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South African Actuarial Journal Volume 12 (2012)

 

Consumption changes on retirement for South African households

Author(s): MBJ Butler and CJ van Zyl
Abstract:
This paper presents the results of an investigation into whether age or work status are statistically significant determinants of the change in the consumption rate at and in retirement. This research used data from the Income and Expenditure Survey 2005–2006 for households comprising one or two adults. It was found that gifting and non-healthcare consumption, which includes gifting, are not influenced by age or work
status. Certain households were found to have higher healthcare consumption after retirement than before retirement. This result challenges the belief that retired households have lower consumption than working households, all other things equal, and may therefore necessitate an upward adjustment to retirement adequacy goals.
Keywords: Consumption; retirement; life-cycle model

Consumption changes on retirement (pdf)

Retirement adequacy goals for South African households

Author(s): MBJ Butler and CJ van Zyl
Abstract:
Despite the importance of retirement adequacy goals to public policy, retirement fund design and personal financial planning, there has been little formal research on the estimation of retirement adequacy goals for South African households. This research derived estimated retirement adequacy goals for employed one- and two-adult households. A consumption-smoothing model with a minimum-income underpin was
developed to estimate wealth–earnings ratio goals using data from the Income and Expenditure Survey 2005–2006. Household wealth–earnings ratio goals were estimated to be between 10,5 and 18,2 times annual salary depending on retirement age, household composition, income, location, age, education, household income distribution, home ownership and salary support. Considering current retirement savings
rates, retirement before age 67 is unlikely to be affordable for most households.
Keywords: Retirement; adequacy goals; South Africa; wealth–earnings ratios

Retirement adequacy goals (pdf)

The effect of SAM on the South African medical-scheme environment: a quantitative analysis

Author: MD Ganz
Abstract:
The globalisation of the financial services industry and the increasing complexity of insurance products, among other factors, have led to the development of new regulatory systems for insurers globally (and, in particular, in South Africa). The primary intention of these systems is to protect the interests of policyholders by ensuring that
insurance companies remain solvent in most foreseeable circumstances. In South Africa, new regulation, known as Solvency Assessment and Management (SAM), is expected in 2015, but this regulation is to apply only to insurance companies and not to medical schemes. This paper considers the implications of the application of capital requirements under Quantitative Impact Study 1 to the measurement of capital
adequacy in South African medical schemes. Data from 2006, 2007 and 2008 were used to parameterise the non-SLT health-underwriting risk module (i.e. the risk module relating to health-underwriting risk that is not similar to life techniques), which was then used to determine the level of economic capital that schemes would have been required to hold in 2009. The results showed an overall reduction in the capital
requirements of medical schemes, as compared with the current statutory minimum requirements, and therefore an increase in the proportion of medical schemes that are found to be solvent.
Keywords: Solvency II; Solvency Assessment and Management; risk-based capital; medical scheme

The effect of SAM on the South African medical scheme environment (pdf)

Surplus? What surplus? Did the Pension Funds Second Amendment Act achieve its aims?

Author(s): RWD Davis and S Kendal
Abstract:

The Pension Funds Second Amendment Act, 2001 required funds to provide statutory minimum benefits for exiting members and pensioners. Any surplus arising at the statutory valuation following the promulgation of this Act was to be distributed—initially to former members and pensioners to top up their benefits to the statutory
minimum, and then equitably to all stakeholders. Surplus available in retirement funds was originally estimated at R80bn, but the surplus distributed by May 2012 was only about R47,6bn. This paper considers some reasons for this discrepancy and, in particular, gives an analysis of 447 surplus valuation reports. It shows that, by
strengthening their valuation assumptions and motivating contingency reserves, actuaries reduced the surplus by R10bn for these 447 funds. The paper questions whether the strengthening of valuation bases was justified and examines critically the new actuarial methods introduced following the promulgation of the Act.
Keywords: Pension funds; distribution of surplus; valuation methods; valuation assumptions; contingency reserves; public interest

Surplus? What surplus (pdf)

Access to public healthcare in South Africa

Author(s): S Plaks and MBJ Butler

Abstract:
Access to healthcare is considered to be a basic human right. This paper explores the concept of access to public healthcare, with a
particular focus on affordability, accessibility and accommodation.
Furthermore, it highlights certain issues around the concept of access in the South African setting, by analysing the results from the General Household Surveys (2002–2009). Affordability of healthcare services and the positioning of the facilities were not identified as being key barriers to access. Instead, other aspects, such as accommodation to the patients’ needs and acceptability
of services received had greater significance and should be prioritised in terms of any proposed healthcare reforms.
Keywords: Access; healthcare; public sector; South Africa, National Health Insurance

Access to public healthcare (pdf)

Guest editorial: Changing paradigms: including soul in actuarial thinking

SAAJ Volume 12 Guest Editorial (pdf)

The views and opinions expressed in this journal are, unless otherwise stated, those of the authors. Editorial opinion or comment is, unless otherwise stated, that of the Editor and publication thereof does not indicate the agreement of the Actuarial Society of South Africa.

Actuarial Society of South Africa
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ISSN-8: 1680-2179
ISSN-13: 977-1680-2170-02