Your retirement is in danger because money which is meant to fund your pension is being eaten up by insurance premiums swollen by the Aids epidemic.
Unless your employer takes steps to protect you from the consequences of the Aids scourge, you may find that your pension has been whittled away by the soaring costs of life and disability assurance.
The Aids epidemic shows no sign of tailing off and unless the situation changes dramatically, the costs of life and disability insurance to retirement funds could double by 2005 and treble by 2010, Alan Martin, Metropolitan Group Employee Benefits actuary, says.
If nothing is done, the Metropolitan-Doyle model predicts that 5,6 million people will be HIV-positive in five years. By then 2,1 million people will have died from Aids and more than 18 percent of the workforce will be infected.
Martin says the projected life expectancy of women in the year 2010 is 37 years, compared to 54 years today. Men's life expectancy in the year 2010 is estimated at 38 years compared to 50 today.
Insurance companies are adjusting their premiums to cope with the huge payouts they must make.
As a result, the group life and disability assurance which you get through your employer and which is costing you up to eight percent of your salary at the moment, could cost 12 percent in the year 2005 and 17 percent in the year 2010.
At the moment, Martin says, in a typical retirement fund, each year about 20 percent of your salary is paid into your fund by you and your employer. A little less than half is used to fund life and disability insurance, and the remainder (about 12 percent of your salary) goes to funding your pension.
By the year 2005 premiums on group life and disability insurance will swallow up so much of the contributions that only eight percent of your salary will be available to fund your retirement.
And by the year 2010, only three percent of your salary will go towards creating a pension for you in your retirement.
If you have a defined benefit fund, where the employer guarantees you a specified pension at retirement, you are sitting relatively pretty because, in theory at least, the problem of higher insurance premiums is the employer's problem, not yours.
Though employers may well cut death and disability benefits as the cost of providing them soars, they will find it difficult to reduce pensions in defined benefit funds.
But if you are a member of a defined contribution fund, you do face the risk of a reduced pension.
"As insurance companies raise their premiums to cope with higher death and disability claims because of Aids, trustees of pension funds only have two options: to decrease the benefits or to ask employers and members to pay more," Martin says.
Since employers usually insist that their contribution is fixed, for instance at 10 percent to 12,5 percent of the employee's salary, the burden of funding the increases in premiums usually falls on the members of the fund, he says.
"At the moment group life cover probably costs about two percent of an employee's salary. By the year 2005 we estimate it will cost four percent and by the year 2010, six percent."
"The cost of disability cover will not rise as fast, because though there will be more people needing disability pensions, many of them will not live as long," Martin says.
The trustees of your retirement fund should be looking at ways to restructure the funds so that premium increases can be kept to a minimum while still meeting the needs of employees.
There are several possibilities to consider, he says:
* Group life assurance benefits could be restructured so that people without dependants or with fewer dependants get smaller payouts (once their annual salary instead of three times, for instance).
Since these are usually younger people who are also more at risk from Aids, this would mean lower insurance premiums for all members;
* Retirement schemes could cover members for a minimum amount only and members could choose to buy top-up cover or not.
For instance, all members could be guaranteed once their annual salary in case of death, and if you wanted to raise this to three times annual salary you would be expected to pay the premiums, with or without help from your employer.
Each member would then be quoted a premium according to his or her age, health and risk profile, so that the costs of insuring the riskier members would not be borne by the less riskier members.
Martin says the cost of individual life cover is not likely to be affected by the Aids epidemic, because the insurance companies "only take on the healthy lives". People who are already sick or in high risk categories are directed to special policies and are expected to pay higher premiums for life cover.
The point, he says, is not to exclude people but to meet the needs of all the employees in the most efficient way.
"Future negotiations," Erich Potgieter, of Fifth Quadrant Actuaries and Consultants, says, "will be focused on the cost, rather than the amount of the benefits".
If retirement funds switch money from retirement saving into risk premiums, says Potgieter, there must be proper communication to members and agreement that this is the best way to use their contributions.
A plan to tackle Aids will only be successful if there is a joint effort by employers, employees and trade unions, Martin says.
"Employers will need to address a list of issues such as advance planning to manage the impact of HIV and Aids on productivity, skills training and disability; an effective communication strategy; and counselling for employees who are HIV positive."
Businesses should not limit Aids education to the workforce but should help with education of the community in which the company operates, including schools, sports clubs and churches.
"The education of employees is the best method of protecting a fund, the employer and employees", Martin says.
WHAT YOU CAN DO
* Contact the trustees of your retirement fund
* Ask how much of your contributions and those of your employer is being spent on disability and life assurance, and how much on investment for your retirement
* Ask how the fund plans to fund rising premiums while leaving money destined for your retirement intact
* If they have not already done so, suggest that the trustees get independent advice from consultants on how to structure the fund in the face of the Aids epidemic