NFB Sensible Finance Magazine Issue 35

A FREE publication distributed by NFB Private Wealth Management

NFB

Issue 35 March 2017

Eastern Cape's Community...

PERSONAL FINANCE Magazine

BEWARE! LOOKING AFTER YOUR RETIREMENT INVESTMENT Will you be working past the age of 60 or 65?

BURGLARIES ON THE INCREASE How to improve security and minimize losses

SEVERE ILLNESS COVER Why this benefit should be enhanced regularly private wealth management

“Based on my calculations, I can retire about 5 years after I die.”

Anonymous, 2014

Are you this “guy”?

Don’t be. Talk to an NFB Private Wealth Manager today to plan your financial future. fortune favours the well advised

Contact one of NFB’s financial advisors: East London s tel no: (043) 735-2000 or e-mail: info@nfbel.co.za Port Elizabeth s tel no: (041) 582-3990 or e-mail: info@nfbpe.co.za Cape Town s tel no: (021) 202-0001 or e-mail: info@nfbct.co.za

web: www.nfbpwm.co.za NFB is an authorised Financial Services Provider

private wealth management

SENSIBLE READ Editors Robyne Moore rmoore@nvestholdings.co.za Brendan Connellan bconnellan@nfbel.co.za

layout and design Jacky Horn TA Willow Design jaxx@at-media.co.za

Photos used in this magazine - 123rf.com

Contributors Phomolo Moreng (NFB East London), Rehana Khan (Prudential Investment Managers), Alex Grunewald (NFB Port Elizabeth), Michelle Wolmarans (NFB Insurance Brokers), Grant Berndt (Abdo & Abdo), Zukiswa Sonjica (NFB East London), Xolisa Funani (NFB Port Elizabeth), Roenica Tyson (Glacier by Sanlam), Kim Doolan (Klinkradt Chartered Accountants), Bryce Wild (NFB East London), Clyde Rossouw (Investec Global Franchise Fund), Debbie Jacobs (IE&T), Xintol Schoeman (NFB Gauteng), Liam Graham (NVest Securities), Travis McClure (NFB East London) Advertising Robyne Moore rmoore@nvestholdings.co.za Address East London Office NFB House, 42 Beach Road Nahoon, East London, 5241 Tel: (043) 735-2000 Fax: (043) 735-2001 E-mail: info@nfbel.co.za Port Elizabeth Office Ground Floor, Building 6, Ascot Office Park, Cnr. Ascot and Conyngham Rds, Greenacres, 6045 Tel: (041) 582-3990 Fax: (041) 586-0053 Email: info@nfbpe.co.za Web: www.nfbpwm.co.za 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 NFB Private Wealth Management. ©2017 All Rights Reserved.

No part of this publication may be reproduced in any form or medium without prior written consent from the Editor.

FROM THE

editors Towards the end of January this year, East London was show-cased as over two thousand local and international triathletes took part in the Standard Bank IRONMAN 70.3 South African triathlon, hosted annually in Buffalo City. Although we are fairly sure that most of you know about the event, it being very well-supported by our local residents, for those who don't know, it consists of a 1.9km sea swim, a 90km cycle and a 21.1km run. Now these may all seem quite do-able on any given day on their own, and each is a feat in itself.... but to do them all on one day...one after the other in blistering heat....takes grit, stamina, self-motivation and some other special mental ingredient we are not sure we even understand.

To participate in a 70.3 IRONMAN event (let alone a full IRONMAN, which doubles up on the above-mentioned distances) takes many months of dedication, time, perseverance and effort – it is a longterm commitment. There will be times that are easier than others; there will be times of having to take pain, questioning the reasons for decisions made and reassessing one's long-term goals and objectives. There will be feelings of self-doubt as well as feelings of immense reward along the way – all, hopefully, leading to fulfilling one's planned final objective.

These characteristics and the long-term commitment required in respect of the training period leading up to the big day, is not all that dissimilar to what one needs and experiences when dealing with one's financial decisions and the differing levels of volatility that investors experience over time depending on the underlying investments chosen.

Always remember that investing needs a long-term view and that it isn't all going to be easy. The important things are to ensure that you get solid advice along the way, that you have an appropriate and effective plan and that you understand what you plan to achieve and how you are going to achieve it. And remember, whereas it is possible to over-train for a triathlon, very few investors will tell you that they over-provided for their big day.

We would also be remiss not to mention the sad passing of Joost van der Westhuizen a few weeks ago. One of our most vivid memories brought back to life, of course, is of our South African Springboks, winning the 1995 World Cup. Joost was the epitome of a warrior in the face of adversity, especially in his last and darkest of days, yet what we can take from him, is that even when he was at his very worst he was always fighting, always looking up and trying his best to help others in need. After all, what else are we here for?

And still ringing in our heads are the words... “It's the world in union, the world as one....”

Robyne Moore Editor and Compliance & Operations Administrator - NFB EL

Brendan Connellan Editor and Director of NFB

sensible finance Mar17

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SENSIBLE CONTENTS MARCH 2017

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DISCUSSING ESTATE DUTY Issues to keep in mind when making estate planning decisions.

By Phomolo Moreng, Financial Paraplanner NFB East London.

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APPAREL RETAILERS: LOOKING MORE ATTRACTIVE Could it be time for Prudential to buy? By Rehana Khan, Portfolio Manager Prudential Investment Managers.

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IF I WERE A BETTING MAN It is imperative that one has a game plan in place. By Alex Grunewald, MD/Private Wealth Manager - NFB Port Elizabeth.

10 RAGING BULL AWARDS NFB Asset Management Wins! By NFB Asset Management.

11 BEWARE - BURGLARIES ON THE INCREASE! How to improve security and minimize losses.

By Michelle Wolmarans, MD - NFB Insurance Brokers.

12 TRUSTS UNDER TAX ATTACK A tax efficient avenue in estate planning curtailed. By Grant Berndt - Abdo & Abdo.

14 PLANTING THE SEEDS FOR A MARKET RALLY A catalyst is needed to unlock the value. By Liam Graham, Portfolio Manager/Trader - NVest Securities.

16 LOOKING AFTER YOUR RETIREMENT INVESTMENT Will you be working past the age of 60 or 65? By Zukiswa Sonjica, Financial Paraplanner - NFB East London.

18 FINAL DEMARCATION REGULATION Changes to some healthcare products. By

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Xolisa Funani, Financial Paraplanner - NFB Port Elizabeth.

19 TAX-FREE SAVINGS ACCOUNTS A vital part of any financial plan. By Roenica Tyson, Investment Product Manager - Glacier by Sanlam.

21 TRUSTS – INTEREST FREE LOANS Solutions developed for clients' unique situations. By Kim Doolan, Tax Consultant - Klinkradt Chartered Accountants.

22 ENDOWMENTS ARE OFTEN OVERLOOKED Income and capital gains tax benefits which you may be able to utilize. By Bryce Wild, Private Wealth Manager - NFB East London.

23 CAN IT BE ARGUED THAT OUR QUALITY STOCKS ARE BOND PROXIES? By Clyde Rossouw, Head of Quality and Portfolio Manager of the Investec Global Franchise Fund - Investec Asset Management.

24 USUFRUCT AND FIDEICOMMISUM These tricky terms explained. By Debbie Jacobs, Senior Estate Administrator - Independent Executor & Trust.

25 SEVERE ILLNESS COVER Why this benefit should be enhanced regularly. By Xintol Schoeman, Financial Paraplanner - NFB Gauteng.

26 Q &A. You ask. We answer. Advice column answering your investment, personal finance, life and/or risk insurance questions with Travis McClure, Director/Private Wealth Manager NFB East London.

SENSIBLE ESTATE PLANNING

DISCUSSING ESTATE DUTY Issues to keep in mind when making estate planning decisions. By Phomolo Moreng, Financial Paraplanner - NFB East London.

A

s with a financial plan, a review of a client's estate planning strategies should be held on a regular basis, to determine whether the current strategies are still fulfilling your goals and are still in line with ever changing legislation.

Over the past years and in accordance with its mandate, the Davis Tax Committee (DTC) has made several proposals to the Minister of Finance pertaining to our tax system as a whole.

The committee submitted its first report on estate duty in 2015, where it raised a couple of issues which, amongst others, included the issue concerning the decrease in estate duty collections by the South African Revenue Services (SARS).

In August 2016, the committee submitted its second and final interim report on Estate duty. In the report the DTC touched on the issues it had raised in the first report and made further recommendations which amongst others include: = The repeal of the inter-spouse exemption

(Section 4(q) deduction). This exemption makes it possible to exempt any bequeaths made to a surviving spouse from estate duty. The committee believes that the exemption excludes a lot of South African families and could discriminate against people on the basis of marital status.

implication of this proposal is that estate duty will be paid by high nett worth individuals.

Furthermore the committee proposes the removal of the inter-spouse abatement, in favour of the “one taxpayer, one tax return” principle. = Reintroduction of the progressive tax system for

estate duty.

Nett estates higher than R15 million will pay estate duty at the current rate of 20%. Nett estates higher than R30 million will pay estate duty at an increased rate of 25%. = Repeal of the Capital Gains Tax (CGT) rollover

between spouses, followed by an increase in the CGT death exemption from the current rate of R300 000.00 to R1 million. = Following the repeal of the inter-spouse

exemptions from estate duty and CGT, the committee proposes that the same inter-spouse exemption be reviewed for Donations Tax purposes, to ensure that there is no loop hole in tax.

Considering that donations between spouses is an everyday activity in some households, the exemption should only apply to assets that are not dutiable in terms of the CGT provisions, such as personal use assets and cash.

= In the first interim report, the committee noted

that the current primary estate duty abatement of R3.5 million has not been increased in the past 9 years, and therefore should be increased to R6 million per tax payer - a recommendation which received a favourable response.

In the second report the committee adjusted its recommendation and proposed a R15 million increase in the abatement per tax year, regardless of a tax payer's marital status. The

To ensure that the provision is not abused, a monetary limit will be set for personal use assets.

For cash amounts, the “enduring benefit” rule will be applied, which will exclude amounts from Donations Tax provided they do not create a benefit which can be enjoyed for a period longer than a year. This will thus ensure that cash transfers are used for the maintenance of the family within a single year. continued on page 28

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You’ve sweated for your money.

You’ve paid your dues, stepped far out of your comfort zone and overcome all sorts of challenges.

NET #WORK BBDO 813036/NFB/E

You work hard for your money. If you’re thinking of investing, visit becauseitsyourmoney.com

Coronation is an authorised financial services provider and approved manager of collective investment schemes. Trust is Earned™.

SENSIBLE TIMING

APPAREL RETAILERS: LOOKING MORE ATTRACTIVE Could it be time for Prudential to buy? By Rehana Khan, Portfolio Manager - Prudential Investment Managers.

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016 was a tough year for the big four South African apparel retailers on the JSE – Truworths, Woolworths, The Foschini Group (TFG) and Mr Price. Added to the increasingly competitive environment for these companies, were changes to the affordability regulations for providing credit, drought-induced food inflation, and the rand blowout following the “Nenegate” scandal. Sales growth has slowed, gross margins are coming under pressure and forecasts for earnings prospects keep being downgraded. This has resulted in share prices coming under a fair amount of pressure, and in addition to the earnings downgrade cycle, the ratings of the stocks have also been coming down from high levels. Could this be the time for valuation-based investors like Prudential to buy?

Where will meaningful sales growth come from?

The government has long been the primary source of supporting consumer spending through new job creation, decent real wage increases and social grants. However, going forward, government must manage its budget much more tightly, which means no more government job growth – new jobs will need to come from the private sector. Yet it's tough to see businesses growing in the current environment, given the political uncertainty and slow economy. At the same time, the ability to leverage consumer debt as a big structural driver for retail sales going forward no longer exists.

The competitive landscape in the South African apparel space has become tougher due to new international entrants such as Cotton On, H&M and Zara, which have been discounting quite aggressively. Despite this, profit margins in the sector have actually been trending upwards over time. Gains in gross margin coupled with strong cost control by local retailers have benefitted their earnings growth, even with sales growth slowing in

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recent years. However, due to the extent of the sales slowdown during 2016 and the increasingly competitive market dynamics, the companies are currently struggling to hold on to their gross margins – and costs have been so well managed that there is very little fat left to take out. Their recent struggles have resulted in falling share prices and de-ratings by the market.

Underweight the clothing retail sector Prudential has been underweight the retail sector in general in our portfolios due to its previously expensive valuations: the average 12-month forward Price-to-Earnings (PE) ratio for the big four apparel retailers has fallen from nearly 20x, well above its long-term median level of just under 13x, to around fair value. Our only active retail holding during the year has been TFG, which has outperformed the other clothing retailers: its share price has risen by nearly 30% in 2016, while its competitors' shares have taken a knock, some falling by over 20%.

While the retailers' valuations have fallen to around fair value, there may still be some risk to the forward earnings embedded in the market consensus forecasts, given the headwinds that the sector faces. A tough medium-term outlook awaits these companies in the absence of higher economic growth and job creation. At Prudential we always base our investment decisions on a medium-term view, and from this perspective, we must judge whether the local growth environment over the next three to five years will support even the lower prospects reflected in the retailers' current valuations. We are certainly watching the sector closely given its improved valuation signals, but patience and caution are required before significantly increasing retail exposure in our funds.

SENSIBLE GAME PLAN

IF I WERE A BETTING MAN It is imperative that one has a game plan in place. By Alex Grunewald, MD/Private Wealth Manager - NFB Port Elizabeth.

I

sit at my desk contemplating what 2017 has in store for us, and have been asked the same question in a number of client meetings I have had this year so far: "what happened to my investments last year and what is going to happen this year?"

In order to get one's head around this question, one need only take a look at the following scenario: if you had given me £5 last year to bet on anything (I know you are thinking what the hell is an investment advisor betting my money on, but please bear with me and the picture will soon become clear) and I had bet on only three things, namely: - Leicester City winning the Premier League - England leaving the European Union (Brexit) - Donald Trump winning the presidential election, that £5 note would have given me £1,400,000; yes, you are reading correctly... 1,4 million pounds!

So if the gamblers did not see it coming, realistically, how on earth would the Asset Managers, who are looking after our investments, have seen it coming? Now I must clarify: The British Premier League and more importantly, Leicester City winning the Premier League, had nothing to do with poor returns on our investments, but the “goings on” of one Mr Trump and the Brexit debacle most certainly had a large amount of influence on markets. And it was something that very few actually predicted happening.

Now that is all good and true, but how does it tie back to your investment and the poor investment returns you may very well have experienced during 2016? The point I am making is that when I have

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had the discussion with clients I have reiterated that we cannot control external issues; what I will always go back to is our original proposal (game plan) and the investment horizon that we both agreed upon when we originally began the plan.

As long as that is in place and meets the needs of the clients from the outset, any peripheral noise or going on, although affecting the investment in the short term, should have no major affect on the greater plan in place. I must stipulate that the due diligence in putting the proposal together with the client has to have been done and tweaking fund selection may happen over the course of the investment, but as long as the correct plan was determined from the outset, there should in reality be no knee jerk reaction needed.

Therefore, to answer the question that I began this article with, "what is going to happen this year?"

The truth of the matter is that I do not know, but as long as a plan was in place to begin with and that plan met the risk profile, investment horizons and goals of the client, there should not be too much of an issue around short term volatility in the market.

In conclusion, it is imperative that one has a game plan in place when investing - when last did you check yours? We are more than willing to assist you should you not have something in place.

So please, come and visit us in our PE office and don't forget... our coffee is great.

Our office contact details are: East London 043-735 2000 = Port Elizabeth 041-582 3990 Cape Town 021-202 0001 = Johannesburg 011-895 8000

NFB AM SECURES TOP AWARD AT RAGING BULL AWARDS CEREMONY NFB Asset Management is pleased to announce that the NFB Ci Cautious Fund of Funds received two accolades at the prestigious 2017 Raging Bull Awards; the Oscars of the investment management industry. The Awards were established to honour funds and fund managers that consistently earn outstanding returns for South African retail investors.

The accolades for the five-year period to the end of December 2016 were as follows: = A Certificate for Top Performance on the Basis of

Risk-adjusted Returns by a Domestic Collective Investment Scheme in the sub-category SOUTH AFRICAN MULTI-ASSET LOW-EQUITY and = A Raging Bull Award for Top Performance by a

Domestic Collective Investment Scheme on a Riskadjusted Basis in the category BEST SOUTH AFRICAN MULTI-ASSET EQUITY FUND The accolades received are testament to the long-term philosophy and robust investment processes developed over the last ten years and to the investment

management team responsible for guiding these. We thank those who have trusted their savings to us and look forward to many more years of the careful and considerate stewardship of your assets.

NFB AM manages in excess of R3bn across a range of risk-profiled collective investment schemes and model portfolios, both onshore and offshore.

WWW.NFBAM.CO.ZA NFB House, 108 Albertyn Avenue, Wierda Valley, Sandton, 2196 PO Box 32462, Braamfontein, 2017 NFB Asset Management (Pty) Ltd. An authorised ď€ nancial services provider

SENSIBLY SECURE

BEWARE! BURGLARIES ON THE INCREASE How to improve security and minimize losses. By Michelle Wolmarans, MD - NFB Insurance Brokers.

D

uring the months of December and January the level of residential burglaries reported to NFB Insurance Brokers increased significantly. The majority of claims submitted to our claims department had the following common characteristics: = The family had left their house unoccupied as they had gone away on holiday. = The dwelling was fitted with a linked alarm system. = The alarm system was activated by the insured when they departed on holiday. = The alarm system did not activate when the perpetrators gained entry to the premises.

It is evident that the burglaries in the suburbs of East London have become more calculated and organized. Information from the police confirm that there are definite syndicates operating in this area.

These syndicates normally consist of a minimum of 4 well-dressed males operating from vehicles (often luxury type vehicles) that are often changed to avoid suspicion. They observe the day-to-day routine of various households and have a good technical knowledge of alarm systems. They target very specific items like electronic goods and jewellery.

The modus operandi of the syndicates is to seek out unprotected sections of the home such as bathrooms, passages and spare bedrooms where passives are often not installed. They gain entry via this point and will then utilise various methods to move undetected to the main alarm board. Entry may also be gained via the roof as many houses do not install passives in the roof area. Once the main alarm board is reached it is disabled in such a way that no signal is sent to the alarm company.

The would-be burglars can then move undetected throughout the house without hindrance.

In certain instances they do not deactivate the main alarm board, but rather conceal their body heat by wearing wet suits or wrapping themselves in duvets or blankets. Traditional passive sensors do not detect movement, but rather a change in the temperature in its field of view. New anti-cloak sensors have been developed to combat this.

What can you do to improve your security and prevent/minimise the loss? ü Replace your traditional passives with anticloaking passives; ü Install passives in ALL areas of your house; ü Install beams around your house; ü If you are going away employ a reliable housesitter to stay in your house; do not leave it unoccupied; ü Lock all inter-leading doors; ü Make sure your safe keys are hidden; ü Install passives in your roof; ü Install magnetic contacts onto key areas; ü Install electric fencing and CCTV cameras; ü Install an alarm cage panel; ü Link your alarm system to your smart phone, as this provides you with remote control of your system.

We believe that it is imperative to contact your alarm company and discuss the various mechanisms that can be installed in order to ensure that your security system cannot be bypassed and that should unauthorised entry be gained to your dwelling that the signal will be transmitted to the alarm company so that they can respond.

Important information that will be required by insurance companies in respect of burglary claims is: = Proof that your alarm was activated if your policy is subject to the burglar alarm warranty; = Police case number; = Valuation certificates in respect of any jewellery that is stolen (must be dated prior to the loss); = Proof of ownership in respect of electronic equipment. This can take the form of invoices, ownership manuals, packaging, etc.

If you require any advice or assistance in respect of your insurance, please do not hesitate to contact our office on 043-7352460.

Thank you to Ross Hartwig for his input and the technical information which he provided that is included in this article.

insurance brokers (border)(pty)ltd.

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TRUSTS UNDER TAX ATTACK

X A T

A tax efficient avenue in estate planning curtailed. By Grant Berndt - Abdo & Abdo.

T

he creation and establishment of trusts, particularly family trusts has been used by many as a useful estate planning tool. Usually the husband and wife set up the trust, with them and one other person being the trustees, and the husband, wife and their children being the beneficiaries.

The trust then in time buys an asset/s, with the funding for the purchase coming from the husband and wife in their personal capacities lending money from their savings or investments to the trust.

The money loaned is then reflected in the trusts' financials as an interest free loan by the trustee/s and is reduced by R100,000 per year, being the maximum tax free amount a tax payer can donate per year. Any donation in excess of R100,000 per year is subject to donations tax at the rate of 20%.

The growth in the asset purchased then accrues in the hands of the trust and not the lender of the money. Should the lender of the money die before the loan has been settled in full, his Will usually bequeaths the loan to the trust and the increase in the value of the asset purchased or the value of the asset itself does not attract estate duty in the lender's estate.

In 2013, the Minister of Finance established a tax review committee, known as the Davis Tax Committee to assess the tax policy framework. The Davis Tax Committee has made recommendations, and thus speculation, that trusts are next in the firing line for major changes in the law surrounding their taxation. This has now started with the passing in January of the Taxation Laws Amendment Act in respect of the interest free loans granted by trustees to their trusts.

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As from 1 March 2017, any loan to a trust by someone connected to that trust that does not charge interest at the current minimum rate of 8% per year is deemed to be a donation on the last day of each tax year that the loan remains outstanding. The amount of any deemed donation will be the difference between the amount of interest actually paid to the lender and the amount payable on the loan at the official interest rate, currently 8% per year.

So the lender will now either have to pay income tax on the interest he/she should have been paid by the trust, had the trust borrowed the money from, say a financial institution, or if no interest rate, or a lower interest rate is charged on the loan, the difference between currently 8% per year and the interest actually charged, is deemed to be a donation.

So, if for example, a trustee lends his trust R500,000 interest free to buy an asset, he would have reduced the loan by donating R100,000 to the trust every year. However, as from the next financial year, starting on 1 March 2017, R40,000 (being R500,000 x 8% deemed interest) will be deemed to have been donated leaving only R60,000 now to be used in reducing the loan. However, should the interest free loan be more than R1,250,000, the deemed donation will be in excess of R100,000 and thus donations tax will have to be paid.

Another tax efficient avenue in estate planning has now been substantially curtailed.

“Managing success into the future” Our services include: Accounting • Auditing • Taxation Planning Estate Planning • All Statutory Registration • Business Structuring Concessions • Due Diligence • Business Succession Planning

Contact us on 043 726 9555 for all your queries.

SENSIBLY OPTIMISTIC

PLANTING THE SEEDS FOR A MARKET RALLY A catalyst is needed to unlock the value. By Liam Graham, Portfolio Manager/Trader - NVest Securities.

2016 was a tough year for the South African financial markets: the Top 40 finished the year down -5%, while the ALSI barely stayed above zero, thanks solely to the resource sector which saw a bounce off significantly depressed levels.

There is definitely more to be optimistic about going into 2017: South African market valuations are at 5 year lows with the forward PE of the ALSI at 12.3x.

Historical one year forward PE - emerging and developed markets *

good returns for shareholders; a catalyst is needed to unlock the value. The catalyst need not be a major event that changes the path of growth overnight, in fact they rarely are - more likely a myriad of small margin changes that together create enough sustained inertia to slowly turn the economic cycle.

IN SEARCH OF MARGINAL SHIFTS GDP growth bottomed in 2016 and general consensus expects GDP growth to more than double in 2017 (although remaining at depressed rates), driven by recovering Agricultural & Commodity sectors.

SA GDP forecasts

Source: Avior Capital Markets, Bloomberg * PEs for economy plotted in local currency terms

Earnings growth across the ALSI should show significant acceleration on the back of a depressed 2016.

SA Equity Market - Earnings growth

The improving Agricultural and Resources sector should aid job stability and a stable Rand will aid investment decisions. However, I believe the biggest driver of marginal benefits in the near term will come from a receding inflation rate.

FOOD INFLATION HEADWIND TURNS TO TAILWIND A big constraint on consumer spending in 2016 was inflation, which spent the year above 6.0%, driven mainly by drought induced food inflation.

Consumers found themselves with very little disposable income left after purchasing their staples.

SA Inflation Rate

Source: Avior Capital Markets, Bloomberg

This sets a good foundation for the market to provide healthy returns, however, reasonable valuations are not sufficient in itself to produce

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Source: tradingeconomics.com

SA Food Inflation

SENSIBLY OPTIMISTIC Luckily for everyone the rains have returned to South African agricultural regions, providing some much-needed relief to farmers. Maize plantings are up 25% vs last year and forecasts for the coming seasons maize crop are for 12.5-14mln tons (up 80100% vs 2016).

Maize Crop Production (tons)

So, given that maize and grain prices are down significantly from their highs, all else being equal, we can expect to see a pullback in food inflation and thus CPI. The ultimate timing will be delayed (2H17) as many food producers hedge their purchases 6 months out. With grain prices, likely to be down 30% plus Y/Y, it is not a stretch to assume Food Inflation can fall within a range to 4-6% (4% * 15% = 60bps < 180bps contribution in 2016), which could take 1 percentage point out of the CPI number.

A pull back in Food Inflation will have two effects.

Firstly, it will provide consumers with some breathing room, allowing them more cash to spend on more discretionary items, in turn stimulating growth.

Secondly, a pullback in CPI may provide the Reserve Bank enough wiggle room to cut rates in order to stimulate the economy.

WHAT CPI MAY CAUSE THE RESERVE BANK TO CUT RATES This rejuvenation in the maize crop has caused the price of maize to pull back from its records highs.

The picture is similar across many of the other grains.

CPI expectations are already coming down toward 5.5% for 2017.

CPI inflation expectations: 2017

Maize Prices

7.

As we move into 2017 expect to see big Y/Y drops in maize prices, in the vicinity of 35-40%.

What does this all mean?

As mentioned earlier, CPI inflation remained stubbornly ahead of the Reserve Bank's inflation target of 3-6%, which was a primary reason for the 75bps hike in interest rates in 2016, despite very weak economic growth. Food has a weighting in the CPI basket of 14.6%, but throughout 2016 Food Inflation contributed almost 30% toward CPI. Refer to table below.

If inflation expectations are correct that means real rates (repo rate minus CPI) will be approximately 150bps, a level that provides the Reserve Bank room to enact a 50bps cut to interest rates (Resbank deems real rate of 100bps to be neutral).

Consensus is for no interest rate cuts in 2017 so a dovish surprise will have a big impact. continued on page 27

CPI

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

6.2%

7.0%

6.3%

6.2%

6.1%

6.3%

6.0%

5.9%

6.1%

6.4%

6.6%

6.8%

Food Inflation contribution

1.1%

1.3%

1.5%

1.6%

1.6%

1.7%

1.7%

1.7%

1.7%

1.8%

1.8%

1.8%

% of CPI

17.7%

18.6%

23.9%

25.7%

26.1%

27.1%

28.2%

28.6%

27.8%

28.3%

27.2%

26.6%

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SENSIBLE INVESTMENT

LOOKING AFTER YOUR RETIREMENT INVESTMENT Will you be working past the age of 60 or 65? By Zukiswa Sonjica, Financial Paraplanner - NFB East London.

F

or individuals under the age of 30, retirement may seem a long way off, and definitely not worth worrying about right now. Recent studies, however, have revealed that the younger you are, the higher your chances of living to 100 years of age.

Odds of Living to 100, By Year of Birth

will employers willingly take on older employees and pay them adequate salaries to meet their financial needs - even with compromised health that could affect productivity and efficiency levels? With these facts to consider it becomes clear that retirement capital is, and will continue to be, an asset to which closer attention must be paid.

Here are a few ways to look after your retirement savings:

40.0%

30.0%

20.0%

10.0%

1940 Male

1960 Female

1980

2000

Both Sexes

Graph sourced: discovertheodds.com/what-are-the-odds-of-living-to100 - accessed 26/01/2017

This research forces many to face the likelihood of working past the age of 60 or 65, and to ensure enough retirement capital is available to provide income for the forty or fifty years after what we currently consider the normal retirement age of 60.

Should the retirement capital not stretch that far,

Getting Started and Sticking to the Plan: like many resolutions to do better and act wisely, one starts with good intentions, but may lose focus along the way. Enlisting the help of a financial advisor to determine your starting contribution amount and the percentage increase of your contributions is the initial step to ensuring sufficient retirement capital. The next step is sticking to your plan and making sure you are on track year after year.

Should there be a break in employment due to retrenchment, maternity leave or unemployment, then your strategy will need to be revised accordingly.

Correct Asset Allocation for your Life Stage: when employees join companies they are given the opportunity to choose the fund allocation of their retirement investment. Most employees do not have a clear understanding of the impact of choosing funds for their retirement fund, nor do they remember to revise their original position at different life stages. Many have fallen into the convenience of overly conservative default options which is a costly mistake that people are not even aware they are making.

Preserve funds till Retirement Age: when changing employers, many people fail to preserve the funds for the intended purpose.

They would rather dip into their retirement savings prematurely, taking the pre-retirement tax hit and foregoing the years of

16

continued on page 28

sensible finance Mar17

FINAL DEMARCATION REGULATIONS Changes to some healthcare products. By Xolisa Funani, Financial Paraplanner - NFB Port Elizabeth.

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to R5,000 per day spent in hospital. As of 1 April 2017 the new limit will be R3,000 per day spent hospitalised with an annual limit of R20,000; this limitation will be irrespective of the number of days spent in hospital.

here has been a bit of uncertainty regarding the outlook of gap cover, hospital cash back plans and primary healthcare insurance policies.

However, in December of 2016 the Finance Minister, Pravin Gordhan, and the Health Minister, Aaron Motsoaledi, published the final demarcation regulations under the Long-term and Short-term Insurance Acts of 1998 relating to the abovementioned products.

Some of these products will continue to exist, however, there will be strict regulations and limitations that they will have to comply with.

A brief look at these products and the changes that will apply: =

Gap cover: policies that cover shortfalls between medical scheme benefits and the rates that are charged by private medical service providers. As of 1 April 2017 gap cover policies will be limited to R150,000 per annum per individual. An example would be a family of 3 that will have a policy limit of R450,000. Note that existing gap cover policies will have to comply with the new regulations from 1 January 2018.

=

Hospital cash back plans: these plans pay out a cash lump sum based on the number of days a client is hospitalized. There are currently no limits on these types of polices and some policy provisions are currently paying up

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sensible finance Mar17

=

Primary healthcare insurance policies: health care insurance policies are not medical schemes and therefore are not governed by the Medical Schemes Act, although they may blur the lines at times. They provide limited medical service benefits such as doctors' visits, basic dentistry and optometry, and acute and chronic medication amongst other limited benefits. As of 1 April 2017 the primary health care insurance policies will be outlawed. The main reason behind this move is that these policies are moving into the realm of medical schemes, which often leaves consumers confused about the products. The policy providers have been given a two-year transition period to phase out existing primary healthcare insurance policies. The policy providers will most likely have to amend these primary healthcare insurance policies in order for them to comply with the requirements of the Medical Schemes Act as they will no longer be recognised as insurance products.

Should you have any further questions please do not hesitate to contact one of our NFB Private Wealth Managers at one of the following offices: East London 043-735 2000 = Port Elizabeth 041-582 3990 Cape Town 021-202 0001 = Johannesburg 011-895 8000

SENSIBLE SAVINGS

TAX-FREE SAVINGS ACCOUNTS

A vital part of any financial plan

By Roenica Tyson, Investment Product Manager - Glacier by Sanlam.

he benefits of Tax-Free Savings Accounts (TFSAs) are well-known by now – no tax on interest or dividends received, and no capital gains tax or tax on funds withdrawn.

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savings plan and R2,500 into a tax-free savings plan.

Making a TFSA work for you to your best advantage, and within the context of your overall investment portfolio, requires some consideration, and professional financial advice in this regard is invaluable.

Weighing up contributions to a retirement annuity (RA) versus a tax-free savings account is a slightly more complex decision. Together with your adviser, you need to look at the advantages and disadvantages from a tax perspective. The RA offers the benefit of tax-deductible contributions and a tax-free lump sum on withdrawal (up to certain limits). It also provides a form of disciplined, forced saving – for those who need that – because the funds can only be accessed from age 55 upwards.

First ensure that you have an emergency fund in place and that your debt repayments are under control. It will take investors 16.5 years to reach the maximum lifetime contribution limit of R500 000 to their TFSA. While you can access the money at any time, any amount withdrawn will be regarded as a further contribution (towards your lifetime contribution limit) when re-invested in the TFSA. Given this negative impact of withdrawals on your contribution limit, your TFSA should be viewed as more of a long-term investment; there are other investment vehicles more suited to short-term savings or emergency funds.

Other important considerations involve weighing up contributions into a TFSA versus a regular investment plan, as well as into a TFSA versus a retirement annuity.

TFSA vs Investment Plan If an investor is currently investing, for example, R5,000 a month into a discretionary savings plan and does not have the means to make additional savings, it will make financial sense to split the investment, i.e. invest R2,500 into the discretionary

TFSA vs Retirement Annuity

However, it needn't necessarily be an 'either/or' choice. Using the two in combination can deliver superior results. It will pay, however, to discuss the differentiating aspects with your adviser when making an investment decision.

Investing on behalf of your children Parents can also open tax-free savings plans for their children, i.e. a family of four, with two children, can save up to R120,000 a year, tax free. This is an ideal way to save for a child's education and can also help to cultivate a savings ethic from a young age.

Note that donations tax – of 20% of the amount donated or invested on behalf of your children – is payable. Investors have an annual donations tax exemption of R100,000.

Investors are encouraged to consult with a qualified financial adviser to ensure their investment portfolio is in line with their personal circumstances and risk profile. sensible finance Nov16 Mar17

19

SENSIBLE SOLUTIONS

TRUSTS AND INTEREST-FREE LOANS

By Kim Doolan, Tax Consultant - Klinkradt Chartered Accountants.

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ational Treasury has taken a tough stance in order to curb the avoidance of estate duty by moving assets into a trust with the introduction of the revised Section 7C of the Income Tax Act, No. 58 of 1962 which was signed into law on the 11 January 2017 and takes effect on 1 March 2017.

Basically, any loan, advance or credit that is provided to a trust by either a natural person or a company at the instance of that person where interest is either not charged or charged at a rate lower than the official rate of interest (currently 8%), an amount equal to the difference between the official interest rate and the amount that was actually charged will now be treated as a donation made to the trust. The annual donations tax exemption of R100,000 can be utilized, however, no deduction, loss or allowance will be available to a lender as a result of the failure of the trust to repay a loan, advance or credit.

What does this mean for you?

The section applies to both new and existing loans and there are transitional provisions or relief to unwind on loan accounts that are already in place. If you have a trust which was funded by way of an interest free loan or interest is charged at a rate lower than the official rate of interest on this loan (currently 8%) and the trust still owes you the money on 1 March 2017, you will have a new tax implication separate to the other taxes that you may already be liable for on behalf of your trust.

The amount of interest that you should have been charged will be seen to be a donation to the trust which will attract donations tax at a rate of 20% on amounts above R100,000. However, even if your loan attracts donations tax of less than R100,000, it does not solve the problem as the full R100,000 will

no longer be available to reduce the capital balance of the loan.

Some practical examples:

Example 1: A R1 million loan is granted from the trust to a natural person interest free. The tax implications will be as follows: R1,000,000 x 8% = R80,000 (this is seen to be the donation to the trust).

There will be no donations tax implications as the donation is less than R100,000. However, only R20,000 (R100,000 – R80,000) is available to reduce the loan account tax free.

Example 2: A R1.5 million loan is granted from the trust to a natural person interest free. The tax implications will be as follows: R1,500,000 x 8% = R120,000 (this is seen to be the donation to the trust) Portion subject to donations tax: R20,000 (R120,000 – R100,000) Donations tax at 20%: R4,000 (R20,000 x 20%)

What are the solutions?

There is no one solution “fits all” scenario; we recommend that your circumstances should be assessed on their own merits. We are already in the process of developing solutions for our clients based on their unique circumstances. Please contact us if you require any assistance with the above.

References Ehlers T, 2016, Interest-free loans to trust, Citadel Wealth Management 2016 Tax Legislative update presented by Pieter van der Zwan

sensible finance Mar17

21

SENSIBLE BENEFITS

ENDOWMENTS ARE OFTEN OVERLOOKED Income and capital gains tax benefits which you may be able to utilize. By Bryce Wild, Private Wealth Manager - NFB East London.

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ince I entered the financial services industry in 2012, I have noticed the trend of many individuals automatically investing discretionary funds into unit trusts, without taking the time to consider any other options or without having received proper guidance in this regard from financial advisors. While I agree that making use of a unit trust is a good investment decision when looking to diversify one's portfolio, it is important that individuals consider whether investing in a unit trust is the best option in their particular circumstance, or whether making use of an endowment would be more beneficial.

Even though the above are compelling reasons to make use of an endowment policy for discretionary funds, there are a couple of limitations that investing in an endowment introduces:

Benefits of Investing in an Endowment:

A unit trust does, however, have the advantage of having more flexibility when compared to an endowment. I say this because an investor is able to add funds to the investment at any time and they don't have to worry about a 5 year restriction period applying.

= Income Tax: within endowments, income tax is

levied on individuals at a tax rate of 30%. Within unit trusts, the individual's marginal tax rate will be applied and this may be anything up to the maximum marginal tax rate of 41%. = Capital Gains Tax: the maximum effective

capital gains tax rate within an endowment structure comes to 12%, whereas it is 16.4% for unit trusts and other discretionary investments held outside of an endowment structure. = Administration Efficiency: an endowment is

taxed in the insurer's hands, which means that the investor does not have to go through the hassle of submitting a tax return for the endowment each year. = Executors Fees: no executors fees are payable

upon death if a beneficiary has been nominated on the endowment policy.

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sensible finance Mar17

= A five year restriction period applies, during

which only one loan and one surrender from the policy is allowed. = Individuals can only invest 120% of the higher

amount invested in each of the past 2 years. If this rule isn't adhered to, the 5 year restriction period starts again.

If one takes all of the abovementioned information into account, it is clear that individuals with a marginal tax rate of greater than 30% are more often than not better served by making use of an endowment (mainly due to the income and capital gains tax benefits).

However, which investment vehicle to make use of is not always a straightforward decision and this is why it is important to consult a qualified financial advisor before making the final decision. If you need assistance in this regard, please contact an NFB Private Wealth Manager at one of the following offices: East London 043-735 2000 = Port Elizabeth 041-582 3990 Cape Town 021-202 0001 = Johannesburg 011-895 8000

SENSIBLE QUALITY

CAN IT BE ARGUED THAT OUR QUALITY STOCKS ARE BOND PROXIES?

By Clyde Rossouw, Head of Quality and Portfolio Manager of the Investec Global Franchise Fund Investec Asset Management.

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uality global franchise companies such as those we look to, to hold in our portfolios, particularly consumer staples, are frequently referred to as 'bond proxies'. In turn, the market often assumes that the sector is a proxy for quality.

Increased expectations of interest rate rises in 2016 helped trigger consumer staples' relative underperformance. However, we believe it is a flawed notion that consumer staples, and hence quality, perform poorly in an environment of rising rates and steepening yield curves.

The impact of rates on consumer staples varies greatly over time, and the correlation is usually at its highest when rates have bottomed. The muchanticipated inflection point in rates in 2016 meant that the market differentiated less between highand low-quality consumer staple companies, slashing their multiples across the board. Not all consumer staples are high-quality compounders.

Hence, we believe that going forward, variations in multiples across the sector will increase again and good stock picking will remain important.

While our Quality funds, which include the Investec Global Franchise Fund, have defensive characteristics, we do not believe they should be considered bond proxies. There is little statistical relationship between our funds and long-dated bond securities or levels of the yield curve. In fact, it can even be argued that the correlation of the portfolio is positively skewed to higher bond yields, challenging the notion that our funds underperform the market in a rising rate environment, for the following reasons: = Not all high-quality compounders are consumer

staples. We continue to find attractive

opportunities in the consumer staples sector, in spite of perceived valuation concerns and lower exposure to any short-term cyclical recovery. However, over the last few years we have made significant changes to the Global Franchise Fund's positioning, with the consumer staples exposure reducing to less than 40% of the portfolio, in favour of interesting defensive growth opportunities, primarily in the technology (more than 25% of the portfolio) and financials (excluding banks) sectors (10% of the portfolio). = We avoid sectors worst affected by rising bond

yields. We have no exposure to real estate, utilities and telecoms.

But one should be careful painting a sector-level brush across Quality strategies and deriving conclusions. We are fundamental, bottom-up quality stock pickers. We believe understanding the sensitivity of our individual companies to changes in yields is a more important consideration. We therefore analysed the sensitivity of our funds, on a stock level, to changes in US 10-year Treasury yields.

Our analysis revealed that the relative marginal contribution for the Investec Global Franchise Fund â&#x20AC;&#x201C; the percentage of Global Franchise returns explained by the performance of 10-year US Treasuries â&#x20AC;&#x201C; is only 6.4%. This means that 93.6% of Global Franchise returns are actually explained by other factors.

Finally, it is worth bearing in mind that the quality companies we seek to invest in have very little debt. Therefore, they shouldn't struggle to refinance debt at the higher rates that bond markets are now pricing in. Banks/financials may benefit in the short term from higher rates, but we question how much expectations here are now priced in or even excessive. In the absence of growth, will rising rates lead to loan defaults (both consumer and corporate) longer term? sensible finance Mar17

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SENSIBLE INFORMATION

USUFRUCT AND FIDEICOMMISSUM EXPLAINED

By Debbie Jacobs, Senior Estate Administrator - Independent Executor & Trust.

WHAT IS A USUFRUCT? A usufruct grants the holder (of the usufruct) a right of use over property for a defined period, but not ownership. The ownership resides with the ultimate owner and their interest is known as the bare dominium. A responsibility is placed on the usufructuary (person to whom the usufruct is granted) to preserve the property for the ultimate owner.

Example: A husband leaves his fixed property (the bare dominium) to his son, with a usufruct to his wife.

in-law.

WHAT IS A FIDEICOMMISSUM? A fideicommissum is whereby a benefit, usually fixed property, is bequeathed to one person (fiduciary) subject to the condition that on the occurrence of a specified event or the fulfilment of a specified condition, usually the death of the fiduciary, that the inheritance, or part thereof, is to pass on to another person.

In this example, the wife will be able to reside upon the property, or to receive the rental from the property while she resides elsewhere. She still has a responsibility to maintain the property for the son, as well as pay the rates and taxes.

The difference between a usufruct and a fideicommissum is that, with a usufruct, the first beneficiary is not the owner of the property. He or she simply has the right to use and enjoy it, and the second beneficiary is always the owner, whereas with a fideicommissum, the first beneficiary owns the property for a period of time before the second beneficiary becomes the next owner.

One of the most popular reasons for usufructs is to protect both the usufructuary and bare dominium holder as he or she cannot alienate the property without the consent of the bare dominium holder.

An example would be a wife leaving her property to her husband with usufruct to her mother who has been living with them to ensure that the mother will not be left destitute if there is not an amicable relationship between the husband and his mother-

Example: You leave your farm to your child, subject to the condition that when he or she dies, the farm will go to his or her child. When that child dies, the farm belongs to the next generation. It is important to note that a fideicommissum limits the transfer of immovable property to three generations. The third generation thus acquires this immovable property free of such restrictions.

At Independent Executor & Trust we are committed to personalized service and individual attention. With combined experience of 65 years, we specialize in the Drafting of Wills, Administration of Estates & Testamentary Trusts.

49 Beach Road, Nahoon, East London, 5241 | PO Box 8081, Nahoon, 5210 Telephone: (043) 735 4633 Fax: 086 693 3356 / (043) 735 3942 | e-mail: info@iet.co.za

Port Elizabeth clients can call 041-582 3990 and you will be re-directed accordingly

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sensible finance Mar17

SENSIBLE COVER

SEVERE ILLNESS COVER What is it and why this benefit should be enhanced regularly

By Xintol Schoeman, Financial Paraplanner - NFB Gauteng.

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evere illness cover typically pays out a lump sum if you are diagnosed with a specifically listed, potentially life threatening condition.

The purpose of severe illness cover is to make up for the potential loss of income when you need to make lifestyle adjustments, such as slowing down your career, cutting back on your responsibilities at home, or employing someone to help you, or when you incur expenses related to your condition that are not covered by your medical scheme, such as adjustments to your home or rehabilitation costs.

Severe Illness is often over-looked due to the fact that it is a relatively expensive benefit, which is unfortunately due to the high probability of claiming.

Statistics show that 1 out of every 6 men and 1 out of every 7 women will be diagnosed with cancer in their lifetime, with a large majority of assurers Severe Illness claims being paid from this category.

Medical advances and increasing longevity is making severe illness cover an essential part of your financial safe guarding against serious illnesses or medical conditions, such as heart attacks, cancers and strokes.

You may be asked to upgrade your policy Life companies are constantly changing and enhancing their Severe Illness benefits, which can leave you feeling powerless when choosing a policy or deciding whether or not to accept enhanced cover on your existing policy.

As medicine advances, severe illness cover is advancing and you, as policyholder, are likely to get a letter from your assurer at some stage advising you of an upgrade of your policy.

Your Severe Illness benefit may in some instances be automatically upgraded to include new illnesses and medical definitions at no additional cost, and you will receive a notification that this has been done.

However, where benefits are upgraded significantly, you will be presented with an offer to upgrade your cover for an increased premium. This enhancement in benefit may or may not include medical underwriting depending on whether your health is more or less the same as when you took out the cover.

Any changes in your health will, however, not affect the cover you already have in place.

It is important to note that whilst these benefit upgrades are completely optional, it is always advisable to enhance your Severe Illness benefit when presented with the opportunity to do so, to make sure that you have the most comprehensive cover in place. These enhancements often mean claimable events which are now payable at lower severity levels, the difference between single and multiple claims and claim definitions not previously considered.

In a nutshell, the more comprehensive your Severe Illness Benefit, the more likely you will be able to claim.

Should you require additional information on Severe Illness cover, please do not hesitate to contact one of our Private Wealth Managers at one of our NFB offices in Johannesburg, East London, Port Elizabeth, Stellenbosch or Cape Town.

Sources: The Independent on Saturday & Old Mutual

sensible finance Mar17

25

Q

It's the end of the tax year and I get to top up my Retirement Annuity and get the tax deduction, but what are the other benefits and what are my options when I retire?

A

This time of year is the silly tax season. The new budget gets announced, clients are scrambling to top up their RA'S and Tax Free Savings accounts and it's all done in the shortest month of the year. The meaning of the word February is to purify or expiate. In ancient Roman times it was the month of purification where great festivities were held to refocus on righteous living.

From a financial point of view we see it as a month to refocus on your financial living and get your financial plans back on track.

The Retirement Annuity benefits allow you to deduct your contributions against your taxable income. What this effectively means is that SARS will fund a portion of your retirement benefits. You can now contribute up to 27.5% (used to be 15%) of your earnings towards your RA up to a maximum deductible amount of R350 000. Depending on your tax bracket you could save up to 41% in tax for every rand you put towards retirement. I realise that we can't all afford to invest 27.5% of our salary and it may mean that your take home pay may be less, but remember that your contributions to retirement is your money and at least you are not paying it away to tax. It will also ensure that you are in a better position at retirement.

Other benefits include

Once you have reached retirement and want to retire from your RA you can access 1/3rd of your funds as a lump sum with the first R500 000 being tax free. If you are wise you will re-invest these funds. The remaining funds within the RA must be transferred to a pension type structure such as a Living Annuity. The Living Annuity has similar characteristics to the RA in that there is no tax within the portfolio and you can nominate a beneficiary. It allows you the flexibility to invest the funds as you see fit. The portfolio must, however, provide an income, which you can select between 2.5% and 17.5% p.a. One needs to be careful not to draw too high an income as you can start eroding capital. The normal withdrawal rates that are sustainable are between 4% and 6% which allows for some capital and income growth over time. The income you draw is taxable.

The Living Annuity is a very transparent portfolio and you can see your value and this can be left to your heirs on death. What is great, is that you get to control your pension portfolio with the assistance of good financial advice and you can tailor make the portfolio to suit your needs and risk profile. The portfolio options have advanced to the stage that you can even hold direct shares within your pension and live off the dividends from these shares. An example of this is at the moment you can get growing rental yields from property stocks of around 9% p.a. and some income funds are producing a yield of 9% as well with lots of protection in the portfolio. Provided your withdrawal rate is lower this allows you to cover your income requirements.

= No tax on the growth within the RA. No CGT, no

tax on interest and dividends and therefore better overall growth if comparing with the same portfolio in a discretionary investment. = Protection from creditors. = Protection from yourself in that you can't cede the portfolio for security and you cannot access the funds before age 55. = Protection for beneficiaries and dependents.

26

On death your beneficiaries have the option to take over the portfolio as it is or have the funds paid out as a lump sum less tax.

Despite some of the restrictions regarding access to the capital the retirement portfolios allow the investor a lot of flexibility to manage the portfolio to their particular needs. In an environment where more and more employers are opting not to continued on page 28

sensible finance Mar17

The Eastern Cape's first home-grown

STOCK BROKERAGE NVest Securities (Pty) Ltd NFB House, 42 Beach Road, Nahoon East London 5241 PO Box 8041, Nahoon 5210 Tel: (043) 735-1270, Fax: (043) 735-1337 Email: info@nvestel.co.za

www.nvestsecurities.co.za Port Elizabeth clients can call 041-582 3990 and you will be re-directed accordingly

NVest Securities is an Authorised Financial Services Provider

SENSIBLE ESTATE PLANNING

PLANTING THE SEEDS FOR A MARKET RALLY

continued from page 15

BUSINESS SPENDING WILL BE THE BIGGEST DRIVER ON MARKET RETURNS ----BUT WHEN?

An interest cut will not only increase disposable income further as consumers' interest expense is reduced, lower rates may stimulate consumer credit expansion which is barely growing and has a greater multiplier effect on the economy.

The biggest missing piece that would drive GDP growth and provide a sustainable catalyst that will move the market to new levels is an increase in business investment. South African businesses certainly have enough cash sitting on the side lines waiting to invest, but they lack the confidence to pull the trigger on capital investments. Unfriendly business legislation and political uncertainty continue to be impediments to business investment. If we can somehow get Private Public Partnerships off the ground, we could be off to the races.

For now, we will have to be content with marginal drivers. sensible finance Mar17

27

SENSIBLE ESTATE PLANNING

DISCUSSING ESTATE DUTY

continued from page 4

Currently, donations made in anticipation of death are excluded from Donations Tax. The committee further proposes a removal of the exemption in order to discourage people from transferring their assets in anticipation of death.

Although these recommendations are merely proposals for the Minister of Finance's consideration, they should be kept in mind in making estate planning decisions. Should they be tabled in a bill and later promulgated as legislation, they will have a huge impact on your estate plan.

Considering that a person's last will and testament contains most of the estate planning strategies,

particularly where part of the estate is left to the surviving spouse, a review of the last will and testament and the holistic estate plan will need to be made. This review will look into whether your estate will be able to handle the estate duty burden which might arise, if these recommendations are promulgated.

Should you believe that your Will needs reviewing or that your circumstances have changed over the past few years, please contact one of our Private Wealth Managers on the following numbers: East London 043-735 2000 = Port Elizabeth 041-582 3990 Cape Town 021-202 0001 = Johannesburg 011-895 8000

SENSIBLE INVESTMENT

LOOKING AFTER YOUR RETIREMENT INVESTMENT compounded tax free growth. This results in a shortfall in retirement capital that is often hard to address during the latter stages of life when university fees, bond payments and other obligations are likely to be more pressing.

Get Financial Advice before Marriage and before Divorce: one never knows whether divorce will affect them or not. One therefore needs to plan for possible outcomes and give attention to planning for undesirable outcomes so as to mitigate financial devastation should these events present themselves. It is important to get advice on how divorce can affect your retirement savings, and which investment strategies can be put in place to

continued from page 16

protect your retirement savings from divorce. For example, moving a retirement annuity from an insurer to another platform prior to a divorce may mean parting with a larger portion of your retirement fund capital in a divorce settlement.

Getting holistic financial planning advice before marriage and before divorce proceedings becomes invaluable in preserving as much of your investment value as possible.

For further detail on any of the aspects discussed in this segment please contact one of our financial advisors on one of the following numbers: East London 043-735 2000 = Port Elizabeth 041-582 3990 Cape Town 021-202 0001 = Johannesburg 011-895 8000

SENSIBLE QUESTIONS

Q&A

continued from page 26

provide retirement benefits for their staff it has become more and more imperative that individuals take on the responsibility of planning and managing their own retirement funds with the assistance of a quality financial advisor.

started to save for retirement you will need to invest around 22% of your salary to achieve 75% of your salary at retirement. If you're only starting at 35 this jumps to 30% and gets exponentially higher the longer you wait.

Government dangle the tax relief â&#x20AC;&#x153;carrotâ&#x20AC;? to encourage you to invest so it is good to take advantage of this. If you are 30 and have not

Chat to your financial advisor to make sure your plan is in place and that you understand all the benefits.

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sensible finance Mar17

Andrew Kent | MIFM - Executive Director and Share Portfolio Manager, 23 years experience; Anthony Godwin RFP™ | MIFM – Executive Director and Private Wealth Manager, 28 years experience; Bryan Lones AFP™ | PGDFP, MIFM - Private Wealth Manager, 25 years experience; Bryce Wild CFP® | B.Com (Hons), PGDFP – Private Wealth Manager, 3 years experience Gavin Ramsay | B.Com, MIFM - Managing Director EL and Private Wealth Manager, 23 years experience; Glen Wattrus CFP® | B.Juris, LLB, PGDFP – Private Wealth Manager, 19 years experience; Jaco de Beer RFP™ │ National Certificate: Financial Services Wealth Management, Private Wealth Manager, 21 years experience; Juanita Niemand | National Certificate in Wealth Management – Healthcare Consultant, 2 years experience; Julie McDonald CFP® | B.Com, PGDFP – Financial Advisor (Risk Assurance Specialist), 5 years

experience; Leona Trollip RFP™ | Divisional Manager – Employee Benefits, 40 years experience; Leonie Schoeman RFP™ | Divisional Manager – Healthcare Advisory Services, 19 years experience; Mikayla Collins CFP® | B.Com (Hons), PGDFP Private Wealth Manager, 5 years experience; Nicky McLean | National Certificate in Wealth Management – Apprentice Healthcare Consultant, 1 year experience.

Phillip Bartlett CFP® | BA LLB, PGDFP, MIFM Executive Director and Private Wealth Manager, 14 years experience; Robert Masters AFP™ | MIFM - Private Wealth Manager, 31 years experience; Travis McClure CFP® | B.Com, PGDFP, MIFM – Executive Director and Private Wealth Manager, 18 years experience; Walter Lowrie | Private Wealth Manager, 31 years experience;

Alex Grunewald CFP® | PGDFP – Managing Director PE and Private Wealth Manager, 10 years experience;

Andrew Duvenage CFP® | B.Com (Hons), PGDFP Advanced Investments – Managing Director NFB Gauteng and Private Wealth Manager, 12 years experience; Grant Magid CFP® | B.Com, PGDFP - Executive Director Gauteng and Private Wealth Manager, 15 years experience; Jeremy Diviani CFP® | B.Com, PGDFP Advanced Investments - Private Wealth Manager, 11 years experience; Laurie Wiid | B.Com, ILPA - Executive Director Gauteng and Private Wealth Manager, 23 years experience; Mike Estment CFP® | BA – CEO Gauteng and Private Wealth Manager, 31 years experience;

Paul Jennings CFP® | B.Com (Hons), PGDFP - Private Wealth Manager, 44 years experience; Philip Shapiro CFP® | B.Acc, H.Dip Tax, Admin of Estates, PGDFP – Financial Director Gauteng and Private Wealth Manager, 22 years experience; Stephen Katzenellenbogen CFP® | B.Com (Hons), PGDFP Advanced Investments – Director and Private Wealth Manager, 13 years experience; Terrance Janse Van Rensburg | B.Econ - Director and Private Wealth Manager, 22 years experience; Xintol Schoeman | Higher Certificate in Wealth Management - Financial Advisor (Life Specialist), 4 years experience.

RAGING BULL

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011 895 8000

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