How the Two-Pot pension fund system is revolutionising member engagement

The introduction of South Africa’s two-pot pension fund system has dramatically changed how pension funds are administered, shifting interactions from employer-based engagement to direct communication with individual members. This transformation has required administrators to implement large-scale innovations to manage the surge in member queries and claims efficiently.

For financial advisory firm NMG Benefits, this shift meant moving from liaising with 1,500 employer groups to engaging with up to 160,000 pension fund members directly. According to Siphamandla Buthelezi, head of platforms at NMG Benefits, this transition demanded swift and substantial innovation.

"Traditionally, pension fund administrators communicated with employers, who then relayed information to their employees. This is still the case for some employee benefits, but when it comes to retirement funds, the two-pot system means that, for the first time, fund members are talking to their fund administrators directly. This brought about an urgent need for digital transformation," Buthelezi explains.

To ensure a smooth transition, NMG Benefits says it developed user-friendly digital platforms, incorporating AI-powered mobile apps, online portals, and automated communications via email and SMS. However, given the strict regulations of the two-pot system, these digital tools had to be created from scratch when members first became eligible to make claims in the 2024/25 tax year.

Buthelezi notes that these innovations not only provided convenience but also empowered fund members. “Our purpose-driven tech innovations allow our members to access and update their information, check their fund balances, and initiate transactions independently, thus ensuring faster processing. Innovation enables us to handle routine queries, provide instant responses to common questions, and guide our members through the claims processes.”

With the increase in direct engagement, many administrators initially struggled to manage the high volume of member inquiries.

The importance of a multi-channel communication strategy quickly became evident, particularly for fund members working in industries such as mining, where workers may not have smartphones and often spend extended periods underground. “The value of multi-channel communication strategies that incorporate email, WhatsApp, SMS, and in-app messaging very quickly came to the fore – especially given the challenges of communicating with members who work in mines, often do not have smartphones, and are underground for days at a time,” Buthelezi explains.

Another key challenge has been the need to facilitate fund withdrawals despite data inconsistencies and inaccuracies. Incorrect tax details, contact information, and other errors provided by employers have led to delays in processing claims.

“Where incorrect tax and contact phone numbers and other details provided by employers delayed payments, that impacted the claims process. By leveraging data validation tools and integrating with national databases like those at Sars – and also allowing members to update their own data via the app – we were able to bridge this gap,” says Buthelezi.

According to Buthelezi, the introduction of the two-pot system has been a transformative moment for pension fund administrators. “Our innovations not only addressed immediate challenges but also set a new standard for efficiency and accessibility,” he states.

However, he emphasises that more work is needed to educate fund members about the two-pot system. “More education is still needed around the two-pot system in terms of how it works. Language barriers and access to information are some of the key issues that still need to be addressed,” he says.

As the two-pot system reshapes South Africa’s pension fund landscape, continuous innovation and digital transformation will remain critical in ensuring smooth, efficient, and accessible fund administration for all members.

PERSONAL FINANCE