Employee Benefits

1. Pension/Provident Industry

Background: “South Africa has the lowest savings level reported since 2009, after households were recovering from the financial turmoil of 2008. Meanwhile, consumers are increasingly cutting back on living expenses in their battle for financial survival.”

These are some of the key findings of the latest Old Mutual Savings and Investment Monitor, which tracks the shifts in the financial attitudes and behaviour of South Africa’s working population:

Confidence in our local economy has plummeted to an all-time low of 31% – a considerable decrease from 55% in 2015 – with two-thirds of respondents describing their level of financial stress as “overwhelmingly” or “high”.

In terms of saving for retirement, a staggering 41% of property owners consider their primary residence to be part of their retirement nest-egg, while the use of pension and provident funds has been decreasing over the past year.

Dependency on children for future care and financial assistance during retirement is at its highest level yet. This correlates with a steadily growing sandwich generation: those who are supporting not only children, but also parents or other ageing dependents. The number of people in the sandwich generation has reached a record high of 29% in 2016, climbing considerably from 25% in 2015.

*Reference:  Old Mutual Superfund Member Update, December 2016

Taking the above mentioned data into consideration, Employer Pension Funds and Provident Funds are clearly becoming an all-time high necessity. These funds not only enhance the benefit structure of employers, but also empower (and force) their employees to timeously prepare for retirement.  In offering their employees the benefit of a retirement fund, employers motivate them to become more informed and conscious about their retirement funds/money than those who do not belong to a fund.

2. Medical Aid Industry

During the past two months, the buzz-words in the Medical Aid industry were “Demarcation Regulations” – It is important to note that the Demarcation Regulations are NOT applicable to Medical Aids/ Schemes and are only applicable to:

1. Gap Cover / Shortfall Cover type of policies

2. Hospital Insurance Products

3. Low-cost Primary Healthcare Policies

On 23 December 2016 Finance Minister Pravin Gordhan, in concurrence with Health Minister Aaron Motsoaledi, published the final Demarcation Regulations in Government Gazette No. 40515. The Regulations will take effect in April 2017. What are the regulations about?

The Regulations clear up confusion as to which Act applies to which category of health insurance product.  Medical Expense Shortfall policies (Gap cover plans): These policies cover the shortfall between medical scheme benefits and the rates that private medical service providers may charge.

Insurers will be able to provide gap cover plans “in a manner that complements medical schemes, subject to strict underwriting and marketing conditions”. Gap cover plans will be able to make multiple pay-outs to the insured, subject to a maximum of R150 000 per insured per year. Non-medical expense cover as a result of hospitalisation policies (Hospital Cash Plans): These policies pay out a stated benefit upon hospitalisation; usually per day spent in hospital. The stated benefit is unrelated to the actual costs of any medical service as it is aimed at covering incidental costs, such as loss of income. Insurers will be able to provide hospital cash plans “in a manner that complements medical schemes, subject to strict underwriting and marketing conditions”. Hospital cash plans will be limited to a maximum pay-out of R3 000 per day in hospital and capped at R20 000 per insured per annum. Primary healthcare insurance policies:

These policies provide limited medical service benefits (often to employee groups or bargaining councils) including services such as general practitioner visits, acute and chronic medication, emergency medical care, dentistry and optometry.

Primary healthcare insurance policies will have to be provided in accordance with the MSA. The regulations allow a two year exemption for such policies, subject to conditions, while the Department of Health explores the development of a Low Cost Benefit Option (LCBO) guideline. Over the long term the primary healthcare insurance products will be replaced by LCBOs.

Implementing these new regulations will ensure that every member of a medical scheme has access to products which will enhance the payment of doctors/specialists during hospitalisation by up to five times or 500% of medical aid rates.

These products are inexpensive compared to paying bills received after hospitalisation; and should be within the reach of everyone as a supplementary product to his/her medical aid plan.