This year a single paper was awarded both the RGA prizes for Best Paper and Best Paper by First-time Authors at the Actuarial Society of South Africa’s 2016 Convention. John Anderson and Steven Empedocles authored The retirement income frontier and its application in constructing investment strategies at retirement in direct response to what they see as a pressing problem in the South African retirement industry.
This year a single paper was awarded both the RGA prizes for Best Paper and Best Paper by First-time Authors at the Actuarial Society of South Africa’s 2016 Convention. John Anderson and Steven Empedocles authored The retirement income frontier and its application in constructing investment strategies at retirement in direct response to what they see as a pressing problem in the South African retirement industry – namely that the vast majority of individuals appear to make inappropriate decisions when purchasing living annuities at retirement.
Currently, the majority of South African retirees convert their savings into income via living annuities, despite economic theory that suggests more use should be made of life annuities and their longevity protection. The paper addresses these problems in a clear and concise way through a powerful combination of actuarial science and behavioural economics.
The Actuarial Society’s Research Committee singled out the paper as addressing a major issue in general society and making a unique and valuable contribution to the South African pensions industry. The framework and model can be used by advisors and automated advice-giving platforms (“robo-advisors”) to recommend optimal investment strategies to retirees and by benefit consultants and trustees when designing default annuity strategies that comply with the National Treasury's draft default regulations.
In addition, Sygnia, in partnership with insurer Just Retirement SA, will be launching an innovative product in the new year that utilises this framework and combines the benefits of both living and life annuities in a single hybrid structure.
John Anderson sees this as a game changer for the industry: “Official statistics confirm that the vast majority of pensioners in South Africa are invested in high cost and unsustainable strategies at retirement that leave them or their dependents vulnerable. The launch of the new Sygnia product in the new year will allow pensioners to achieve greater value for money whilst improving the sustainability of their pensions, as well as improving the potential legacy they can leave their dependants.”