Allan Gray has announced that its highly anticipated new commercial umbrella fund, the Allan Gray Umbrella Retirement Fund, is now officially open for business.
Saleem Sonday, head of group savings and investments at Allan Gray, believes that the industry needs a new entrant that can cut through the clutter and offer a simple, transparent and competitively-priced solution.
“In the group savings space umbrella funds have a bad reputation due to opaque cost structures and complexity. The way fees are disclosed varies from one provider to the next, as does the level of fee disclosure. In addition, the fee structures are often bundled with those for group life and disability insurance cover,” explains Sonday.
He says that many members end up saving in opaque products, without knowing what portion of their contribution is actually going towards retirement. However, if structured correctly, umbrella funds are excellent vehicles for saving for retirement.
“Umbrella funds club together multiple employers and their employees into a single fund with standardised rules and a single board of trustees. Due to their economies of scale, they are able to offer lower distribution costs for providers, as well as lower fees. These advantages should result in better outcomes for members than many employer-sponsored funds can offer,” says Sonday.
“Many umbrella funds offer a choice of different investment options but this can often come at a high cost. We believe that members shouldn’t be penalised for their investment decisions,” he says.
He adds that fee disclosure is critical to ensure that where a member or employer representative is exercising choice, they understand what they will be charged for and how much, and are equipped to make the right decisions.
The Allan Gray Umbrella Retirement Fund offers a single fee for administration, with no additional fee for investment choice. Group risk benefits are provided separately, which means that retirement fund contributions are only used for their intended purpose, i.e. saving for retirement.
“Our product aims to make things simple for employers and puts member needs at the centre by offering an unbiased, limited range of high quality managers, fair and transparent pricing and great service,” Sonday concludes.