Umbrella Funds on the Rise Says Old Mutual Survey

The recent Old Mutual Retirement Fund Survey saw an interesting trend with the rise of Umbrella Funds in the industry. According to the survey, more and more employers are turning to these funds in a bid to reduce costs and also to free themselves from the responsibility of trusteeship, especially in a more legislated South African economy.

Old Mutual Pushes Umbrella Funds Big increase in the use of umbrella funds is being witnessed

While it was traditional for small companies with 50 to 100 employees to use Umbrella Funds, the Old Mutual survey found that more and more larger companies are turning to these services. The average-sized company using an Umbrella Fund stood at around 350 employees, although some companies also had a staff of over 500.

One of the main reasons for the upsurge in popularity of Umbrella Funds, according to the Executive General Manager at Old Mutual Corporate, Seelan Gobalsamy, is that they have taken heed of previous criticism directed at them and changed their policies to make their funds more flexible to suit employees and employers.

Umbrella Funds essentially allow the transfer of responsibility of fund management from the employer to the fund itself. This was seen as the main draw card to these options, although the lower costs involved, better benefits and professional expertise were also major deciding factors.

"This is backed by employers who have joined Umbrella Fund arrangements, saying they are very satisfied," said Gobalsamy.

Experts suggest that employers switch to Umbrella Funds if they can answer yes to any one of these questions: Does your company lack the expertise to manage an in-house fund? Are you keen to get rid of the responsibility of running a private fund? Does it make sense from a cost perspective?