AFRF Newsletter Issue 2 2022

Retirement

Alexander Forbes Retirement Fund newsletter Issue 2 for 2022

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Alexander Forbes Retirement Fund newsletter

Win at saving for retirement – how to do it

Pension funds and their role in community development

AF Online – information at your fingertips

Trending topics – Empower

Quick links – more opportunities to win!

Investment returns at 31 March 2022

How to win at saving for retirement The end of February every year marks South Africa’s official tax year-end. It is also a good time to consider making the most out of the available tax concessions. You can claim a tax deduction of up to 27.5% a year of your taxable income (up to R350 000) for pension, provident and retirement annuity funds.

Let’s look at the different opportunities in more detail:

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Sign up to contribute extra money to your retirement fund (additional voluntary contributions) – this is how it works …

This option gives you the flexibility to decide how much extra you want to contribute, it can be a percentage of your fund salary, or any other amount as long as your employer agrees to it. You can also choose to contribute a lump sum amount into the fund whenever you have extra money available*.

The good news is that there are no fees charged for putting extra money into your fund, so the full amount you put into the fund is invested for your retirement. *

Normal FICA verification will apply to identify the source of funds for amounts not paid through the employer payroll.

If you choose to make an extra monthly contribution based on a percentage of your fund salary, you’ll need to keep putting this extra money in the fund until the next anniversary date set by your employer or management committee. The extra money you put into the fund will show as ‘additional contributions’ on your statement and will be added to your retirement savings in the fund.

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Alexander Forbes Retirement Fund newsletter

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Increase your contribution rate, if you can If your employer offers different contribution rates, this is an easy and effective way to boost your ongoing retirement savings. For both additional voluntary contributions and increased contribution rates, you’ll enjoy these two important benefits:

• •

Your contributions to your fund are deducted from your salary before tax. If you contribute an extra 5%, your take-home pay will not decrease by 5% because you’ll pay less tax on the reduced pre-tax income.

When you contribute more to your retirement fund, more money is invested towards your retirement savings and less goes to the taxman.

As an example, let’s look at the tax you’ll pay on different contribution levels made to the fund.

As you can see, the more you save, the less tax you’ll pay: 0%

15%

27.5

R25 000

R25 000

R25 000

R0

R3 750

R6 875

R25 000

R21 250

R18 125

R3 749.17

R2 774.17

R1 961.67

Total monthly income Retirement contribution Taxable income Tax

Please speak to your HR or payroll department to find out if you can increase your contribution rate, and if you can, when you can do it.

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Start a retirement annuity If you only have one contribution category in your fund, you can use this solution to top up your retirement savings.

Retirement annuities (RAs) are popular because:

• • •

There are tax incentives - you get tax back on the contributions you made during the year when you submit your personal tax returns You have flexible contribution rates They are separate from employment-related products

Important note: Government’s tax incentives apply to all the contributions you make towards your retirement benefits be it to a pension, provident or retirement annuity fund. The total tax incentive for all retirement savings vehicles is up to 27.5% of your total income, subject to a maximum of R350 000 per year.

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Alexander Forbes Retirement Fund newsletter

Think out of the box If you don’t have any spare money for the three options provided, think out of the box – like Gina …

Gina has been paying R800 for her car insurance. A friend at work told her about a different insurer that gave her excellent service and cost-effective rates for drivers who now work from home and use their car less. Gina got a quote from this insurer for R400 a month. This is where Gina thinks out of the box. She changes insurers and takes that extra R400 and puts it aside. Gina then looks at her petrol costs. By working from home, she is also saving on petrol. She takes R100 from those savings, to give her R500 a month that she can invest as an additional voluntary contribution in the retirement fund with her employer, or in a retirement annuity. R500 a month may seem like a small amount of money to invest but over the years it can make a very big difference!

Another cost-effective solution

Extended or additional options

The Alexander Forbes Retirement Income Solution (AFRIS) Retirement Annuity Fund can supplement your existing employer retirement fund in your individual capacity. It helps you save more by allowing you to top up your savings on a regular basis or as a lump sum. It also lets you keep all your retirement savings in one cost-effective place so you can easily check if you’re on track to reach your retirement goals. You can also retire later by deferring your retirement and continuing to contribute, which allows you to build up more savings.

If you can’t make additional contributions and can’t increase your contribution rates, there are other options available to you. The full AFRIS solution is included as part of your retirement benefit offering. This means that you can choose any one of AFRIS’ benefits to supplement your existing retirement savings. It offers you a living annuity, unit trust, retirement annuity fund, preservation pension fund and preservation provident fund, all of which offer cost savings and diverse portfolio options.

FINANCIAL TIP: Most annuities have a minimum investment amount to get started. You may need to save up for the minimum amount if you don’t have it to start with. Otherwise, you can wait until you get a bonus or you get money back from SARS when you submit your tax returns. Speak to a financial adviser or call the My Money Matters Centre on 0860 000 381 or at mymoneymatters@aforbes.com for more information on your options.

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Alexander Forbes Retirement Fund newsletter

Pension funds and their role in community development

Private market investments, such as your pension fund investments, can play a part in developing communities in need. These investments fall into alternative investment classes because they are made up of funds and investors that invest directly into private companies that are not listed on the Johannesburg Stock Exchange (JSE).

John To illustrate how private market investments play a role in community development, let’s look at how these investments interact with John – a member of a pension fund portfolio – in his everyday life.

Each month, when John’s contribution towards his employer’s pension fund gets deducted from his salary, a certain portion gets allocated to the investment portfolio of his choice. John’s investment portfolio is an accumulation portfolio that aims to grow his retirement savings. Among other investments, John’s investment portfolio comprises an allocation to private market investments. Through the private market allocation, John directly contributes to entities he interacts with in his day-to-day life, even if he doesn’t know it yet. Here are some examples:

AF Balanced and AF Specialist High Growth portfolios both invest in private markets.

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Alexander Forbes Retirement Fund newsletter

John’s house

John’s work

John has just purchased a home in a new housing development that offers affordable, quality housing in an estate, near his place of work – social infrastructure managers within private markets often fund these types of developments.

He works in an office complex that was jointly developed and funded by direct property and unlisted credit private market managers which has offered employment opportunities to many others.

John’s gym

John’s family visits

To keep healthy, John goes to the gym that is close to his home. The gym is part of the direct property portfolio of the private markets manager.

Twice a year, John, his mother and his son travel to Kwa-Zulu Natal to visit family. The main route they travel on forms part of the investment portfolio of a private market infrastructure manager. The toll collections provide longdated inflation-protected returns that drive member benefits over the long term. In other words, John will see the benefits of the tolls he pays both in the quality of the road surface and in his member benefit statement when he retires.

All of these assets form part of private market investments that John had contributed to with his first paycheck – and will continue to do so with each contribution over his working career.

With private markets, your investments are made tangible and real. They are SMEs, schools, retirement villages, roads and power plants that you and future generations will benefit from.

FINANCIAL TIP: A World Bank recently reported that South Africa is the most unequal country in the world, with race playing a determining factor in a society where 10% of the population owns more than 80% of the wealth. Your retirement savings, invested in private markets, could contribute towards levelling out the playing field while earning a return, making South Africa a better place to live and therefore for you to retire into.

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Alexander Forbes Retirement Fund newsletter

INVESTMENT UPDATE: portfolio additions The trustees are introducing an AF Retirement Navigator portfolio which skilfully smooths out returns by keeping excess returns aside when markets perform well, to balance out returns when markets drop. Here’s some more information on how it works.

REMINDER: get your benefit statements (and more!) online

With AF Online, you can: 1 View your updated:

• • •

investment values retirement fund values values of any other products you may have through Alexander Forbes

2 Find investment values and performances, and use valuable financial planning tools, to track and improve your financial plan.

This is how you register: Step 1: Log in here Step 2: Click on Register now Step 3: Complete the registration page to get registered on AF Online Important note: This may take a couple of days.

This is how you download your benefit statement: Step 1: Log into AF Online Step 2: Click on the Individual tab and select Investment values Step 3: The investment value screen will open. Click on Statements Step 4: The Statements screen will open. Select the statement you’d like to view from the list

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Alexander Forbes Retirement Fund newsletter

Trending topics: Empower Empower is an online learning experience that connects you to content, people and resources that matter. A complimentary service created and provided by Alex Forbes for the benefit of employees belonging to our Retirement fund.

Tusani, Linda and Nonhlanhla completed the Empower team’s survey and were three of the lucky winners! Here they are showing off some of the goodies they received:

Thanks for participating, we love getting feedback from our members!

Over 5 000 people have already signed up for Empower have you?

Click here to sign up for Empower

And remember, your empowerment and development is the best investment you can make. Access to Empower is free!

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Alexander Forbes Retirement Fund newsletter

Quick links: more opportunities to win!!

Find the answer and win How can you add more money to your retirement savings?

Click here to submit your answer and you can win

a R200 Takealot voucher - we have 15 vouchers to give away!

My Retirement Picture competition winners Well done Delmone Hendriks, thank you for sending us your My Retirement Picture character, your Takealot voucher will be sent to you soon.

Survey feedback Thank you for your feedback on our newsletters. Please keep sending us feedback so that we can keep giving you articles that are interesting reads for you!

Reminder: give our newsletter a new name and WIN! We have extended the closing date of this competition. Click here to share your ideas for a new newsletter name or email us at umbrellafundnews@alexforbes.com.

You could win a R1 000 Takealot voucher if your name is chosen.

Any questions on these articles?

0860 100 333 afrfqueries@alexforbes.com

Anything we can improve? contactus@alexforbes.com

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Alexander Forbes Retirement Fund newsletter

Investment returns at 31 March 2022

AF goal-based lifestage model portfolios

3 months

1 year

3 years

5 years

AF High Growth

-1.23%

13.91%

11.55%

8.80%

Benchmark

-1.05%

13.86%

10.70%

8.67%

AF Balanced High Growth

-0,16%

13.99%

11.79%

9.88%

Benchmark

-0.38%

12.91%

10.12%

8.60%

AF Passive Bold

-0.98%

14.53%

10.81%

8.37%

-1.01%

14.26%

10.52%

8.24%

AFRF Protector

-0.48%

11.88%

7.70%

Benchmark

-0.69%

11.19%

7.25%

AFRF Passive Protector

-0.46%

11.63%

7.44%

Benchmark

-0.46%

11.63%

7.44%

3 months

1 year

3 years

5 years

AFRF Real Return Focus

0.20%

12.01%

9.01%

8.58%

Benchmark

2.30%

9.69%

8.45%

8.30%

AFRF Stable Focus

1.97%

9.50%

8.37%

8.12%

Benchmark

2.07%

8.68%

7.43%

7.28%

Benchmark

Real Return LifeStage Model *

* Closed Core Plan LifeStage Model - Members cannot choose to switch into this strategy If you don’t see the returns for the portfolio you are invested in, in the ones above click here.

23247-NL-2022-4 • Getty Images

Contact details Phone the Alexander Forbes Client Contact Centre on 0860 100 333 Monday to Friday between 08:30 and 17:30

Send an email to: afrfqueries@alexforbes.com

Disclaimer: Please note that while care has been taken to ensure that the information provided in this article is correct, it represents an overview of the topic under discussion and as such does not constitute advice. While Alexander Forbes has taken reasonable effort to ensure that the information contained herein is true and correct it will not be held liable in respect of any loss arising from any advice provided arising out of the contents of this circular. We suggest that you contact your Legal department before taking any decisions based on the information herein.

The following businesses are licensed financial services providers: Alexander Forbes Financial Services Limited is a licensed financial services provider (FSP 1177 and registration number 1969/018487/07).

Alexander Forbes Investments Limited (FSP711 and registration number 1997/000595/06)

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