Analysis: MAXWELL PHIRI
MOST employees in Africa have this tendency of absolutely leaving their lives after retirement in the hands of the employer, which is not supposed to be the case because doing so is trading on a dangerous path.
We have to realise that employers can do so much to protect their balance sheets. The same principal applies in the public sector. Government, which is the largest employer in most African countries, can do so much to protect its interests because the pension scheme can cost the government a fortune.
It is therefore prudent that as an individual, you set aside your own pension saving account to avoid becoming a destitute and subsequently claiming that BOMA Iyanganepo. How many times and how many people is Government going to help? We need to wake up and use insurance schemes whilst we are earning an income as one of the investment engines for future pension plans.
Saving for retirement seems incredibly easy to put off for another day. After all, it is still a long way to go, isn’t it?
With everyday bills piling up, the kids’ education to save for and that family holiday you want to take, there are many excuses for spending your money on things you might need now, rather than saving it for retirement.
But when that time comes, and it is sooner than you think, you will suddenly find yourself wishing you had a solid retirement plan in place. Think of money you save for your retirement as money you are saving for your freedom to do whatever you want later in life.
Fail to plan and you have planned to fail. The biggest mistake you can make in retirement is not having a plan in place. This is one of the most common reasons why retirees run into problems, as most people underestimate how much money they will need in retirement. Most people also neglect to plan and discuss with their partners what type of retirement they would like to enjoy.
Whether your retirement plan is to spoil the grandkids or travel the world, the general rule of thumb is that you will need approximately 70 to 80 percent of your current annual income in retirement in order to survive the holocaust of being tagged as a stranded millionaire pensioner.
Some retirement insurance funds have a reputation of being confusing and complicated. You therefore need to make sure that the fund you choose and the risks and benefits involved have been explained in a way that you fully understand. This will enable you to make an informed decision about your fund and avoid any financial surprises when you start to draw on your funds.
It is advisable to visit a personal financial adviser for more information on the chosen insurance scheme to enable you make an informed and well-calculated decision.
This week, we will look at Aon Pension Fund Zambia, which provides one of the unique pension investment engines called Mukuyu Investment Fund.
The Mukuyu Growth Investment Fund (Mukuyu) is a mutual fund designed by Aon Zambia Pension Fund Administrators Limited (Aon Zambia). Aon Zambia is the management company of the fund responsible for its day-to-day management.
The Mukuyu aims to give an opportunity to investors who seek to save. The management company believes that the design of the fund allows individuals a chance to easily invest through a fund that is hinged on sound corporate governance principles from its design.
The Mukuyu was designed to make saving easier, which has been a challenge and perhaps “expensive” for many people. The Mukuyu has made savings simple and interesting for anybody interested in creating wealth for themselves and their family.
After you have filled in the application form, you will be required to send a minimum of K500 per month to the Mukuyu. For those who work, this can be done through regular payroll deductions, which will help you avoid the trouble of having to physically go to the fund or go to deposit in the fund’s bank account every month.
The contribution can also be sent to the fund quarterly, semi-annually or annually in advance as may be agreed with the management company. The contributions sent to the fund will purchase you units at the unit price on the day the contributions are received by the fund.
The fund has several unit trusts (investment vehicles) under it, designed to meet certain objectives. You will therefore be required to purchase units in a unit trust that matches your personal investment objective.
The money that is collected from the purchase of units in the unit trust that meets your investment objective is then invested in appropriate securities by the fund. The respective unit trusts are designed to meet different investment objectives and therefore invest in several investments, which include capital market instruments such as shares, bonds/debentures and other securities.
The combination and/or composition of the market instrument for each unit trust are designed to meet a prescribed investment objective. The fund invests in a combination of various investments to maximise wealth creation for the investors or (contributor).
The combination of the various investments, the management and expertise involved in the management of the investments and the fund is something that individual investors will not have, but they get through the purchase of units in the Mukuyu.
WHO SHOULD INVEST IN THE MUKUYU?
3) Self-employed individuals; and
4) Any person that seeks to save.
The author is a human resources practitioner and pension advisor.