NFB Sensible Finance Magazine Issue 20
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Transcript of NFB Sensible Finance Magazine Issue 20
Eastern Cape's Community...
PERSONAL FINANCE
A FREE publicationdistributed by NFB Private Wealth Management
p r i v a t e w e a l t h m a n a g e m e n t
Issue 20March 2012
NFB
PERSONAL FINANCEMagazine
Eastern Cape's Community...
How much do I need toretire in comfort?
A SNAPSHOT OFTHE 2012/2013BUDGET SPEECHHow will thisimpact you?
GAMBLERS BEWARE!A tax on gambling
winnings is imminent
RETIREMENTRETIREMENT
“The best way of preparing for the future is to takegood care of the present, because we know that ifthe present is made up of the past, then the futurewill be made up of the present.
Only the present is within our reach. To care forthe present is to care for the future.”
- Buddha
p r i v a t e w e a l t h m a n a g e m e n t
East London tel no: (043) 735-2000 or e-mail: [email protected]
Port Elizabeth tel no: (041) 582-3990 or email: [email protected]
Johannesburg tel no: (011) 895-8000 or email: [email protected]
Web: www.nfbec.co.za
NFB is an authorised Financial Services Provider
contact one of NFB's private wealth managers:
fortune favours the well-advised
Providing quality retirement,
investment and risk planning
advice since 1985.
a sensible read
The Greek debt crisis is an all too familiar topic right now as
decisions are being made on Greece's future in the Eurozone
and austerity measures to try keep the country from defaulting
and the problem as contained to Greece as possible. But what is
important to understand is what led to the problem escalating to
such a degree and how can we, as individuals, learn from this
expensive lesson.
Essentially the reason for the crisis was decades of over-
spending and poor fiscal management, coupled with failing to
record billions of Dollars of expenditure to appear compliant with
budget deficit requirements of the Maastricht Treaty. In addition,
Greece then manipulated the EU into lending them money for years
and instead of using the funds to generate real returns back into the
world economy, they used the funds to ensure that Greeks lived well
beyond their means, confident that the IMF or EU would rescue
them if need be when time came to repay.
And some of the results of such irresponsible governance are
forced cuts in wages, losses of jobs, reductions in pensions and bond
holders taking huge losses on government bonds. Furthermore,
Greece will need to spend many years repaying the EU for the
bailout amount borrowed and is unlikely to see any economic
growth for around the next decade, deepening an already five
year old recession.
And that is the crux of it. Just as a country cannot live beyond its
means for any extended length of time, neither can individuals! And
if one does try to do so, the results can be devastating and take
years to recover from. It is simply not worth the gamble. So if you are
someone with a heavy bond that you are still trying to pay off or if
you have various accounts that are adding up, think twice before
you decide to upgrade your car or redo your house! And even if
you do have some extra disposable income at hand, you may want
to consider investing it for that rainy day – something that I am sure
most Greeks wish they'd done when they had the opportunity!
Brendan Connellan - Editor and Director of NFB
editor
Advertising
layout and design
Address
Contributors
Brendan Connellan
Laurie Wiid (NFB Gauteng), Travis
McClure (NFB East London),
Emmanuella Fernandez (NFB
Gauteng), Shaun Murphy
(Klinkradt & Assoc.), Grant Berndt
(Abdo & Abdo), Sheldon
Holdsworth (OMI), Cilma Heyns
(Glacier by Sanlam), Michelle
Wolmarans (NFB Insurance
Brokers), Natalie Dillion (Old
Mutual), Robert McIntyre (NVest
Securities), Evan Walker
(Momentum Investments).
Robyne Moore
The views expressed in articles by
external columnists are the views
of the relevant authors and do not
necessarily reflect the views of the
editor or the NFB Private Wealth
Management.
©2012 All Rights Reserved.
No part of this publication may be
reproduced in any form or
medium without prior written
consent from the Editor.
Jacky Horn TA Willow Design
NFB Private Wealth Management
East London Office
NFB House, 42 Beach Road
Nahoon, East London, 5241
Tel: (043) 735-2000
Fax: (043) 735-2001
E-mail: [email protected]
Web: www.nfbec.co.za
a sensible read
sensible finance ED’SLETTER
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sensible finance march12
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GAMBLERS BEWARE!
PROTECTION THAT PAYS - DIRECTORS AND OFFICERSLIABILITY COVER
INTRODUCING OLD MUTUAL INTERNATIONALINVESTMENT PORTFOLIO
IS YOUR FINANCIAL PLANNING IN ORDER?
RETIREMENT - HOW MUCH DO I NEED TO RETIRE INCOMFORT?
DEFERRED COMPENSATION SCHEMES AND THE NEWTAX LAWS
SOUTH AFRICANS NEED DISABILITY COVER
2012 TAX RELATED BUDGET PROPOSALS
THE PRICE OF BEING TOO CONSERVATIVE
MOMENTUM SMALL/MID-CAP FUND WINS A TOPOUTRIGHT PERFORMER AWARD FOR THE FOURTHCONSECUTIVE YEAR AT THE 2012 RAGING BULL AWARDS
YOUR RA HAS MORE ADVANTAGES THAN YOU THINK
SASOL MAKES FOR A GREAT INVESTMENT
Q &A
A tax on all gambling winnings is imminent.
Minimize your company's risk by ensuring you have the correct policies in place.
A checklist to ensure you're on the right track.
The answer seems to be a moving target.
The changes are effective March 2012.
Has your cover been appropriately tailored for your needs?
A summary of the tax related budget proposals announced by the Minister ofFinance on 22 February 2012.
Be wary of the “safe” cash option.
More than just an opportunity to add to your retirement.
A further look at the core holdings in NVest's general equity portfolios.
You ask. We answer. Advice column answering your investment, personal finance,life and/or risk insurance questions
By Grandt Berndt, Abdo & Abdo.
By Michelle Wolmarans, Manager - NFB Insurance Brokers (Border).
By Sheldon Holdsworth, Regional Manager – Offshore Distribution, Old MutualInternational.
By Julie McDonald, Paraplanner -NFB Private Wealth Management.
By Laurie Wiid, Director / Private WealthManager - NFB Gauteng.
By Natalie Dillon, Senior Legal Advisor - OldMutual Broker Division.
By EmmanuellaFernandez, Paraplanner - NFB Gauteng.
By Shaun Murphy, CA (SA), Partner - Klinkradt &Associates.
By Henry van Deventer, financial planningcoach at acsis. Source: www.fanews.co.za.
By Evan Walker, Portfolio Manager - Momentum Investments.
By Cilma Heyns, BusinessDevelopment Officer - Glacier by Sanlam.
By RobMcIntyre, Portfolio Manager - NVest Securities.
with Travis McClure, Private Wealth Manager -NFB East London.
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A tax on all gambling
winnings is imminent. By
Grandt Berndt - Abdo & Abdo
GAMBLER'SBEWARE!
SENSIBLY LEGAL
The threat of a tax on all gambling winnings,
whether at a Casino, through the lottery or at
the horses appears to be imminent.
In the 2011 budget speech, the Minister of
Finance stated that as from April 2012 all winnings
above R25 000.00 will become liable to a final 15%
withholding tax. Needless to say the gaming
industry is none too pleased with this proposed tax.
A withholding tax, by definition, means that an
amount of money must be deducted from the
income and paid directly to SARS. The difference
between the proposed gaming tax and other
withholding taxes is the use of the word "final" by
the Minister of Finance. Most withholding taxes are
imposed on non-residents to obtain taxes from
them. For instance, if a non-South African resident
sells immovable property of a value exceeding R2
000 000.00 then the purchaser, the estate agent
and conveyancing attorney must ensure that a
percentage of the sales price is withheld from the
seller until such time as SARS have calculated the
Capital Gains Tax due. The seller is then refunded
any excess amount withheld.
However, with the proposed gaming tax, it is
imposed on all winnings in South Africa, whether of
South African residents or not and is a final tax. In
other words, irrespective of whether the gaming
winner is a recreational or a professional gambler
or whether the recreational gambler pays an
average income tax of 10% or pays income tax at
the marginal rate of 40%, they will all pay a "final"
tax of 15%.
When Capital Gains Tax ("CGT") was
introduced on 1 October 2001, the calculated
capital gain was added to ones taxable income
for the year of sale of that asset. For example, if
the capital gain was R500 000.00, 25% of this gain is
added to the taxable income for the individual in
the year of sale. So if the individual is paying an
average rate of 20% income tax, the effective CGT
payable would be calculated as follows:
R500 000.00 x 25% = R125 000.00 x 20% = R25
000.00 (or 5% of the full capital gain)
However, if the individual was paying an
average income tax of 40%, the effective CGT
payable would be:
R500 000.00 x 25% = R125 000.00 x 40% = R50
000.00 (or 10% of the full capital gain)
Our tax system initially only taxed gross income
being what was commonly known as "income" or
"revenue". However, with the introduction of CGT,
certain accruals of a capital nature also became
taxable. With CGT the tax payer can, however,
offset certain expenses such as the cost of the
asset and any improvements effected, thus
ensuring that he pays a maximum of 10% of the
actual capital gain (if the tax payer is at the
marginal rate of tax). With the proposed final
withholding gaming tax, there is no differentiation
between the professional and recreational
gambler, nor as between recreational gamblers,
their levels of income, as there is with CGT. The
gaming winner also cannot offset the losses
incurred in trying to hit the jackpot from any
winnings. The further question arises whether the
professional gambler will now no longer have to
submit a tax return to SARS.
The implementation of this tax will place
onerous obligations on gaming institutions who are
consulting with government in this regard and it is
thus anticipated that the implementation of this tax
will be delayed, but the one thing we can be
certain of, is that it is coming.
4 sensible finance march12
i n s u r a n c e b r o k e r s ( b o r d e r ) ( p t y ) l t d .
Governments worldwide are implementing
and developing new legislation pertaining
to the regulation of companies in order to
prevent the reckless corporate behaviour that we
have witnessed in recent years. A director, board
committee member or any person who controls or
manages a significant portion of a company can
be sued for any perceived breach of duty by
shareholders, employees, customers, competitors,
creditors, investors, suppliers and regulators. In
South Africa the new Companies Act, The
Consumer Protection Act and the King III Code of
Governance have resulted in the codification of
directors' common law fiduciary duties and
responsibilities and introduced statutory liability for
these individuals in their personal capacity.
The general public's heighted awareness of
their rights and the recourse they have against
negligent parties has significantly increased the risk
of litigation. A judgement against a director could
result in huge financial losses, and in the event that
judgement is not made, the legal cost of defence
can in itself be crippling. In order to manage and
minimise this risk it is imperative that both private
and public companies have a Directors and
Officers Liability Policy.
The policy pays for defence costs and financial
losses in the event of a claim. It also extends to
cover costs incurred in the course of investigations
by regulators and public relations expenses.
The policy provides cover for past, present and
future directors, officers of a company and
employees in a managerial or supervisory
capacity. In addition the policy extends to protect
spouses, administrators and executors of an
insured's estate.
The policy will not pay for defence costs or
compensate for financial losses resulting from
dishonest and fraudulent acts, illegal remuneration
or personal profit, existing or known claims or
circumstances, property damage and/or bodily
injury.
A small shareholder in a
private company took action against the directors
alleging that over a period of several years, the
directors had abused their positions by paying
themselves excessive salaries, but paying low
dividends to the shareholders. The shareholder
applied to the High Court for a review of the
directors' actions and demanded that they repay
over R11 million to the company.
A female employee accused
her superior of sexual harassment and denial of
promotion. The employee sued the superior and
the company and sought millions in compensation.
Directors were prosecuted
by local authorities after persistently failing to
comply with fire regulations.
An action of
breach was brought against a director following
the release of an employee's medical records.
The plaintiff filed a complaint
against the directors of a company alleging that
they conspired to use the plaintiff's services to
furnish, install and repair company equipment
knowing it was insolvent and were planning to file
for bankruptcy protection.
Getting the appropriate advice from your short
term insurance advisor and putting in place a
Directors and Officers Liability Policy will ensure
access to quality attorneys whilst protecting a
company's cash flow. Defence costs are covered
by the policy, protecting a director's personal
wealth, and allowing management to focus on
running the business effectively rather than
managing protracted litigation which is not only
costly in monetary terms, but is also mentally taxing
and takes up a huge amount of time that could be
invested in the company.
If you are a director of any company, do not
delay in contacting Richard Clarke or Steven Pope
to arrange an appointment to discuss putting a
Directors and Officers Liability Policy in place for
your business.
Shareholder claim:
Employee claim:
Regulatory claim:
Breach of Companies Act:
Creditor claim:
What does this policy cover?
Who does the policy cover?
What are key exclusions in the policy?
Examples of claims
Minimize your company's risk by ensuring you have the correct policies in
place. By , NFB Insurance Brokers, ManagerMichelle Wolmarans
PROTECTION THAT PAYSDIRECTORS AND OFFICERS LIABILITY COVER
Sources of information:Cover magazine November 2011; Chartis Insurance Company
Old Mutual International has launched a
new investment product for the
sophisticated investor which can
accommodate their R4 million direct offshore
investment and R1 million discretionary offshore
investment allowance and also allows investors to
transfer their existing offshore assets (including
asset swaps) into their Investment Portfolio at the
outset, subject to certain acceptance criteria.
The Old Mutual International Investment
Portfolio is issued by Old Mutual Isle of Man, a
branch of Old Mutual Life Assurance Company
(South Africa) Limited, a registered long-term
insurer and licensed Financial Services Provider.
Designed specifically to allow you, the investor,
to hold, consolidate and manage your
international investment holdings in one place, the
Old Mutual International Investment Portfolio,
provides you with access to a range of
international assets via a tax-efficient life wrapper.
Due to the relationship between Old Mutual
Life Assurance Company (South Africa) (Pty) Ltd
and our Reinsurance company, there is no tax in
South Africa in respect of returns earned. In
essence, any returns on the Investment Portfolio
accumulate tax free.
It is possible that withholding tax may be
deducted from some of the dividends at their
country of origin. However, once the dividend is
received, its reinvestment can accumulate tax free
inside the Investment Portfolio.
Buying and selling assets within the Investment
Portfolio will attract no liability to capital gains tax.
The Investment Portfolio provides you freedom
of choice through access to an array of
international assets. These include collective
investments, bank accounts and stocks and shares
quoted on recognised stock exchanges, fixed-
interest securities, multi-currency deposits, hedge
fund of funds, structured notes, exchange-traded
funds and other alternative investments.
Specifically excluded are investments in any Old
Mutual or Skandia Group Company.
The Investment Portfolio may be denominated
in euros, UK pounds, Australian dollars, Swiss francs
and US dollars, in recognition that investors may
hold existing funds in a variety of currencies. The
minimum initial investment is £100 000 or 150,000 in
other currencies.
The Investment Portfolio is structured in such a
way that the underlying assets are held in safe
custody by an authorised custodian. Initially, Old
Mutual International has agreed to terms with
Savoy International Investment Service, amongst
others. We will continue to add to the list of
custodians/offshore stockbrokers, such as Investec,
Fairbairn Private Bank etc.
In the event of death, you can choose to have
the contract transferred to a nominated
beneficiary rather than to your estate, subject to
there being no surviving contract holders. This
avoids probate, reduces delay and costs, and
gives you the reassurance of knowing what will
happen to the Investment Portfolio after death.
You may also appoint secondary beneficiaries in
the event that the appointed beneficiaries
predecease you.
For more information, please contact Sheldon
Holdsworth on 041 5024244, or 0824544836 or
visit www.oldmutualinternational.com
By , Regional
Manager – Offshore Distribution,
Old Mutual International
Sheldon Holdsworth
IntroducingOld Mutual
InternationalInvestment Portfolio
SENSIBLE INVESTMENT
7sensible finance march12
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“Yes”, you may say, “I have a provident fund at
work for my retirement savings, some life cover and
a small investment portfolio”. But is that all that
needs to be considered?
Life cover
Lump sum Disability & Income protection
Severe Illness
Buy and Sell Agreements
Do you have your own business? Are you
protected against loss of your income due to
disability? Do you have children and need to
provide for their future educational needs? Is your
will in order?
All of these need to be considered when
checking through your financial plan.
Go through the items below and see if you
have considered these to make sure your financial
planning is on the right track.
This makes provision for dependants who will be
responsible to settle outstanding debt, estate duty
and many other expenses and liabilities on behalf
of the deceased, as well as enables those that are
left behind to maintain a similar lifestyle to that
which they have become accustomed. This is the
most important risk to be covered against,
especially for asset owners. The costs arising from a
deceased estate, assuming the estate to be
greater than R3.5 million, may be significant and
there may be liquidity issues.
In the event that you become disabled through an
accident or illness, would you need a lump sum to
make adjustments to your lifestyle? Would your
income decrease due to an inability to work or
your capacity to work becoming limited? If any of
the above applies to you, then you would need to
review your disability cover and determine whether
it would be sufficient to provide for the above
needs.
This cover compensates for lifestyle adjustments,
the cost of treatment and possible loss of income
as a result of a severe illness such as a heart attack,
cancer or a stroke.
In addition, most employed people have a
medical aid nowadays, but your medical scheme
may not cover all the costs associated with a
severe illness. You will, therefore, need money to
pay for additional medical accounts, treatment in
a recuperation clinic or professional medical care
at home. Other basic expenses such as a home or
car loan repayments, childcare expenses or the
cost of having to take long leave or possibly travel
for treatment will also need to be covered. Severe
illness cover is meant to help account for such
additional expenses.
Are you a partner in a business? Have you
considered if you have enough funds to purchase
the shares of the other partners in the business
should they die? Would you be happy if the person
who inherited your business partner's shares
decides that they want a say in the business? You
Risk Planning:
Business Assurance Planning:
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A checklist to ensure
you're on the right track.
By ,
Paraplanner - NFB
Private Wealth
Management.
Julie McDonald
Is your
in order?Financial Plan
SENSIBLE PLAN
continued on page 15...sensible finance march12
12
By Laurie Wiid, NFB Gauteng,
Director/Private Wealth Manager
How much do I needto retire in comfort?
How much do I needto retire in comfort?
This question is asked by all of us, many times
over and the answer seems to be a moving
target. The problem, of course, largely due
to the influence of a 1% or 2% change in the
variables used by the financial model to determine
this magical capital amount that you require. A
few other reasons that will influence the capital
required at retirement, include:
The real inflation that you and I experience in
our budgets is greater than expected.
The inflation rate used in the scenario cannot
be the official CPI statistic as we typically
experience higher increases in electricity, fuel,
medical aid contributions and food.
The real growth that we achieve can be lower
than forecasted.
Be careful not to be over optimistic with your
return forecast.
Higher returns normally require higher risk
investments.
A major stock market collapse can take several
years to recover the losses sustained and makeup
the returns that should have been achieved over
this period.
This is evident from the equity market collapse
of 2008; resulting in the average equity fund only
yielding 7% p.a. over the past 5 years.
The longer you are invested in the stock
market, the less vulnerable you are to such volatility
or under-performance.
New expenses arise that were not budgeted for,
for example:
More and more families have loved ones that
have emigrated and as a pensioner the cost of
international travel can be significant.
A spouse suffers from a severe illness and
requires specialised care that is not fully covered
by the medical aid.
A financial setback.
Retrenchment or early retirement can affect
your ability to save the required monthly amount
for your retirement.
You may lose a large capital sum due to a
poor investment decision or being forced to help a
family member.
Your business fails to realise the capital sum
that you expected or you file for bankruptcy.
A collapse in your marriage requiring the division
of your assets.
With the high divorce rate in South Africa, the
division of assets can destroy significant wealth for
both parties who must now rebuild their financial
security.
Three friends start work at the age of 25 and earn a
salary of R7,500 p.m. Their career paths are similar
with similar earning patterns. The following
scenarios unfold:
Salary increases at 6% p.a. with promotion
increases along the way resulting in an average
salary increase of 9.20% p.a.
A savings rate of 15% of their salary is
recommended by their financial advisors
John follows this advice and his portfolio
performs at 12% p.a. average for the 40 years
Simon follows this advice and his portfolio
performs at 10% p.a. average for the 40 years
Justin only starts to save at age 41 and his
portfolio performs at 12% p.a. for the remaining 25
years
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Three Retirement Scenarios
RETIREMENTRETIREMENT
sensible finance march12
At age 65 the three friends turn to their financial
advisor to structure an income for their retirement.
The requirement is to provide an income of 75% of
their final salary (i.e. R190,560 p.m.) with an inflation
increase of 8% p.a. on the basis that the investment
return will be 10% p.a. In other words a real growth
of 2% is attained.
John's capital base will provide this income
with ease and continue to grow to age 93 before
the capital starts to decline. Simon's capital will be
depleted at the age of 87 while Justin's capital will
be depleted at the age of 81. The graph below
illustrates the capital values of these three
scenarios.
Given longevity and modern medical care, let
us assume that each of the friends project their life
expectancy to be age 90. What is the maximum
monthly income that they can expect to draw
when they retire?
John R 190,560 p.m.
Simon R 164,207 p.m. (14% less than John)
Justin R 126,036 p.m. (34% less than John)
Because John was a disciplined saver, he had
amassed a capital sum of R1,490,474 by
the time Justin started saving at the age
of 41. The compound effect on this
capital sum is what gives John 34% more
income in his retirement years.
We all have different earnings
capacities, monthly budgets and
circumstances that will influence our
ability to save. So, is there a general Rule
of Thumb? In the days of higher returns,
investors were said to require 10 times
their annual pension as a capital base. Given lower
investment returns and higher inflation figures, this
multiple has risen to 15 times the annual pension
required – only to secure income for just over 20
years. Unfortunately this is still not adequate for
comfortable retirement with today's longevity. The
multiple is now closer to 19 times the annual
pension required.
1. Start saving as soon as possible
2. Save 15% of your earnings
3. Don't use long term savings for short
term needs
4. Constantly review your retirement
plan – actual vs target
5. Ensure that under-performing assets
are identified early
6. Protect your capital from “scamsters”
7. Take advantage of tax breaks
afforded by Retirement Annuities
8. Diversify your investments across
investment classes and a variety of
products
Those of us that are formally
employed normally have the luxury of a
company Pension or Provident Fund. The
combined savings rate can vary between 10% -
20% of pensionable salary. Provided this is well
managed and you avoid early withdrawal or
retrenchment, this will go a long way in securing
your financial independence in your retirement
years. Further voluntary savings and the benefit of a
husband and wife both saving for retirement should
secure you an adequate retirement.
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The Rule of Thumb
Steps to secure yourretirement plan
SENSIBLE INVESTOR
13
John Simon Justin
12% return 10% return 12% return
Age Salary Savings Capital Capital Capital
25 R7,500 R1,125 R14,268 R14,136 R -
30 R13,224 R1,984 R153,365 R144,725 R -
35 R27,980 R4,197 R538,610 R485,925 R -
40 R59,200 R8,880 R1,490,474 R1,287,826 R -
45 R79,223 R11,884 R3,562,495 R2,931,188 R854,757
50 R106,019 R15,903 R7,615,830 R5,909,771 R2,696,691
55 R141,877 R21,282 R15,366,393 R11,178,133 R6,429,808
60 R189,863 R28,480 R29,964,549 R20,338,244 R13,729,486
65 R254,080 R38,112 R57,177,817 R36,067,901 R27,683,631
sensible finance march12
may need to consider a Buy and Sell policy.
Is there someone in your business that is vital to the
running of the business? If they had to pass away,
would the business and the future of the business
be affected? Do you have the additional funds to
recruit a new person for the position? Can you
cope with the loss of revenue due to loss of a key
person? If you answered yes to any of these, key
person insurance is probably suitable to your
business.
Are you contributing enough to a
pension fund, provident fund or a retirement
annuity to make sure you have enough to retire
on? Are you taking full advantage of the tax
deductibility of retirement fund contributions? Will
you have sufficient funds saved to maintain your
standard of living when you retire? Be careful with
this answer - most people are very unpleasantly
surprised when they properly investigate the
correct answer here.
Is your income level on your living
annuity sustainable or are you depleting capital
and running the risk of exhausting your funds during
your lifetime?
Do you have an investment set up to save for your
children's future educational needs? Have you
invested in a little 'nest egg' either by investing into
direct shares or unit trusts locally or offshore? Are
your investments appropriately risk profiled?
Do you have a Will? Do you know
where it is kept? Is it up to date with
your correct beneficiaries? Was it
drafted specifically with you in mind
or was it a generic one that may
result in complications or unnecessary
Estate Duty at a later stage? Have
you nominated an executor and is
that executor capable and aware of the
complexities and drawn out time-frames
surrounding his or her responsibility? Have you
considered appointing an independent executor
who has experience in that regard?
Do you have a medical aid? Do you know if it is
totally appropriate for you and your needs? Do you
understand the limits and exclusions of your
medical plan or your scheme's pay-out rate?
Employee benefits:
Do you have a business and would you like to
provide your employees with a provident or
pension fund or look at options for Group cover to
help improve their sense of security?
Are you covered for your short term insurance
needs? Have you ever had a detailed assessment
done on your car, business, household or building
insurances? Do you understand excesses and
various options that are available to you?
NFB and its affiliated group companies are able to
assist you regarding all of the above issues. We all
need a little guidance sometimes and NFB would
be pleased to help point you in the right direction.
� Keyperson assurance
Pre-retirement:
Post –retirement:
Retirement Planning:
Investment Planning:
Your Will:
Medical Schemes:
Short term insurance:
Contact us on 043 735 2000 or [email protected] and
we will put you in touch with the appropriate
person or persons in our company to assist you.
15
SENSIBLE PLAN
sensible finance march12
continued from page 10...
Is your financialplan in order?
16
Early last year, I wrote about how changes to
Income Tax legislation were brought into
effect since SARS had for a long time
frowned on the use of Deferred Compensation
(DC) schemes as a way for employees to benefit
from not paying tax /receiving preferential tax
treatment on a benefit that they were receiving
from their employer.
The new legislation caused much confusion
and it extended unintended restrictions to all
company owned policies such as Keyman and
Contingent liability policies. It also created
confusion for employers and employees regarding
whether to continue with their existing DC schemes.
The recently enacted Taxation Laws
Amendment Act of 2011 provides us with clarity on
how the premiums and the proceeds of DC
policies will be taxed. The 'new' changes come into
effect from 1 March 2012 and are briefly explained
below. For the tax regime that came into effect on
1 January 2011 and applied until 10 January 2012,
please refer to my previous article.
To recap on the DC structure: the employer
takes out a policy on the employee's life and
contributes a premium to the policy which
accumulates in value over time. The employer and
employee enter into a service agreement in terms
of which the employer is obligated to pay the
policy proceeds to the employee at a determined
future date. The purpose of the scheme is to
incentivise the employee to remain employed at
the company until that future date.
With effect from 1 March 2012, any employer
paid premiums in respect of a policy where the
proceeds are for the benefit of the employee /
his/her spouse /dependants is subject to fringe
benefits tax in the employee's hands.
The proceeds of the employer owned policies
will be taxed in the hands of the ultimate recipient.
Where the employer is the ultimate recipient, the
employer will be taxed, and where the
employee/his estate is the ultimate recipient, the
employee/his estate will be taxed.
If the employer elects to terminate the DC
scheme, the employee can elect to take cession
of the policy (i.e. the employee becomes owner of
the policy) in which case the cession will attract
income tax in the employee's hands. The ultimate
proceeds, however, will pay out tax-free.
Where the employer's pension /provident fund
allows it, the employee may elect to have the DC
policy ceded to the pension/provident fund. In this
case, the cession will attract income tax in the
employee's hands and when the proceeds pay
out, the proceeds will be taxed according to the
lump sum retirement tables.
After a year of much confusion regarding the
options available to members of a DC scheme,
there is now clarity on the tax implications of either
continuing or terminating the scheme.
Remember that DC schemes, in most
instances, formed part of the employee's
retirement planning. It is as such, still necessary to
seek expert advice from your financial advisor as to
whether one continues with or terminates the
scheme; the impact on the member's retirement
planning must also be reviewed.
The changes are effective
March 2012. By Natalie Dillon,
Senior Legal Advisor -
Old Mutual
Broker Division.
DeferredCompensationSchemes and
the NEW tax laws
SENSIBLE ADVICE
sensible finance march12
17
The Life Insurance Industry provides us with two
solutions: a) Monthly Income Replacement
Cover or b) Lumpsum Disability Cover. In
determining a solution your financial planner
will compare the appropriateness of these two
benefits, taking into account the following:
Premium affordability
Waiting periods for Income replacement
Permanent vs Temporary Disability Cover
Industry maximums for Income replacement –
limited to 75% of Income
Consideration to existing Group Life Benefits
Specified occupation
Smoker status and other risk factors
Own Occupation vs reasonable alternative
occupation
Comprehensive Disability cover vs Functional
Impairment cover
A comprehensive analysis is required to
determine the most appropriately tailored solution.
The solution normally would include a combination
of these two products.
Clients that are seeking a guaranteed Income
solution who don't wish to manage the capital
lumpsum will elect the Income Replacement
option for all or part of their income needs. Income
Replacement benefits are designed to replace any
loss of income an individual suffers due to disability
such that they are unable to perform their
occupation. Income Replacement benefits can be
paid for both temporary and permanent disability.
It is imperative to ensure that your income is
reviewed and that the benefits are regularly
updated. Similarly, you need to ensure that an “in
claim” escalation is selected on your policy. These
payments are guaranteed up until retirement age
or your selected term. Certain Life Companies
have “top up” products that can increase your
benefit to 100% of your salary in the event of
permanent disability.
The premiums for Permanent Income
Replacement Cover are tax deductible and the
Income received will be taxable. Temporary
Income Replacement Benefits or Sickness Benefits
are usually tax free for a limited period and these
premiums are not tax deductible.
Clients that prefer a lumpsum payment in the event
of a disability have the freedom to invest the
proceeds to generate an income. The impacts of
inflation, the ability to achieve the required return,
the capital and market risk of the investment will all
have a major impact in determining the adequacy
of the required lumpsum amount. Poor investment
performance or loss of capital could imply that the
income does not increase with inflation, or worse –
it could decrease.
The premiums on lumpsum disability cover are
not tax deductible and therefore the proceeds are
tax free.
Let's take a look at the following Income
Replacement Quote:
Client Mr Smith
Age 40
Salary R80,000 p.m. (before tax)
Insured salary R60,000 p.m. (75% of salary)
Net Payment after an
aver. tax rate of 30% R42,000 p.m.
Claims escalation CPI (estimated at 6%)
Term of cover Age 65
Monthly premium R1,300 (approximately) Tax
deductible
For the same premium of R1,300 p.m. we can
purchase a Lumpsum Disability Amount of
R4,850,000. This amount would be further reduced if
you utilised the after tax premium on the Income
replacement product. Should Mr Smith be disabled
after one month and the proceeds were invested
at a 9% average yield, a monthly income of
approximately R22,000 (escalating at 6%) will be
generated for a period of 25 years. This illustration
assumes a tax efficient investment and therefore a
low tax base. Clearly this income would increase
should Mr Smith become disabled at a later stage.
The suitability of these two products would need to
be reviewed by your NFB Financial Advisor in
determining your optimal solution.
When the primary need for insurance is to
compensate for loss of income, Income
Replacement benefits are likely to be the most
effective solution. Where the individual requires a
cash lump sum, Lump Sum Disability benefits are
better suited.
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Income Replacement Cover
Lumpsum Disability Cover
Example
South Africans, unfortunately, live in a very violent
society and have one of the highest disability
claim statistics. It is therefore vital that our clients
review the adequacy of their disability cover.
By NFB Gauteng,
Paraplanner
Emmanuella Fernandes,
DISABILITY COVERSOUTH AFRICANS NEEDDISABILITY COVER
sensible finance march12
2012 TAX RELATED BUDGET PROPOSALSA summary of the tax related budget proposals announced by theMinister of Finance on 22 February 2012. By Shaun Murphy, CA (SA)
Partner - Klinkradt & Associates
BUDGET HIGHLIGHTS
INDIVIDUALS
COMPANIES
The main tax proposals for 2012 include:
Increase effective capital gains tax rates to 13.3%
for individuals, 18.6% for companies and 26.7% for trusts
from 1 March 2012.
Dividends tax becomes effective from 1 April 2012
at a rate of 15%.
Conversion of remaining medical tax deductions to
tax credits from March 2014.
From March 2014 an employer's contribution to
retirement funds on behalf of an employee will be
treated as a taxable fringe benefit in the hands of the
employee. Individuals will from that date be allowed to
deduct up to 22.5% of the higher of taxable income or
employment income for contributions to pension,
provident and retirement annuity funds with a minimum
annual deduction of R20 000 and an annual maximum
of R250 000. For individuals at least 45 years of age the
deductible amounts will be up to 27.5% with a
minimum annual deduction of R20 000 and an annual
maximum of R300 000.
Tax preferred savings and investment vehicles for
individuals are to be introduced from March 2014.
Reduction in the rates of tax on small business
corporations.
Reduction in the compliance burden of micro
businesses.
Additional tax on gambling from 1 April 2013 at 1%
on a uniform provincial gambling tax base.
Discussion paper on carbon emissions tax to be
published in 2012.
The 2012 Budget proposes direct personal income tax
relief to individuals amounting to R9.5 billion.
The tax threshold for individuals younger than 65
will be R63 556 and for individuals 65 up to 75 will be
R99 056 and older than 75 will be R110 889.
(no updates from the Pocket Guide)
The annual exemption on interest earned for
individuals younger than 65 years is raised from R22 300
to R22 800.
The exemption for individuals 65 years and older
increases from R32 000 to R33 000.
The threshold for the tax-free portion of interest and
dividends from foreign investment stays unchanged at
R3 700 from the 2010 budget.
As announced in the 2011 Budget, income tax
deductions for medical scheme contributions for
taxpayers below 65 years will be converted into credits.
Monthly tax credits will be increased from R216 to R230
for the first two beneficiaries and from R144 to R154 for
each additional beneficiary with effect from 1 March
2012.
The dividend withholding tax will come into effect on
1 April 2012, bringing an end to the secondary tax on
companies. For equity reasons it is proposed that the
dividend withholding tax come into effect at 15% – five
percentage points higher than the previous secondary
tax on companies' rate. Income from capital can be
derived as interest income, dividends or capital gains, all
of which should be taxed equitably.
To enhance equity, effective capital gains tax rates will
be increased. The inclusion rate for individuals and
special trusts will increase to 33.3%, shifting their maximum
effective capital gains tax rate to 13.3%. The inclusion
rate for other entities (companies and other trusts) will
increase to 66.6%, raising the effective rate for
companies to 18.6% and for other trusts to 26.7%. These
changes will come into effect for the disposal of assets
from 1 March 2012.
The following exemptions for individual capital gains
are increased from 1 March 2012:
The annual exclusion from R20 000 to R30 000
The exclusion amount on death from R200 000 to
R300 000
The primary residence exclusion from R1.5 million to
R2 million
The exclusion amount on the disposal of a small
business when a person is over age 55 from R900 000 to
R1.8 million
The maximum market value of assets allowed for a
small business disposal for business owners over 55 years
increases from R5 million to R10 million.
No change is proposed to corporate tax rates.
Several reforms of the turnover tax for micro businesses
(with annual turnover below R1 million) were announced
in 2011. Building on these reforms, micro businesses will be
given the option of making payments for turnover tax,
VAT and employees' tax at twice-yearly intervals from
1 March 2012. It is further envisaged that a single
combined return will be filed on a twice-yearly basis from
1 March 2013.
To encourage the growth of small incorporated
businesses, government proposes to increase the tax-free
threshold for such firms from R59 750 to R63 556. Taxable
income up to R300 000 is taxed at 10%; this threshold is
now increased to R350 000 and the applicable rate
reduced to 7%. For taxable income above R350 000, the
normal corporate tax rate of 28% applies. These
amendments will come into effect for years of
assessment ending on or after 1 April 2012.
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Relief for Individuals
Personal Income Tax
Exemption for interest and dividend income remains
the same
Medical Expenses
Other Tax Proposals Affecting Individuals:
Dividend Withholding Tax
Increase in Effective Capital Gains Tax Rates
Turnover tax for micro businesses
Small business corporations
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20
Be wary of the “safe” cash option. By
Henry van Deventer, financial planning
coach at acsis. Source:
www.fanews.co.za.
The price of beingtoo conservative
While the volatile markets that
characterised most of 2011 are most
likely to continue into this year,
retirement fund investors should be wary of opting
for the 'safe', cash investment options, as this is
often one of the greatest mistakes investors make.
after
Henry van Deventer, financial planning coach
at acsis says that the closer investors get to
retirement, the more stressful the decision becomes
because the consequences of making the 'wrong'
decision could seriously affect their quality of life in
retirement. “Because of this concern, the natural
instinct before retirement is to put money where it is
'safe'. This often means a more conservative
investment strategy, and in most cases, it entails
being heavily invested in cash. The reasoning is that
if the market falls during the year that an individual
retires, he or she should be safe. If it does not, the
individual will still be able to sleep at night.”
Van Deventer says that this mistake is often
made by investors who do not understand what
they are potentially sacrificing by seeking safety in
cash. “As a starting point, consider that, as a rule of
thumb, investors can draw a monthly income of
about R5 000 before tax for every million rand
invested at retirement. They therefore need to give
themselves the best possible chance to
accumulate as much as possible before retirement
with as much certainty as possible. The five years
prior to retirement are especially crucial in
achieving this.”
He says that investors need to know how to
grow their funds before retirement age and what
to expect. “For the best possible growth, investors
should mainly be exposed to shares. Between 1925
and 2011, the average annual return on South
African shares was approximately 14.4%. This means
that a responsibly managed, share-focused
strategy would have doubled roughly every five
years. In cash, over the same period, the average
return was approximately 6.7% per annum.
“Therefore, by applying the above, investors
with R1 million five years before retirement, a share
portfolio could, on average, result in about R1.96m
at retirement. A cash portfolio on the other hand
could result in just over R1.38m – about two-thirds
less. In terms of difference to monthly standard of
living, a share portfolio would have produced
about R3 000 more per month. If we apply the
same argument to ten years before retirement
instead of five, the difference becomes quite
staggering - an additional R10 000 per month.”
Van Deventer says that one concern with the
above argument is that share market returns are
not guaranteed. “Investors will most probably lose
some money during one of the five years before
retirement, as historically, South African shares
produce a negative return 32% of the time, or
roughly once every three years. However, over a
five-year period, they have a 95% chance of
achieving a positive return.
“Over longer terms, chances of a positive
return become even better. By investing in a
responsibly managed and diversified share
portfolio, the chances of getting a high positive
return become better yet. We also need to
remember that the investment term does not stop
when one retires. It stops when the investors stops –
which should be more than 25 years
retirement age.
He says that investors should consider that the
more time they have available and the more
responsible they are by not gambling on the share
market (it is best to stick to a fund that will
consistently follow the markets), the less the risk
becomes and the better their retirement lifestyles
could be. “However, investors need to remember
that an objective, expert financial planner needs
to play a vital role this regard. Do not be afraid to
pay a fee to get sound advice – it may well turn
out to be the most valuable item ever bought,”
concludes Van Deventer.
SENSIBLE GROWTH
sensible finance march12
21
Small/mid-cap funds are currently providing higher-
quality listings and Evan Walker, portfolio manager
at Momentum Asset Management, gives us an
overview of the company's award-winning fund.
The fund invests in small- or mid-cap shares falling
outside of the ALSI 40 and has a strict structure that
assists in limiting fund risk. The fund has a 50%
(approximate) low risk 'blue chip' share allocation
that is defensive and offers high dividend yields.
Twenty percent is allocated to medium risk funds
with less earnings visibility, lower earnings and
dividend yields.
Another 20% is invested in high risk counters,
which include very illiquid small-cap shares, with
the balance (10%) in cash. These splits vary
conservatively as the manager identifies
opportunities and deploys cash holdings. A
significant focus on stocks that offer a margin of
safety through high dividend yields also
compliments the conservative bias.
The more aggressive investor as the fund has a low
diversification to the market and general equity
funds providing diversification benefits when
included in a portfolio of equity unit trusts. Less risk
averse investors can consider smaller portfolio
allocations.
Performance over 1, 3 and 5 years
Fund 21.62%
Sector average 3.12%
All Share 2.57%
Small Cap Index 1.10%
The fund has an annual fee structure of 1.5%.
The fund will retain its defensive portfolio of high
dividend-yielding shares. The portfolio has,
however, been diversified to include smaller
holdings in order to take advantage of market
mispricing and lessen overall fund risk.
The fund has outperformed its peers, and the
market, consistently over time and continues to be
ranked as one of the top five overall unit trusts in
the market. It has also ranked as best performing
unit trust in South Africa for over 10 years and won
four consecutive Raging Bull Awards.
While investing in only small- and mid-cap
portfolios, the fund's risk may not be as high as
perceived given its conservative investment
philosophy. The fund also declined less than the
global bear market in 2008/09.
Fund investment strategy
Investors most suited to thefund
Fund fee structure
Fund positioning for 2012
Why choose this fund?
1 year 3 years 5 years
29.66% 12.95%
17.17% 4.79%
17.27% 8.09%
17.36% 8.31%
Momentum Small/Mid-Cap Fundwins a top outright performer award for the fourthconsecutive year at the 2012 Raging Bull Awards
By Evan Walker, Portfolio Manager - Momentum Investments.
SENSIBLE PORTFOLIO
sensible finance march12
Momentum Investments is a full-service investment
house offering clients more choice. Exceeding R320
billion assets under management it holds some of
the country's most respected investments players –
Momentum Asset Management, Momentum
Alternative Investments, Momentum Manager of
Managers, Momentum Collective Investments,
Momentum Investment Consulting, Momentum
Global Investment Management, Momentum
Properties, Momentum Wealth and Momentum
Wealth International.
Evan Walker (BCompt (Hons), MBA)
joined Momentum Asset Management
in 2007, bringing with him extensive
knowledge of industrial stocks from his
previous role as head of industrial
research at Credit Suisse Standard
Securities. Evan has managed the
Momentum Small/Mid-Cap Fund for
five years.
22
More than just an opportunity to add to your
retirement. By , Business
Development Officer - Glacier by Sanlam.
Cilma Heyns
Your RA hasmore advantages
than you think
Your RA hasmore advantages
than you think
Retirement Annuities (RA's) offer more than
just the opportunity to make additional
provision for retirement: they also offer the
potential for tax and estate duty savings.
People are living longer and retiring earlier and
therefore preserving and also growing capital well
into retirement is a requirement in order to maintain
your standard of living. Even if you are contributing
the maximum amount allowed to your company
pension fund, you will in all likelihood still
experience a shortfall. To retire with 75% of your
final salary you will need to make additional
savings. If you do not need immediate access to
your savings, i.e. you have an emergency fund in
place, then an RA is an ideal vehicle. With an RA
you will not be able to access the funds before age
55 and the funds may also be protected from
creditors.
RA's offer transparency, as well as a wide
underlying fund choice. There are currently over
900 collective investment funds available to South
African investors. More adventurous investors with
a longer time horizon may even include a share
portfolio as part of their underlying investment
within the RA.
Younger investors who want to invest as
aggressively as possible may view the Regulation
28 legislation as a hindrance. This stipulates that no
more than 75% of the RA investment may be in
equities and no more than 25% in funds with foreign
exposure. Your equity exposure can be maximised
by combining pure equity funds with property
equity funds. This is an optimal way of structuring
the underlying funds while allowing for maximum
growth.
New generation RA's also permit investors to
make ad hoc contributions, and even to stop or
reduce premiums at any time, with no penalties.
RA investors can enjoy tax relief on their
contributions of up to 15% of the non-retirement
funding income. Non-retirement funding income is
that portion of your income that is not taken into
account when calculating your retirement fund
contributions. Because retirement contributions are
done before tax, investors can afford to invest
more funds before tax than after. For example, if
you have R1 000 a month available to invest after
tax and a 30% marginal tax rate, you would be
able to invest a larger amount (R1 428-57) in an
RA before tax, than you'd be able to invest in a
savings plan after tax – without altering your net
salary. Investing a larger amount each month,
coupled with compound interest over time, will see
RA investors reap rewards in years to come. In
addition, returns within the RA's underlying funds
are tax free.
On retirement, when the RA is transferred to an
annuity (either guaranteed or investment-linked),
tax will be paid on the lump sum portion taken as
cash (based on a retirement sliding scale) as well
as on the monthly income drawn, but not on the
investment returns.
RA's can also provide opportunities for clever
and efficient estate planning. All funds within the
RA fall outside of the investor's personal estate for
estate duty purposes. The investor, therefore, does
not pay estate duty (currently 20%) on the value of
the RA. There is also a saving in executor's fees.
Whether an RA is your primary retirement
savings vehicle, or a supplement to your employer's
pension fund, it remains an excellent way to grow
your money to ensure a successful retirement.
SENSIBLE SAVINGS
sensible finance march12
23
In this article we continue discussing the core
holdings in the general equity portfolios that we
manage and today's turn is Sasol.
South African Coal, Oil and Gas Corporation
(Sasol) was formed in 1950 by the previous
government as an attempt to bolster the country's
self reliance and was listed in 1979 under its current
guise of Sasol Limited (with the ticker SOL) on the
JSE. Sasol also trades on the NYSE. The company's
first MD, Etienne Rousseau, wanted to name the
company South African Synthetic Oil Limited
(Sasol). The name wasn't adopted, but the
acronym stuck. Sasol has an interesting history
closely linked to the industrial development of
South Africa and its people; towns are even
named after it. It pioneered the synthetic fuel
industry (synthetic fuel is produced by taking coal
and speeding up the natural process of creating oil
from the coal by a couple of million years) and is a
major contributor to the GDP of South Africa by
producing oil and thereby saving the country
billions in foreign exchange by limiting the need to
import the oil that it produces.
Whilst the synthetic fuels business is still a
dominant component of the business, Sasol today
operates chemical plants across the world and is
involved in Greenfield projects to convert gas and
coal to liquid in some exotic countries and has
recently purchased coal shale fields in Canada.
Many of the chemicals are by-products of the
synthetic oil process, but there is also a genuine
chemicals business that has a negative correlation
to oil prices and is driven by industrial demand.
Whilst it may be hard to believe, Sasol is actually an
alternative energy multinational and not a
traditional oil company. This is to its great
advantage as, unlike the oil majors, it is not
extracting crude oil from the earth which is being
depleted and needs to be replaced through
expensive exploration and development. Rather,
Sasol turns gas and coal to fuel.
The success of Sasol depends largely on its
ability to attract and retain highly talented
scientists, engineers and technical managers. Sasol
therefore represents the best of South Africa and
we were particularly encouraged when Sasol on 1
July 2011, in keeping with its ethos of appointing
people on merit only, appointed a foreigner, David
Constable, as the new CEO based in Rosebank.
The closing price of Sasol on 14 February 2012
(Valentine's day) was R401.02, which puts a market
capitalisation of R258bn on the company. This puts
Sasol firmly in the top ten shares on the JSE.
Avior Research estimates that Sasol will earn
R48.73 per share and pay a dividend of R17.77 over
the coming year. This places Sasol on a forward PE
of 8.2 times and a dividend yield of 4.4%. Despite
the recent rise in Sasol's share price, this is not a
demanding multiple and quite an attractive
dividend yield in any market.
As you would expect, Sasol's earnings are
highly geared to the oil price, and with oil prices
trading at elevated levels, Sasol's earnings should
be well supported. The Rand/Dollar exchange rate
also has a great impact on reported earnings in
Rand. Even the company itself has trouble getting
a grip on its earnings outlook. On 2 February 2012
the company advised that its earnings for the year
ended 31 December 2011 would be 80% - 90%
better than the previous six months, having advised
the market on 23 November 2011 of an increase of
at least 45%! We expect good results to be
reported next month.
It is clear that buying Sasol depends on your
view of the growth in South Africa's economy
(which drives the consumption of oil), the price of
oil itself and the Rand/Dollar exchange rate.
Despite an uncertain outlook for all of these
factors, given where we are in the global recovery,
we believe that Sasol represents decent value and
we include Sasol at a weighting of 7% to 8% in any
general equity portfolio that we manage.
SASOLGREAT INVESTMENT
MAKES FOR A
A further look at the core holdings in NVest's
general equity portfolios. By ,
Portfolio Manager - NVest Securities.
Rob McIntyre
SENSIBLE EQUITY
sensible finance march12
24
Q:
A:
A Financial Plan is all good and well, but how
does one protect against the unknown factors in
your financial plan? What and how much should I
be protecting and what do the statistics say?
Too often people plan their investments and
retirements based on the assumption that they are
going to reach these goals without any health risks
along the way. Risk or life and disability needs form
a very important part of the financial planning
process.
Most people list their assets as their house, or
business or investments. Few list their own income
earning ability or their intellectual capital that pays
for these assets as their main asset. Without income
it would be impossible to amass the material
wealth and tangible assets we desire now and into
the future. So your greatest asset is actually your
ability to earn an income and your future earnings
potential.
Like all assets, your future potential income,
needs to be protected. Premature death, disability
or severe illness may prevent you from realising the
full value of your earning potential.
The way to protect this asset is to have a life
assurance policy that covers you against these
risks, be they an accident or a debilitating disease.
The life companies offer a range of products that
can ensure that your full potential can be reached
no matter what may befall you along the way.
One should consider the impact on one's
family should a death or disability occur. Events are
random and insurance is a great way to hedge
your future potential income and make it safe so
that you can invest to achieve your life's goals
successfully.
50% of a particular life companies death
claims were from policyholders younger than 50 yrs
and 75% were from people under the age of 60 yrs.
This is in a period of one's life where you are still
trying to consolidate and grow your wealth. Debt is
still quite high and earnings potential still on the up.
40% of income disability payments are made
for claimants between the ages of 31 and 40. The
probability that a 45 yr old male claimant is
permanently disabled is 23%. 70% of all lumpsum
disability claims were between the ages of 31 and
50 yrs. Remember that in the disability space it is
not just the medical impairment that is taken into
account, but also the ability to perform one's
nominated occupation that counts.
The two leading causes of claims in the severe
illness category were cancer and heart and artery
disease, accounting for more than 70%.
In order to establish how much cover is enough
we use financial needs analysis tools that give us a
guideline as to what amount of cover you should
have. It does, however, depend on each
individual's requirements and what amount they
want to protect or what sort of income they would
want to replace and leave for their family. One
also needs to understand that it is a dynamic thing,
because as you accumulate more assets over time
and your needs and liabilities reduce or increase,
your risk cover will need to be adjusted.
The products offered by the leading life
assurance companies are very comprehensive
and competitively priced. They cover just about
any event and often try and reward clients for
being healthier and therefore less of a risk. Benefits
such as income protection are also tax deductible
so it makes the “grudge” payment a less bitter pill
to swallow.
Risk cover is an important part of the financial
planning process and we would encourage
people to review their cover levels and consult a
professional financial planner to ensure that they
know what they are paying for and realise the
consequences to themselves and their families of
being under insured.
“Sensible Finance - Questions and Answers” is an advice
column that will allow our readers the opportunity to write to
a professional and experienced financial advisor for advice
regarding investments, personal finance, life and/or risk cover.
Travis McClure will be answering any questions that you may have.
Travis McClure
SENSIBLE FINANCE QUESTIONS & ANSWERS
Please address all Questions to: Travis McClure,
NFB Sensible Finance Q&A, Box 8132, Nahoon,
5210 or email: [email protected]
sensible finance march12
Anthony Godwin
Gavin Ramsay
Andrew Kent
Walter Lowrie
Robert Masters
Bryan Lones
Travis McClure
Marc Schroeder
Phillip Bartlett
Duncan Wilson
Glen Wattrus
Leona Trollip
Leonie Schoeman
(RFP™, MIFM) - ManagingDirector and Private Wealth Manager, 23 yearsexperience;
(BCom, MIFM) - ExecutiveDirector and , 18 yearsexperience;
(MIFM) - Executive Director andShare Portfolio Manager, 16 years experience;
- , 26years experience;
(AFP , MIFM) -, 26 years experience;
(AFP , MIFM) -, 20 years experience;
(BCom, CFP ) -, 12 years experience;
(BCom Hons(Ecos), CFP ) -
, 7 years experience;
(BA LLB, -, 9 years experience;
(BCom Hons, CFP ), 4 years experience;
(B.Juris LL.B CFP ) – Private WealthManager, 14 years experience;
(RFP ) - Employee BenefitsDivisional Manager and Advisor, 35 yearsexperience;
- Healthcare DivisionalManager and Advisor, 14 years experience;
NFB has a separate specialist Short TermInsurance Division, as well as now offeringspecialist group companies in the fields of stockbroking, wills and the administration ofdeceased estates.
®
Private Wealth Manager
Private Wealth Manager
™ Private WealthManager
™ Private WealthManager
Private WealthManager
Private Wealth Manager
CFP ) Private WealthManager
– PrivateWealth Manager
™
(RFP™)
®
®
®
®
NFB have a
with a between them:
STRONG, REPUTABLE TEAM OF ADVISORSWEALTH OF EXPERIENCE
25
NVest Securities (Pty) Ltd
NFB House, 42 Beach Road,
Nahoon East London 5241
PO Box 8041, Nahoon 5210
(043) 735-1270,
(043) 735-1337
Tel:
Fax:
Email:
www.nvestsecurities.co.za
The Eastern Cape's first home-grown
STOCK BROKERAGE
sensible finance march12
fortune favours the well advised
You’ve worked hardfor your money...
“It requires a great deal of
boldness and a great deal of
caution to make a great
fortune...but when you have got
it, it requires 10 times as much wit
to keep it”
Nathan Rothschild, 1834
contact one of NFB’s financial advisors
East London
Port Elizabeth
Johannesburg
• tel no: (043) 735-2000 or e-mail: [email protected]
• tel no: (011) 895-8000 or e-mail: [email protected]
• tel no: (041) 582 3990 or e-mail: [email protected]
NFB is an authorised Financial Services Provider
Web: www.nfbec.co.za
p r i v a t e w e a l t h m a n a g e m e n t
now let NFBmake your money
work for you.