirement Fund default investment strategy continues to perform in line with its peers, members of the Jigsaw Umbrella Retirement Fund will enjoy the combined impact of lower costs and superior investment returns, offered by the Jigsaw Umbrella Retirement Fund, will result in significantly better retirement outcomes for members compared to the options used in the examples.
For more information on the Ensimini Umbrella Provident Fund, view the Jigsaw Umbrella Retirement Fund brochure.
If you wish to receive a quote to participate in the Fund, please contact Marina Prinsloo at firstname.lastname@example.org.
This example uses a member with a starting fund credit of R500,000 that earns R300,000 per annum and makes a net retirement funding contribution of 12% before costs. Investment returns of 12% were used for both funds.
The Jigsaw Umbrella Retirement Fund’s default investment management and administration fees are used (with the latter increasing at CPI annually) were used, whilst a fee of 1% of assets per annum (inclusive of investment management and administrative costs) was used for Fund X.