![]() As 2017 gets underway, a look at asset valuations across the globe tells us that, going forward into the new year, returns that substantially beat inflation are likely to be harder to come by for South African investors than they have been in the past few years. Not only is global growth slow, but many assets are expensive compared to their long-term histories. This means that investment managers like Prudential will have to search even harder for attractive sources of real returns, while being ever-vigilant of the risk involved. Political risk will also play a greater role in the new year given the uncertainty surrounding the policies of the Trump administration in the US, Brexit in the UK and possible election victories for anti-euro populists in France, Germany and the Netherlands. Finding good value in SA bonds So how are we positioning our multi-asset funds to earn the best possible returns over the medium term? From a global perspective, we believe that South African bonds are cheap compared to their long-term fair value, and offer good prospective returns. This follows their weakness stemming from elevated political risk (incidents such as “Nenegate” and threats to the Finance Minister’s position), as well as the ongoing risk of a credit rating downgrade, both being priced into yields. Relatively high yields of around 8.9% (for the 10-year government bond at year-end 2016) offer attractive real returns on a risk/reward basis. The stronger rand, easing of inflation and diminished likelihood of further interest rate hikes have improved – to an extent – the outlook for interest-rate-sensitive assets like bonds and listed property, despite very slow economic growth. Local listed property, meanwhile, is priced to deliver low-double-digit returns in the medium term (in the absence of a market de-rating). This is well above inflation, and we consider it attractively priced. As such, we are overweight both SA bonds and listed property (to a lesser extent) in the Prudential Balanced and Inflation Plus Funds. SA equities now more attractively priced South African equities fell to cheaper valuations in December compared to their long-term fair value: at 31 December 2016 the FTSE/JSE All Share Index’s 12-month forward P/E was 13.8x, versus 15.2x at the end of September. In response Prudential moved to an overweight position in our multi-asset unit trust funds. Within equities, we are underweight expensive global heavyweights like Aspen and Steinhoff. By contrast, British American Tobacco is one of our top overweights as a solid defensive stock. We also retain our defensive positioning in resources, being underweight specialised miners like Anglogold and Implats, and preferring diversified miners (like Anglo American) and non-mining shares such as Sappi. We are also overweight financial stocks, including Old Mutual, Barclays Group Africa and Investec, all of which remain undervalued. Finally, we continue to be underweight retail shares, despite the recent improvement in valuations, as we believe SA consumers and the economy will continue to struggle over the medium-term. Global equities expensive, especially in the US For global equities, our portfolios are currently neutrally weighted generally. This is despite a rally in share prices in November and December of this year (particularly in the US) as a result of the surprise election of Donald Trump, in anticipation of more expansionary spending policies. Some European markets do still offer value, where concerns over growth have kept share prices under pressure. At the same time, certain emerging market equities are also valued attractively, but we are very selective in our exposure as many also come with relatively high risks. India is a market that we like. In the Prudential Balanced Fund we are near the 25% maximum exposure allowed for offshore equity. Prepare for volatility, take advantage of downturns In conclusion, South African investors can expect continued volatility in 2017 amid high levels of global uncertainty and political risk. The bullish Trump-related rallies in the US could yet prove to be overdone. Locally, despite the marginally improving outlooks for inflation, interest rates and growth, material risks remain for a possible credit rating downgrade mid-year. Economic growth remains sluggish and pro-growth reforms difficult to implement. To cope with market volatility, investors would be prudent to save and invest more, stay well diversified, maintain a long-term view and ignore the short-term “noise”. Remember that there are always opportunities to add well-priced assets to a portfolio in downturns, and as an investment manager Prudential will certainly be taking advantage of these. Should you require assistance and advice on what funds to invest in contact Thato or Kevin , tel 011-658-133, or email [email protected] Written by: David Knee Source: Prudential ![]() Decreases in cost and increases in transparency and choice regarding underlying investment options make endowments a viable option to consider for discretionary (non-retirement funding) savings. In addition to estate planning benefits, the latest budget changes further strengthen the tax benefits of the endowment, encouraging high income investors to revisit the case for this often overlooked product. Increased income tax rates The recent budget proposed that personal income tax rates increase by 1%. This was done from the second bracket (those earning in excess of R181 900 per year) upwards, but considering adjustments to rebates and tax brackets there will only be tax relief for tax payers earning below R450 000 per year. The highest tax bracket for individuals has now increased to 41%. This tax rate now also applies to trusts (other than special trusts), which previously paid 40%. When does an endowment make sense? There are a number of factors to consider when choosing between a pure discretionary savings plan (DSP) or an endowment. This includes availability of interest and capital gains allowances as well as required access to capital within the first five years. A key consideration in how to allocate between the two products is the clients’ tax rate. Income tax legislation requires policyholders of an endowment to be classified as an individual, company or untaxed policyholder and income and capital gains tax varies accordingly. An endowment is available to individuals as well as trusts with individuals as beneficiaries with tax as follows: Tax on income at 30% and effective tax on capital gains at 10%. Individuals in a DSP are now taxed at marginal rates up to 41% resulting in an effective tax rate on capital gains of 13.7%. For such high income earners the endowment can offer significant tax saving. Within the two products there is no differentiation for dividend tax, which is withheld at 15% either way. How much can you save on tax in an endowment? Consider an individual that has no interest and capital gains allowance available and invests R5m for 10 years. Assume a balanced fund-type investment with 11% return per annum and no trading of the portfolio over the period. After five years, allowing redemptions for payment of income tax annually, such an investment would have grown to R8.16m in a DSP. An equivalent investment in an endowment would have grown to R8.23m, but saved about R145 000 over the period. This consists of: income tax saving (30% versus 41% marginal rate assumed) capital gains tax saving (taking 100% of the capital gain into account) additional return earned as a result of higher base to compound from Over the full 10 year period assets in the DSP would be at R13.32m, but the investor would have missed out on a total saving of R426 000 relative to the endowment. Do the math Trusts or individuals with significant discretionary savings and high marginal tax rates should consider an endowment. There are restrictions that may not make it a suitable option, but multiple benefits and the significant potential tax saving are not to be ignored. Benefits of an endowment Greater tax efficiency for higher income earners (above 30% tax rate) who have exhausted their interest exemptions. Beneficiary nomination can lead to potential savings on executor’s fees (up to 3.99% of fund value). Where a beneficiary has been nominated, payment of the death benefit does not depend on the winding up of the estate and beneficiaries will receive the proceeds relatively quickly. Tax administration is taken care of on your behalf (the insurance company calculates, deducts and pays the tax to SARS). Insolvency protection – the entire value of the endowment will be protected against creditors after three years. This protection will continue until five years after the termination of the policy. Investors are not restricted to maximum levels of equities and offshore investments, as in the case of retirement savings products. Investors can also use an endowment to draw income upon retirement – provided the five-year restricted period has passed. This may be done on an ad-hoc basis, and you are not forced to draw income at specific intervals. To get a quote for your Endowment policy please contact please contact Kevin or Thato, email: [email protected], tel no: (011 658-1333) Written by: Roenica Tyson Source: Sanlam ![]() Considering the importance of money, it’s surprising that children receive little formal education about this critical commodity. We give our kids extra lessons to ensure they perform well academically, additional coaching to keep them in the team and technology to access the world. Parents are the number-one influence on their children’s financial behaviour, so it’s up to us to raise a generation of mindful consumers, investors, savers and givers. “According to a research report from the University of Cambridge, kids’ money habits are formed by age seven,” Craig Torr, a director of Cape Town-based financial planning company Crue Invest, says. A father of three boys, Torr outlines some of the tools he has used to get his kids on the money-savvy highway. “From a young age, money, saving and investments have been part of our family conversations; nothing complicated to start, but covering the basics,” Torr says. Here are Torr’s 10 tips for teaching your children smart financial habits: 1. Pocket money: from as early as possible, give your children age-appropriate pocket money so they can develop a sense of responsibility and custodianship. 2. Giving: encourage your kids to give. It helps them to understand their privilege, and develops a sense of duty towards those less fortunate. 3. Online saving: open an online savings account for your children and spend time with them once a month tracking the effects of compound interest. As your children grow, you could consider online trading or virtual online trading games 4. Delayed gratification: practise delayed gratification in real-life situations, teaching consideration and self-control when making financial decisions. Even if your children intend to spend their own pocket money, there is value in allowing them to “window-shop” for a few days before making a final purchasing decision. 5. Family finances: involving children in family budgeting decisions is an excellent way of getting them to understand the value of money. High-cost purchases such as holidays, new cars and appliances should be discussed with your children so that they learn to appreciate how much these things cost and how hard you must work to afford them. 6. Borrowing: it is important to allow your children to borrow money from you so that they know what it feels like to be in debt. Ideally, charge them a nominal interest rate on their loan so that they can experience the dread of watching their debt grow over time. 7. Budgeting: give your children a budget and a shopping list, and let them do the grocery shop themselves. 8. Earning: allow your children to experience the wonder of being able to earn extra money. Household chores and entrepreneurial ventures are also a good exercise in self-empowerment. 9. Tough love: as your children get older and become more responsible for their own money, resist the temptation to bail them out when they make financial mistakes. Practice tough love to teach them how to manage money responsibly. 10. Read: encourage your children to read articles and books about personal finance. Source: Business Live ![]() When times are tough, we understand that people try to save money wherever they can. But never compromise on quality insurance of your most prized possessions. At Santam, we feel there are always ways to structure your policy to suit your pocket so you’re properly covered and we can pay your claim. Let’s look at ways to do this. How to afford quality insurance First of all, do a quick run-through of your lifestyle, profile and assets. These are the factors that determine how much you are charged every month. Things change all the time – for example, you may have installed extra security measures around your home and not told us, or you’ve changed jobs and your car is now parked in an underground garage instead of outdoors. Perhaps your student daughter now has a job and no longer lives in a high-risk city area. Just by updating your profile, you may find that your premium decreases or that you risk profile has changed. Saving on car insurance premiums Consider Third Party Only car insurance: This is the minimum amount of cover you can give your vehicle, making it the cheapest there is. Raise your excess payment: The greater your excess is, the lower your premium. During the quotation process, you will be asked to select the amount of voluntary excess you will be prepared to pay in the event of a claim. Although there is a compulsory excess amount, you can always choose to increase this. This would mean paying more out of your pocket, so make sure you can afford the higher excess amount. Pay for smaller damages yourself: If you are able to keep a rainy-day fund for smaller nicks and dents, you will manage to stay claim-free for longer and get a big reduction on your premium. Make sure the correct person is noted as the regular driver: Your risk factor is determined by the person who most often drives the car, so be sure to keep this information updated. Install additional security features: Although we know this means spending more money, drivers who install tracking systems in their vehicles could benefit from a lower premium. Vehicle tracking technology could also impact your risk profile, as it will be easier to recover your car in case of a theft or hijacking. How to reduce home insurance payments Increase your excess payment: The greater your excess is, the lower your premium. During the quotation process, you will be asked to select the excess you will be prepared to pay in the event of a claim. Although there is a compulsory excess amount, you can always choose to increase this. This would mean paying more out of your pocket, so make sure you can afford the higher excess amount. Pay for smaller damages yourself: If you are able to keep a rainy-day fund for smaller repairs, you will manage to stay claim-free for longer and reduce your premium. Upgrade security features: Installing a home security system or upgrading your existing security measures can decrease insurance premiums – plus ensure that you are safer. Also join a neighbourhood or block watch, as some insurers will offer reduced rates to homeowners who belong to these types of organisations. Tip: Combine your car, home and building insurance to reduce your insurance premium. To get a quote and cover that will be sufficient for you please contact Sandy in our Short – Term Department, email [email protected] , tel (011)658-1333 Source: Santam ![]() It’s tempting to want to splurge on over-the-counter vitamins and supplements or some other lifestyle item when medical aid benefits, limits and savings accounts get renewed come 1 January each year, especially after the costly festive season spending. GTC’s Head of Healthcare Consulting, Jill Larkan, cautions however that members should spend medical aid savings prudently and use benefits wisely, particularly in the early part of the New Year. “The governing body of this sector - the Council for Medical Schemes (CMS) - recently released commentary urging members to make medical aid benefits last longer,” says Larkan. “We completely concur with the CMS. Spending sensibly from the outset helps to extend the availability of funds later in the year, while ensuring you are able to retain a positive balance in your savings account for as long as possible.” The acting Chief Executive and Registrar at the CMS, Mr Daniel Lehutjo, said in his statement that “members should resist the urge to spend all their benefits in the first couple of months” and “not to use your benefits to buy sunglasses, multivitamins or other lifestyle items over the counter.” All South African medical aids run financial years concurrent with the calendar year. This means that all the benefits (with the exception of oncology), limits and savings accounts are “renewed” on 1 January each year. When the New Year comes around a bulk lump sum of money is allocated to every member’s medical aid savings accounts and this sum is the accumulation of the next twelve, savings allocation portions, of the monthly premiums. “The lump sum of advanced annual savings needs to last until the end of December, and any non-essential items purchased now may unnecessarily increase any self-payment gaps which may require attention later in the year, once your savings are exhausted,” continues Larkan. Some additional tips from Larkan and the CMS which would help to extend members’ medical aid savings include: • Check if your medical aid has a formulary list of medications and if they do have one, request that your doctor, as far as possible, only dispenses listed medicines. A formulary is a list of prescribed medications – both generic and branded, for which your medical aid scheme will pay. The formulary helps to guide you to the most cost-effective medications that are effective for treating a particular condition. • If your scheme offers preventative screening tests, paid for by the scheme, get a list of these, and have as many done as possible, ensuring that any potential health issues are detected and addressed as early as possible. • If you take chronic medication, check that you are registered as a chronic medication member with your scheme, ensuring that as much of your monthly costs as possible are covered, by your scheme. If there is a Chronic Management program for your ailment, register for this and follow the program to improve, monitor and maintain your health. • Ensure that you know whether there is a designated service provider stipulated by your medical aid which you are required to use for various medical procedures. These service providers may include pharmacies, hospitals, doctors, specialists and even optometrist networks. Ensuring the designated service providers are used will help to curb additional expenses which service providers not in the network/s may be charging. • Obtain procedure codes and confirm authorisation and cover levels provided by your scheme. Understand what your portion of payment will be. Discuss these rates/tariffs with your doctor and negotiate these wherever possible. “By incorporating as many of these strategies as possible, members will be well on their way to maximising valuable medical aid savings. Professional advice from experienced medical aid consultants and advisors should be sought – whether through one’s employer or in a personal capacity – to ensure the retention of as much of your savings as possible,” Larkan concludes. To find out more on what your savings are from our different medical scheme providers please contact Namhla or Judy in our Health and Wellness Department, email [email protected], tel (011)658-1333 Source: FANews ![]() Over the years Discovery has gathered an in-depth understanding of the evolving risks against which their policyholders need protection.The complexity of the healthcare environment and continuous advances in medical technology mean that new treatments are continuously becoming available. In line with these trends, Discovery has enhanced their Severe Illness Benefit and re-engineered their multiple claims facility to offer broader and more relevant coverage. The LifeTime Severe Illness Benefit Discovery’s LifeTime Severe Illness Benefit provides clients with a minimum payment of 100% of their insured amount for all SCIDEP conditions. This benefit will pay up to 215% of the sum assured, based on the long-term impact of the illness and the life assured’s family composition at point of claim. Multiple claims The most comprehensive multiple claims facility on the market offers clients the ability to claim in excess of the benefit amount for multiple related non-progressive claims, regardless of whether a subsequent claim is of a higher, lower or the same severity as the previous claim. The new Cancer Relapse Benefit The Cancer Relapse Benefit will automatically form part of the new LifeTime and LifeTime Plus Severe Illness Benefits. On recurrence of a cancer after a one-year remission period, a client will receive an additional payment of 50% or 100% of their sum assured, based on the LifeTime Maximum they selected. The new Intensive Care Benefit The Intensive Care Benefit provides cover for intensive care unit (ICU) admissions for both natural diseases and unnatural trauma events, at no additional premium. The new Early Cancer Benefit The Early Cancer Benefit will automatically form part of the Comprehensive Plus and LifeTime Plus Severe Illness Benefits at no additional premium. The benefit provides cover for qualifying in situ cancers and precancerous prostatic lesions. BenefitBooster The BenefitBooster provides up to 40% additional severe illness cover at no additional premium. The Child Severe Illness Benefit and ParentCare These benefits provide automatic severe illness cover for the children and parents of the life assured on a Classic Life Plan. The Global Treatment Benefit The Global Treatment Benefit provides up to 180% of the benefit amount if treatment is required at top overseas facilities. As part of Discoveryr Severe Illness Benefit enhancements, they are running a limited special offer. Qualifying clients are able to select the LifeTime or LifeTime Plus Severe Illness Benefit and get the LifeTime portion of their Severe Illness Benefit premium for the first two years paid back to them in their first five-yearly PayBack. This is subject to the terms and conditions of the special offer. This special offer essentially allows clients to take out the LifeTime Severe Illness Benefit at the same effective premium as the Comprehensive Severe Illness Benefit for two years. This offer ends on 31 March 2017! To find out more information on the Severe Illness benefits contact Thato or Kevin in our Life Department, email [email protected], tel (011)658-1333 Source: Discovery We at Daberistic aim to provide our clients with the best advice and service, thus we moved to Infinity Business Park. We will be hosting an open day at our new premises and this is an invite to all existing and potential clients to get to know more about Daberistic Financial Services as well as Daberistic Accounting & Auditors. We look forward to seeing you there.
Date : Tuesday 21st February 2017 Place : Block B, Infinity Business Park, 4 Pieter Wenning Road, Fourways (Next to IndabaHotel) Time: 14: 00 - 15:00 pm (thereafter refreshments will be served) You are welcome to invite a friend but please take note that number of seats are limited For more information and to book your seat please contact Koketso at [email protected] or call us on 011 658 1333 |
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