When applying for a home loan, one vital aspect to carefully consider is life cover or mortgage protection cover. This will ensure that you can continue to provide your dependants with a roof over their head if you pass away, or become disabled and cannot work.

If you are the main income earner, but don’t have appropriate life cover or mortgage insurance, you could leave your family in a world of financial hardship after your death, or create complications that could have been easily avoided. As any financial planner will agree, this area of a financial portfolio is one of the first building blocks to be put into place.

Life Insurance 101

A bondgiver is the person paying the bond, while the bank is known as the bondholder. In the event of the death of the bondgiver, a lack of life cover can make a very distressing situation all the more tragic. Families who have lost a member, who is responsible for paying the home loan, can face the very real possibility of losing their home.

According to an article published on Fin24, “life cover or life insurance is a means of ensuring that money is available to settle all outstanding debts and provide dependants with financial security in the event of the death or disability of the person whose life is insured. The cash sum paid out can be used to settle debt like the home loan that could then allow dependents to keep their home. Mortgage protection insurance, another type of life cover, is limited to provision of cover for the home loan only.”

South Africa

In spite of its arguable importance, taking out life cover or mortgage protection to cover a home loan is not always compulsory and, in our stressed economy in which more than half of credit active customers are considered to be credit impaired, many South African homeowners opt to forego this option in order to avoid additional monthly costs.

Many people choose to take a gamble and pray that they won’t be the victim of a life-changing incident, and that it won’t have a negative impact on their situation or their families if they are. According to a survey conducted by FinScope, this risk-taking tendency led to only 15% of South African consumers buying life insurance products in 2013. Although the Timetric report shows that the life insurance sector grew at a compound annual growth rate of 12.1% from 2012 to 2016, the lower economic growth that was expected until 2019 has meant that the life insurance sector hasn’t expanded as quickly as need be. Ironically, many South African adults are believed to have funeral cover, but few of these have life cover, and even fewer have disability insurance.

South Africa is not alone in its pitiful mortgage protection statistics, but the low figures do point to a possible lack of understanding among bondgivers about the essential nature of life cover. The crux of the matter is that, if you are a homeowner with a bond, it is important to have life cover in place so that your family will be protected in the sad event of your passing. A small monthly installment can save your family from massive financial pressure in the future, while not paying now can end up costing them dearly.

Don’t leave these things to chance — be proactive and ensure you have taken the necessary steps now to protect those you love after you’re gone. Don’t hesitate to arrange a meeting to discuss how you can secure your family’s financial well-being.

It is highly advisable that anyone who runs their own business takes out business assurance, which is a broad term for a range of life assurance products that are designed to cover various scenarios and requirements.

Running a successful business often takes considerable financial investment, but many business owners fail to plan for what happens in the event that they die, become disabled or severely ill; or if they lose one of their key employees for one of the same reasons.

However, it is essential to consider all risks in order to avoid adverse consequences for the business, and your dependants, as often a family’s financial health is intertwined with the health of a business. This blog serves as an overview to how this product could bolster your portfolio, but for your specific needs it is always best to setup a meeting for us to chat directly to your situation.

What is business assurance?

Generally speaking, business assurance is risk and/or investment assurance that will protect a business in the event that someone essential to the operation — be that an owner, a director or a key employee — dies or becomes disabled.

Business assurance not only protects those involved against potentially dire financial consequences, but it can also be used to prevent any main employees from leaving to work for a competitor by providing them with a policy that will mature to their future financial benefit.

Arguably, one of the principal purposes of business assurance is to ensure that a business can continue to be fully operational after an unfortunate loss of a key player, so as to protect the owner(s) and their dependants from financial hardship.

The last thing you would want in the event of your passing would be to leave your dependants or your business in dire straits. This is particularly the case if your business has an overdraft, which you have secured in a personal capacity. The appropriate assurance product will allow you to rest assured that any loans will be repaid when you die, so that your loved ones won’t suffer further. When setting up a business, it is, therefore, vital to carefully consider all financial risks, and take the appropriate measures to negate those risks.

Business structures

One of the most important aspects to consider when setting up a business is its ownership structure, as whether you choose to structure your business as a sole proprietorship, a partnership, a close corporation (CC), a company, or a small business corporation will determine the type of business assurance you will need.

All of these types of business structures have different implications when it comes to financial planning, and each business assurance product has different tax consequences that must be taken into account.

For example, there will be more tax obligations for a sole proprietor at death than someone who is a shareholder in a company. It is, therefore, extremely important that a sole proprietor ensures that any debts — including income tax and CGT — can be paid in the event of their death, so as not to leave debts to their dependents.

Most businesses tend to consist of three distinct levels — the owner, the management, and the employees. All involved parties have particular risks and financial needs that can be covered by a business assurance product.

The consequences and financial risks of each business structure should be carefully analysed to establish what type of business assurance is needed. This will require regular valuations and cash flow assessments, as well as taking into consideration any tax obligations and capital investment borrowings.

Question time

Business owners should ask themselves some hypothetical questions when it comes to making necessary arrangements for business assurance. Can your family still draw an income from the business if you die? In the event of your death, how can you unlock the value of your shareholding for your family’s benefit? Will there be any conflicts of interest between your family and business partners that you need to mitigate before your passing?

In the event that you cannot simply leave your business to a family member to run, it’s wise to ensure that you have done all that you can to guard your heirs against any risks, rather than leaving anything to chance. Usually, in the event of death, your share of a business would become part of your estate — but other people involved may have different ideas, and it’s best to avoid any unnecessary complications if possible. Written agreements, as well as appropriate life assurance and disability cover, can help a great deal in this regard. If you structure your policy holdings well, you could even save in terms of capital gains tax and estate duty, so it is important to make sure you correctly implement and structure your financial plan so that your loved ones can reap the most benefits possible.

Don’t hesitate to arrange a meeting if you wish to discuss your options and their implications.

In 1993, the United Nations General Assembly proclaimed that 15th May should be observed each year as the International Day of Families. The aim of this annual observance is to increase awareness of family-related issues, and to help countries to tackle these problems with comprehensive policies.

The United Nations states that this day “reflects the importance which the international community attaches to families as basic units of society, as well as its concern regarding their situation around the world.” The aim of the day is to mobilise action in countries across the globe, and to offer the opportunity for people to speak out about and demonstrate support of varying family issues in different societies.

2018

In 2018, the annual observance takes the theme of Families and Inclusive Societies, which aims to explore the role of families and policies in advancing the 17 Sustainable Development Goals, which include achieving gender equality, eradicating hunger, and providing clean water and sanitation for all.

These were adopted in September 2015 with the aim of ending poverty, protecting the planet and ensuring prosperity for everyone. For these world-changing objectives to be reached, it is important that everyone plays their part — that doesn’t just mean governments, international organisations, world leaders and the private sector, but civil society in general and each of us as individuals.

Here is a list of actions that you can do in your daily life to contribute towards a sustainable future, make an impact and be part of the solution (some of these can even be done from the comfort of your sofa).

In the good ol’ R. of S.A.

Every year, this day (2 April) is an occasion to promote a better understanding of the social, economic and demographic processes affecting the family unit. In South Africa, the family plays an important role in society, and nothing is arguably more important than making sure your dependents are safe, happy and healthy — while you’re still alive and after you’re gone.

In a country where divorce, unemployment, crime and health issues are rife, cover for dependents is more important than ever, and it’s advisable to do thorough research about what and who your medical aid policy will cover. Many schemes will cover you (principal member), your spouse (adult dependent) and children (child dependents) as members; and the same members should be covered if you take out a medical aid gap cover policy too. However, many factors determine who can be added to your medical aid scheme as a dependent. A dependent is classified as someone who depends on you financially, or who cannot take care of themselves due to a physical or mental disability — this does not need to be a blood relative, but you will need to be able to provide proof that they are dependent on you.

Medical aid schemes can vary on the age that they define children as becoming adults, but for most schemes, this tends to be at 21 years of age. The child can remain classified as a ‘child dependent’ for longer — even up to the age of 27 — If the parent can prove that the child is still dependent on them, be that because they are studying or unemployed.

If a child is included under a parent’s membership and the parent passes away, the dependent’s cover as a minor will remain valid so long as premium payments are maintained. In this case, children can often maintain the status of dependent until the age of 26, which will mean they are covered throughout university and early employment.

Many feel it important to ensure that their dependents will be taken care of after they’ve gone. If you are one of these people, do take the appropriate measures to cover any debts in case you pass away, and make sure you have the necessary life assurance products to cover you and your family in the event of a tragedy. A bit of planning and preparation are key to ensure that you have all your bases covered, so that you can rest assured that your loved ones won’t suffer any adverse financial consequences after your death.

The overarching goal of days such as International Day of Families is to make us realise the importance of what we often take for granted, and to review and rectify our situation so that we can protect those we love in the long-run.

Let’s pave the way this 15th May for an inclusive society that can work together towards sustainable development and look after each other for posterity.

Navigating today’s complex world can be challenging, and acting in an effective manner can help you to thrive in our current reality. However, research has shown that many people are not thriving in modern times or feeling fulfilled. Every individual has the potential for greatness but, in order to excel in our environment, we may need to change our mindsets, and develop new skills and habits.

Stephen Convey’s best-selling book, The 7 Habits of Highly Effective People, is based on principles of fairness, integrity, honesty, and human dignity; and it has been inspiring people to solve an array of problems for 15 years.

This thought leader’s message is simple — to find success and meaning, we must maintain solid principles. He teaches that “there are three constants in life: change, choice and principles.”

Let’s take a brief look at the habits summarised in his international bestseller to see what behavioural techniques can be developed and applied in a financial context. You may find it useful to practice some of these habits to improve your behavioural patterns, so that you can successfully reach your financial goals. Don’t hesitate to arrange a meeting if you’d like a bit of help along the way.

1. Be proactive

You may not always have control over what happens to you, but you do have control over how you choose to react to your circumstances, and that is often most the battle. You make your own choices, and every situation provides a new choice — so be proactive about taking responsibility for your life.

The book teaches that “proactive people recognise that they are response-able” and know they can choose how to behave. Whereas, reactive people are often easily affected by environmental conditions and find external sources to blame.

Problems, challenges and opportunities tend to fall into two areas — a Circle of Concern and a Circle of Influence. Proactive people focus their time and energy on things they can control, such as their physical and mental well-being, their family or their work. This is referred to as a Circle of Influence. On the other hand, reactive people tend to focus their efforts on a Circle of Concern, which is to say the things over which they have little or no control, such as politics or the weather.

Your greatest power lies between the stimulus and your response. Remember you are free to choose how you respond, so evaluate what issues you can control, then work out how to be proactive in doing so. For example, you know you can look after your family by taking simple steps, such as making sure you have adequate life insurance and income protection; and you can prioritise your health by making sure you have sufficient medical aid coverage.

2. Begin with the end in mind

The book offers the belief that all things are created twice — firstly as a mental creation, and secondly as a physical creation.

Are you who you want to be? If not, make a conscious effort to visualise what you want yourself and your life to look like. Take some time to reflect on what you believe to be your personal set of morals. Begin each day or task with a clear vision of where you want to be, then be proactive in taking the steps to get there.

You may find that writing a personal mission statement helps you to put your goals in focus and reaffirms who you are. Once this is all clear in your mind, you can set about securing the future you envision by taking appropriate measures, such as saving sufficiently for retirement.

3. Put first things first
Strive to live a balanced existence by recognising that you don’t have to do everything that is put in front of you. Be careful not to overextend yourself, but rather focus on your priorities.

It’s a question of managing your life in a way that will make you happiest. Decide what you value the most, then manage your time and choices to be in line with these personal priorities.

4. Think win-win

For many of us, our self-worth is based on comparisons. It’s easy to think about success in terms of someone else failing — if they lose, you win (or the other way around).

It would arguably be much healthier to view life as a cooperative arena, rather than a competitive one. Train your mind to always look for mutual benefits in all human interactions, so that everyone can win and feel satisfied.

This approach exercises integrity and maturity, as well as a mentality of abundance. It is a question of moving away from thinking in terms of “either/or”. You can be both nice and strong. Practice this balancing act between courage and consideration, and develop your sense of empathy as well as confidence.

5. Think first to understand, then to be understood

Good communication is one of the most important skills we can learn in life. However, there is often a tendency to focus on speaking, rather than listening.

One of the biggest communication problems is listening to be able to reply, rather than to understand. Sometimes we do this because we filter everything we hear through our own life experiences, so we think that we already know the answer. Many of us are also guilty of seeking primarily to be understood ourselves.

However, as a result, we often end up ignoring what someone is actually saying and missing their point entirely. When we listen ‘autobiographically’, we tend to respond in one of four ways — (1) We make a judgement that leads us to either agree or disagree; (2) We ask questions solely from our own frames of reference; (3) We rush to give unsolicited advice or incorrect solutions; (4) We analyse motives and behaviours based on our own experiences.

To understand things as they actually are, and to properly connect with another human being, we need to start listening properly — without judgement or bias, but with an open mind.

6. Synergise

To follow on from the last point is the habit of creative cooperation. This is understanding the importance of teamwork and finding new solutions to old problems. If you view your life and financial situation as a process, you can appreciate that external experience and expertise can help you to produce far better results than you could on your own.

No man is an island, and sometimes we need a little help from outside sources to achieve the optimum solutions. By committing to genuine interactions and remaining open to other people’s influence, you can gain valuable insights.

It’s important to be aware that you may not always know best, and you can exponentially improve your situation by valuing other people’s differences and what they have to offer.

7. Sharpen the saw

Protect and continuously develop your well-being by having a balanced approach in four main areas — physical (eat well, exercise and rest more) social/emotional (make meaningful connections with other people), mental (keep on learning — teach yourself and others), and spiritual (spend time in nature, expand your being with practices such as meditation or service to others).

By consistently trying to improve yourself in these areas, you may find yourself growing as an individual and naturally making changes in your life. You may also find it easier to handle any challenges that come your way. Take the time to work on yourself on a daily basis, as every day provides a new opportunity to recharge your batteries and avoid hitting a wall.

The empowering seven approaches of this highly-acclaimed book transcend socio-economic, religious, political, generational and gender differences. The principles can be recognised in every society and can be notably applied in a context of wealth creation.

The World Health Organisation (WHO) was founded on 7th April 1948, and this date is celebrated every year as World Health Day, with the goal of drawing attention to a specific global health concern.

Last year, the focus of the campaign was to mobilise action with regards to depression, and the theme for this year will be “Universal Health Coverage: everyone, everywhere.” The slogan and hashtag behind the 2018 drive is #HealthForAll, and the aim is to encourage and support countries to provide quality Universal Health Coverage for all citizens.

It is vital for leaders to understand the importance of investing significantly in human capital, as access to quality care not only improves people’s health and longevity, but it also prevents outbreaks of epidemics, and creates jobs, which in turn alleviates poverty and drives economic growth.

The World Health Organisation supports the principle that all people should have the right to live their life in good health. According to the organisation’s website, the Director-General said that “no one should have to choose between death and financial hardship. No one should have to choose between buying medicine and buying food.”

As WHO is also celebrating a notable rite of passage this year — its 70th anniversary — it is calling on world leaders to follow through on the pledges they made in 2015 when they agreed to the Sustainable Development Goals. From a South African perspective, it is important that we now commit to taking the concrete steps necessary to protect and ameliorate the health of all citizens.

Turning the spotlight on South Africa

Although South Africa does have a public healthcare system, it would be fair to say that it is severely lacking and is often unable to provide the quality of care, equipment, skill and service that citizens need and deserve. And unfortunately, the country still has issues with deadly outbreaks of diseases such as malaria, HIV, rabies and, most recently, listeriosis. These diseases particularly affect the poor, and highlight systemic failures in providing secure shelter and proper sanitation to many South Africans.

Having some form of private medical cover in South Africa is, therefore, still an arguably unavoidable and expensive necessity if you wish to have access to quality medical treatment if the need arises. According to statistics released by the Council for Medical Schemes (CMS), by the end of 2016, there were 82 medical aid schemes operating in South Africa, with a total subscription of just under 8.9 million members; and Discovery remains the country’s largest medical aid provider, with currently over 2.7 million members.

According to an article published on Business Tech, “over the past decade and half, the average year-on-year increase of medical scheme contributions has been 7.6%”. However, due to the country’s recent political and economic turmoil, many people’s salaries have not increased in line with this each year, and many citizens are feeling the financial strain of keeping up with their contributions.

As a result, some people have started looking for cheaper options, which is known as ‘buying down’, and the popularity of hospital plans is on the increase due to its affordability. However, this could have a significant impact on your health and future well-being, as certain schemes do not cover patients in full. Even if it is stated that hospital procedures will be covered 100%, this may mean that you will only be paid out in full for the tariffs that are specified by your scheme, rather than 100% of the actual treatment costs.

For example, if a specialist charges more than your scheme specifies, which is common, you will have to pay the balance yourself, which can be financially crippling. As a result, many South Africans also opt to pay for Gap Cover to cover any differences in rates, and this is yet another cost that must be budgeted each month.

A brighter future

However, the future is looking bright for South Africa now that Cyril Ramaphosa has been elected president and Jacob Zuma has left the building.

According to an article published by Eyewitness News, Ramaphosa has spoken frankly in the past about the country’s ailing health system and “has urged the Treatment Action Campaign (TAC) to take on government, and challenge officials to do more to improve the healthcare system.”
Now that he is president, it is essential that he doesn’t neglect the issue of National Health Insurance (NHI), which is an important implementation that would improve the lives of millions. The urgency of structural change to resolve the country’s crushing inequality should be at the forefront of our new leader’s objectives and, as citizens, it is up to us to collectively push for the right of everyone to have access to quality healthcare — #HealthForAll.
In the meantime, take the time this global awareness day to ensure that you understand the benefits and potential implications of your medical scheme. Rather than opting to ‘buy down’, research your options and don’t skimp on appropriate coverage if you can afford not to.
Don’t hesitate to arrange a meeting to discuss how you can ensure that you and your family are always fully protected in the event of any unfortunate circumstances – get the best advice and make the right choice..

Human Rights Day is celebrated annually in South Africa on 21st March, and is arguably one of the country’s most important public holidays. The commemoration of this day serves as a reminder to all citizens of the country’s struggle for democracy, and the sacrifices that were made on everyone’s behalf to attain the basic rights of dignity, equality and freedom.

As well as being a remembrance of the suffering that was endured in the days of apartheid, this national day is also a celebration of the rights that everyone living in the RSA now enjoys (and often takes for granted).

One of the most notable celebrations is the Cape Town Festival, which aims to promote tolerance and understanding of diversity through performances, workshops and various artistic endeavours. While other events around the country are designed to draw attention to current human rights concerns, such as racism and police brutality.

A bit of background

Back on 21st March 1960, thousands of unarmed South Africans gathered in a township called Sharpeville to peacefully protest against the atrocious apartheid government and its pass laws, which required indigenous adults to carry a passbook with them everywhere (this allowed the regime to control travel and dictate the duration for which black South Africans could stay in white areas).

However, as the crowd grew in size, tensions increased along with the police presence. 150 armed reinforcements and four armoured personnel carriers arrived, and the police eventually opened fire on the crowd, murdering 69 people and injuring 180 more.

This massacre became a turning point in the struggle for human rights in South Africa, which finally came to a head on 27th April 1994 when Nelson Mandela was elected as president. Shortly after his election, Tata Madiba announced 21st March to be Human Rights Day, in order to pay tribute to the people who fought for the freedom of all South Africans.

Know your rights

The South African Constitution protects the human rights of all its citizens. These rights were previously denied to the overwhelming majority of the population, and Human Rights Day thus serves as an important reminder to us all to reinforce our commitment to the Bill of Rights that is specified in the Constitution.

These hard-earned rights stipulate that everyone is equal before the law and thus has the right to equal protection and benefit of the law. The bill also includes the right for inherent human dignity to be respected and protected; the right to freedom of movement and residence anywhere in the country; the right to participate in the cultural life of choice; and the right to peaceful protest.

Financial rights?

Likewise, being financially secure and having access to a certain standard of living is also an important goal that all South Africans should strive for. Knowing how to make your money work for you can greatly relieve stress, as well as improve the quality of your life and afford you the freedom of choice.

Protections and benefits come in different forms, and there are ways to make the most of your earnings so that you can live comfortably and look after your family — even after you’ve gone. The key is to be aware of your entitlements, so that you can maximise your benefits and ensure you are protected in the event of any unforeseen circumstances.

The battle against the oppression of apartheid may have been won, but we still need to fight for the right to financial security. Don’t hesitate to arrange a meeting if you wish to discuss any legislative rights that could help to improve your financial situation.

Being unable to temporarily – or permanently – work as a result of a serious illness or injury can put a serious strain on your financial well-being. In this day and age, an income protection policy can, therefore, prove vital, as it ensures that you will receive tax-free monthly payments if you ever cannot work. Basically, income protection (sometimes called ICB – Income Continuation Benefit) is designed to replace lost income, so that you can maintain the same lifestyle that you enjoyed whilst working.

Whether you’re self-employed or formally employed, protecting your earnings should be considered a critical component of your financial planning portfolio. An income protection policy will help you to remain financially secure, no matter what unforeseeable life event occurs.

It essentially offers the peace of mind that you will always be able to meet your financial obligations and take care of your family, especially given as many employee-sponsored schemes will not provide sufficient cover.

What are the benefits?

Income protection benefits can replace income, service debt and monthly obligations (thereby indirectly protecting your credit rating), provide cover until retirement, and protect you in the event of permanent and temporary disability. As opposed to the traditionally-preferred lump sum disability benefit, income protection benefits are notably easier to claim, involve shorter waiting periods, and allow you to make multiple claims.

As income can be inflation-proofed, one of the benefits of income protection is that it will allow you to maintain your standard of living, rather than need to adjust it to fit a lump sum.

What’s best for you?

Although income protection is often argued as a more desirable option than lump sum disability cover, ultimately these policies are designed to meet different requirements. It is advisable to never rely solely on a lump sum disability benefit to cover an income need, but we may feel that a suitable scenario for you is a combined approach. This should always be discussed, in person, in a proper planning meeting where your full lifestyle financial plan can add valuable context to this decision.

It is also worth noting that any changes in tax legislation may require adjustments, so be sure that you stay informed and understand any implementations that could affect your payments and benefits.

Income benefits have come a long way since the days when only 75% of a client’s income would be covered if they couldn’t work. Recent additional product benefits can include holistic protection against several eventualities that could threaten your earnings, such as family responsibilities and retrenchment.

It is important that your income protection meets your specific needs at a premium that you can afford (while also not placing you at risk of being under-insured), so don’t hesitate to arrange a meeting to discuss your options and ensure you understand the claims criteria. Remember, nothing on our website constitutes actual financial advice, but is aimed to bring context and supporting information to the fore.

Arguably, one of the best things about spring in South Africa — apart from the pleasant weather and the abundance of Easter eggs — is the public holidays!

Many people in South Africa work very hard. Legislation regarding the Basic Conditions of Employment dictate that employees are entitled to 21 consecutive days of annual paid leave, which equates to only 15 working days per year if you work a five-day week, and 18 working days per year if you work a six-day week.

Unfortunately, this isn’t very much compared to many other countries. You may be interested to know that most employees who work a five-day week in England are entitled to at least 28 days of paid annual leave per year, which is equivalent to 5.6 weeks of holiday. However, there’s no use crying over our lot, and there’s not always much we can do about South African legislation. We simply need to make the most of our entitlements, and we can start by being savvy when it comes to how and when we take our leave.

17 DAYS FOR 8
The good news is that there are more public holidays in South Africa than many other countries. And the steady flow of national days in March, April and May make for the perfect excuse to unplug and step away from the daily grind. Already a quarter of the way through the year, you’re in luck if you feel in need of a long break because you can start getting ready for a 17-day holiday that will only use up about half of the basic annual leave.

With a bit of forward thinking, you can really make the most of the sunshine and public holidays at the start of spring. Combined with weekends, Human Rights Day on Wednesday, 21st March, Good Friday on Friday, 30th March and Family Day on Monday, 2nd April mean that if you leave on the evening of Friday, 16th March and return on the evening of Monday, 2nd April, you can turn on your Out-of-Office for 17 glorious days, whilst only needing to apply for eight days of leave. You can start back fresh at work on the morning of Tuesday, 3rd April, with a contented grin on your face, knowing you’ve managed your time and entitlements well.

10 DAYS FOR 4
Don’t despair if you have children and need to fit in with school holidays, as you can still get a good run by going away on the evening of Thursday, 29th March and returning to work on Monday, 9th April. This will make use of Good Friday and Family Day, giving you a 10-day holiday, while only needing to take four days off from work.

5 DAYS FOR 1
And if that weren’t enough, you can also make the most of a lovely long weekend at the end of April — perhaps this could be spent as a romantic couple’s break that would give you and your loved one the chance to spend some quality time together. This year, Friday, 27th April is Freedom Day and Tuesday, 1st May is Worker’s Day, so if you take the initiative to book Monday, 30th April off work, you can kick back and enjoy a five-day break, while only needing to use one day of annual leave.

If you use the time wisely, you stand to get 22 days off work in March and April for just 9 days of annual leave! Once you’ve had the nod of approval, all that remains is to decide where you want to go – or if you even want to go anywhere. Although it is possible to find some great last-minute deals, you could stand to save money and precious holiday time if you make a few preparations and bookings beforehand. So pack your slops and start planning!

(Article ideas from all4women.co.za and iol.co.za)

South Africa is currently in the midst of what is widely referred to as a ‘retirement crisis’, which could intensify if the issue isn’t addressed properly soon. After a period of excellent investment returns that have, up until recently, somewhat masked the fact that retirees in living annuities haven’t saved enough, local retirement fund members have now entered a lower-return environment, which will only exacerbate the problem.

Only a small percentage of the population is believed to be in a position to maintain their standard of living in retirement. And, according to a survey conducted in late 2016, approximately 30% of working South Africans have no formal retirement provision whatsoever.

Early withdrawals of retirement savings are considered to be one of the main reasons for this dire situation. And a variety of economic factors may be responsible for this concerning attitude to withdrawals.

Notably, disposable income has come under pressure in recent years, which has resulted in many people falling into debt or struggling to meet their daily needs. Many citizens earn less than R5,000 a month and are in survival mode, and a lack of financial literacy is also arguably an issue, as many people don’t understand the benefits of compound interest, or don’t realise the impact that early withdrawals could have on their future.

Roughly a quarter of the population also doesn’t believe that they will even reach retirement age, and recent changes to the Taxation Laws Amendment Act have caused some people to fear that the government could take their retirement money.

The process of retirement reform is slowly taking its course in South Africa, and compulsory annuitisation in the provident fund space is potentially on the cards. However, as South Africa doesn’t have the option of being bailed out by the fiscus, it is more important than ever that all citizens prepare for their retirement and plan how best to achieve their financial goals.

Here are 5 tips that could help you to avoid being part of this ‘retirement crisis’.

1. If you change jobs, don’t just cash in your retirement savings. And even if you quit the 9-to-5 grind, consider not completely exiting the workforce. Part-time work that you enjoy may still bring in a significant sum per month, and will reduce how much you need to dip into your savings.
2. Don’t underestimate how long you may live. Due to the prevalence of HIV/AIDS, South Africa may tragically have the lowest life expectancy in the world, but the US Census Bureau has noted a change in prospects for the country. By 2050, the population of people over the age of 65 is expected to jump to 5.6 million, up from the 3.1 million that it was in 2015.
3. Factor in healthcare costs. Medical costs will undoubtedly rise each year, so be sure that you have appropriate medical aid, as well as enough savings to pay for any expenses that aren’t covered.
4. Don’t ignore major expenses that could affect your monthly budget. These could include foreseeable events, such as helping your children to pay for university fees, but could also include less predictable occurrences, such as needing to fix a car or fly abroad for a wedding.
5. Simplify your finances. If you have multiple savings accounts, it may be worth consolidating them so that you have a better idea of your overall asset allocation and can avoid any overlaps. You may also benefit from a revised fee structure or enhanced compound interest.

The retirement crisis doesn’t have to directly affect you, so long as you take some simple steps now to prepare in advance for your future. Don’t hesitate to arrange a meeting to discuss the best ways to ensure you will have enough savings to sustain you throughout what will hopefully be a long and happy retirement.

Original source:

aarp – Achieve retirement planning financial goals

moneyweb – retirement crisis could get worse

Retirement Annuities (RAs) have been around for a long time, and are basically private pension plans that help you to save for retirement. As we near the end of yet another tax year, we move into a period that is often referred to as RA season, which is a good time to weigh up the advantages of this investment product.

Over the years, RAs have evolved into much more flexible and affordable investment vehicles than they once were, and investors can now benefit from “new-generation” RAs on linked investments platforms (LISPs). These offer a vast selection of underlying unit trusts, and they allow contributions to be made at the investor’s discretion, without penalties for missed contributions.

The most significant benefit of having a retirement annuity is the tax deductibility of contributions. According to an article published on Fin24, as of 1st March 2016, “all contributions to pension, provident and RA funds are consolidated and are deductible up to 27.5% of the greater of remuneration or taxable income, capped to R350,000 annually.” An investor can expect to receive an annual tax refund in line with their income, and this RA rebate can considerably boost your retirement benefit.

Capital gains tax normally needs to be paid for any discretionary investment, but this isn’t the case with an RA. Interest and dividends are also not taxed in an RA, which means that the entire growth of your investment is tax-free, which makes a significant difference over the long-term.

Do be aware that when you do finally retire after the age of 55 and are finally allowed to take up to one third of your RA in cash, you will have to pay tax on the proceeds taken. However, a portion of the lump-sum benefit is tax-free and the rest is taxed on a sliding scale. And, as you have deferred paying tax on the proceeds, a larger investment amount has had the chance to compound tax-free over time.

Come retirement, the other two thirds of the proceeds from your RA will be used to purchase an annuity, which will then provide you with an income to sustain you in your golden years. You will need to pay tax on your monthly “income”, but many individuals’ personal tax rates decrease after they retire.

An RA presents another advantage when it comes to estate planning, as it falls outside of your estate, so the proceeds from your RA will be paid directly to your nominated beneficiaries when you pass away, without the estate duty or executor’s fees. For the most part, your money is also protected from the claims of creditors, which is another yay for RAs.

In spite of this list of positives, many investors feel uneasy when it comes to retirement annuities and are reluctant to consider them as an investment option. However, it’s important to understand that RAs have evolved significantly, become much more affordable, and new regulations have been implemented to minimise risk and force investors to diversify. This may not be considered as a positive thing by everyone, as Regulation 28 of the Pension Funds Act does restrict investors to a maximum of 75% allocation in shares, which many people debate as shares have managed to outperform all other asset classes over the long-term. However, this risk management method was implemented to benefit broad spectrum investors in different environments, and it offers more investment protection when markets become volatile.

If your objective is to specifically save for retirement, a retirement annuity could be the best vehicle for you. So don’t hesitate to arrange a meeting this RA season to discuss your options and goals.

Original source:

fin24 – take advantage of RA season

fin24 – does the taxman help you save for retirement

fin24 – regulation 28 and the growth of your RA

fin24 – new retirement fund rules to better protect consumers

taxtim – How SARS new changes affect you