Category: Chartered Blog

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Financial Planning with Chartered excellence

John-Cambell

When I started financial planning 25 years ago, I quickly learnt that there were many significant flaws in the industry. During your working lives, you may have either experienced or witnessed some of these pitfalls.

The first is that most clients deal with an individual advisor who represents a bigger business or themselves, but who approach planning in their own way. I believe that dealing with one person compromises you and your family’s financial wellbeing.

I recall my father getting advice on different occasions from two people representing the same company: their advice was completely different. I remember seeing another client who received a letter in the post informing them that their advisor was emigrating. Where does it leave the client in each instance? The greatest risk to your finances is a new advisor changing your investments to suit him.

Considering this very real problem, when we set out to build our company, we decided that Chartered Wealth Solutions would have an offering and advice process followed by everyone who worked here, ensuring consistency of advice. It was also essential for our Planners to have an associate with them in meetings so that at least two people were aware of clients’ family circumstances and finances.

It is important that our clients deal with specialists. In my first eight years in the industry, as a generalist, I offered advice across the full spectrum of financial services: retirement funds, medical aids, life assurance, and investments. As the industry became more complex, we realised that the general practitioner days were limited – being the best at everything was impossible. I equate this to a General Practitioner versus a Specialist in the medical field: if you need heart surgery, you are unlikely to consult your GP.

Chartered ensures that at every point of the advice process you deal with a specialist: a team only advising on medical aids; a team of lawyers who only write Wills, with a specialist executor winding up estates; dedicated specialists in assurance with a thorough understanding of this complex industry. Our RetiremeantTM specialists are highly trained, all with honours degrees in Financial Planning who not only understand RetiremeantTM but who also recognise when to involve another specialist in your planning – our team of tax specialists at Chartered Tax is an example. We have worked hard to build a business offering consistency of advice, where a team of specialists takes care of you and your family’s financial planning needs. We encourage our clients to form trusted relationships with our specialists, knowing that we can be true custodians of your RetiremeantTM.

I am often cautious to share much from Chartered’s behind-the-scenes, but following a recent forum where clients shared their experiences of Chartered, I realised that much goes on that clients should know. For many years we have been working on Chartered Invest, a business responsible for the implementation of your investments. This is because there is often a blurring between advice and implementation and, though inextricably linked, these are two distinct functions.

Two exciting outcomes are, firstly, the vastly improved reporting, simplifying your affairs and placing all your investments on one statement (not the variety from a few providers you may be receiving currently); and, secondly, the Chartered App. This will give you access to your new statements and Chartered newsletters and invitations. We will share more in the months ahead about this new offering.

Warm regards
John

You can read John Campbell’s article on the SA elections by clicking here.

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Changing circumstances? Change Your Will

Like most things in life, sometimes your Will needs to change.

Your Will details how you would like your assets to be distributed after you pass away. In part, it embodies how you would like to be remembered by those you love when you are gone.

Most of life’s significant “changes” may trigger a Will revision: birth of a child, death of a family member, divorce, marriage, re-marriage and relocation of you or your beneficiaries (within South Africa or abroad).
The executor nominated in your Will may also need to change – for example, if the nominated person moves offshore – or you may have a change of heart about your nominated beneficiaries. Any changes to your asset structures (for instance, as a result of retirement) can mean a review of your Will to ensure that it still fulfils your wishes. Here are details on some aspects:

Children

When a person under the age of 18 stands to inherit, we generally recommend that a trust be used to safeguard the inheritance for the child and prevent it from being administered by the Guardian’s Fund. When a child is to inherit, your Will may need to include provisions to create a trust through your Will if a registered family trust does not already exist. Parents should nominate guardians for their children in their Wills. When your children reach age 18, guardianship falls away and you can remove this provision from your Will.

Divorce

After a divorce, the law gives a “grace period” within which to update your Will. If you pass away within three months of the divorce, the law assumes that you were still going to change your Will and will treat your ex-spouse as though they passed away before you. However, if you have not updated your Will in the three months following your divorce, this protection lapses as the law assumes that you did not want to change your Will. As a result, your ex-spouse may inherit from you according to the provisions of your latest Will.

Offshore assets

Another reason to revise your Will may be if you acquire offshore assets. Most movable assets – cash, investments, vehicles, personal and household effects – situated in a foreign country can be governed by your South African Will, but exercise caution with immovable property and larger investments.

Depending on the jurisdiction, you may wish to draft an offshore Will and take specialist legal tax advice for those assets, since not all countries have the freedom of testation that South Africa does and various countries have different legal rules about how to deal with your assets on death. There are also special tax concessions regarding an offshore inheritance that is never repatriated to South Africa – if you have inherited an offshore asset, ask your financial planner for details!

How to change your Will

Most frequently, the best way to update your will is to make a new one to replace the old. You can also draw a codicil to update your Will, but the original Will and original codicil must be kept together and must “talk” to each other by cross-referencing the codicil to the Will provisions. The simplest option, though, is to draw a new Will reflecting your current wishes – any outdated portions of your old Will can then also be revised.
It is never advisable to write on your Will to try to change the provisions. Handwritten wills, and handwriting on an original Will, will create problems for your beneficiaries and lead to delays in the winding up of your estate or your Will being declared invalid!

If you want to change your Will, or if you have any questions about changing your Will, the team at Chartered Legacy & Trust can guide you through the process and help you to navigate the legal labyrinth to leave a lasting legacy for your loved ones.

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SARS Commissioner comes with commendable credentials

edward-kieswetter-1While chatting with clients and friends following this year’s Budget Speech, the phrase, “at least” was frequent feature: “At least it was Tito Mboweni” or “At least Ramaphosa is President” or “At least, it isn’t so-and-so” (I leave specific names to your imagination!).

Regarding our new SARS Commissioner, though, we tax practitioners and experts are far more positive.

Why so hopeful, you wonder … and rightly so! Following a string of Commissioners, including the questionable Oupa Magashula, and, most recently, the deeply tainted Tom Moyane, we need the restoration of this once globally respected institution, systematically dismantled by corrupt officials.

Take centre stage Edward Kieswetter, new SARS Commissioner.

From the time of his appointment, Kieswetter has been at pains to comply with good governance: he resigned as Shoprite’s Lead Independent Director, and fully disclosed outside interests and involvement in organisations, including directorships on SOEs such as Transnet and Technology Innovation Agency.

President Ramaphosa has said that he has “every confidence” that this new Commissioner has the “experience, integrity and skills” to restore this once fêted institution to its former honour. Between 1997 and 2009, under Pravin Gordhan’s leadership, SARS established itself as one of the foremost revenue services in the world, embracing technology and viewing the taxpayer as valuable customer. It was applauded as efficient, transparent and modern.

Fit for task

In May, Fin24 listed the most urgent matters facing Kieswetter, and these serve to highlight the new Commissioner’s suitability for his new role.

Firstly, SARS needs to increase its revenue collection. For the financial year ended 31 March 2019, SARS had collected R14.6bn less than estimated in the revised Budget – this larger deficit was attributed to an increase in refunds paid out. In contrast to Moyane with no tax experience or financial background, Kieswetter was SARS Deputy Commissioner between 2004 and 2009, during Gordhan’s tenure as Commissioner; it is said that Kieswetter’s unit was responsible for 30% of the SARS revenue generated then. This contributed to the Government surplus that allowed South Africa to weather the 2008 financial crisis better than many countries. Kieswetter has a Master’s degree in Education, an Executive MBA and an MCom degree in Tax.

SARS must cut down on illicit trade in its mandate to increase revenue collection, and has now tendered for a track and trace marker. South Africa has reportedly lost over R6bn in a single year in illicit alcohol trade and loses around R8bn annually to illicit tobacco trade.
In addition, SARS will be following up on errant taxpayers. Kieswetter has already articulated his policy of prosecuting ‘without fear or favour’.
Secondly, cleaning up after state capture will not only require an unwavering commitment to personal integrity, but also mean reviewing procurement processes, re-establishing the Large Business Centre and other units dismantled by Moyane, and evaluating all SARS posts. Moyane suspended or replaced the whole of the SARS top structure in four months, and in less than a year, many of the most experienced and respected executives had left. IT development halted and millions were paid to such companies as Bain & Co.

So, developing future leaders will be part of Kieswetter’s mission, to recreate a thriving and confident organisation. Kieswetter is known for his transformative leadership approach, with a philosophy of a leader as steward, as an opportunity to serve, not to be served.

Next, with Moyane having stopped the drive to modernise systems, Kieswetter must increase innovation. Embattled IT head, Mmamathe Makhekhe-Mokhuane, has been on suspended leave, following her infamous television interview in October last year.

All these tasks are aimed at restoring the institution’s credibility, both locally and abroad. Finance Minister, Tito Mboweni, is looking forward to “seeing SARS re-established as a respected tax collector and improved revenue collection outcomes.” For the sake of the country’s growth and the goodwill of the taxpayer, so do we.

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Building our economic future … together

I write this article in the wake of the national and provincial elections in South Africa, the results enabling the ANC to retain its ruling party status, though significantly weakened. The next five years will reveal if the President and the ANC is worthy of this ‘second chance’.

In the slew of political and economic commentary that followed, I saw a tentatively positive response to the relatively orderly and incident-free voting process, with the Rand appreciating 20c (also attributable to global factors), RSA ten year bond yields improving nine points and the big banking shares rising between 3% and 4%.

As a Financial Planner focused on helping clients in their wealth creation phase, it is a matter of concern for me that almost 10 million eligible voters did not even register to vote. Given our country’s history, and the cost at which the universal right to vote has come, this apparent apathy is worrying. Of course, it may be argued that a reluctance (or refusal) to vote shows no confidence in any of the 48 parties. The pessimism can be understood: the ANC’s recent kleptocracy and pillaging, and the lack of credibility of the other parties.

That said, I am a firm subscriber to the view that our younger generations can shape the future of this country; and participation is personally empowering – be it in our country’s political elections or in shaping our personal financial futures. I believe that this is the time for younger generations to be active in building our nation.

How to be an active citizen

All eyes are on the President who, no doubt, helped the ANC stay in power. A good start has been Cyril Ramaphosa’s revival of the advisory unit to drive policy. The challenges, though, remain what they have always been: economic growth not entirely based on direct foreign investment, but on creating, in the words of Ronnie Kasrils in a Daily Maverick article: “ … industrial policy with teeth to reinvigorate production, giving rise to economic modernisation with jobs, and redistribution instead of austerity.”

Obviously, government must implement measures to regulate SOEs such as Eskom, SAA, Telkom, and Transnet. Government spending on employees needs to be revisited.

Large corporations are cutting back on staff, an indication of the slowing of the economy. While government is setting up policies to create jobs, we as citizens can lend support to the quest to bring economic stability by supporting local entrepreneurs and small businesses; mentoring and encouraging those seeking to create a local brand of excellence; as an employer, to transfer skills to employees and help domestic staff where possible.

South Africans have a dismal record of saving, and improving our savings culture contributes to a healthier national economy.

The role of Financial Planning

In times of economic uncertainty or constraint, planning our finances becomes paramount. Being strategic about spending, saving and investing means that our money works for us and is the means to supporting the life we want for ourselves and our families, as well as helping those who work for us and philanthropic initiatives.

One way to be strategic is to ensure that our money is wisely invested. In the past five years, I am pleased to see clients asking more questions about their portfolio and its composition.

Some clients have enquired about investing money offshore (outside South Africa). I always emphasise the need to diversify with my clients, and part of that is investing offshore, though political uncertainty is but one factor to consider. A diversified approach includes choice of asset classes and asset managers, economies, politics, currencies, and a much wider scope of investment choice. A significant consideration for me is not to have all assets exposed in one country.

Economic prosperity in South Africa will require more than the efforts of government – let’s respond to the President’s call: Thuma Thina: Send us.

Craig Turton is a Certified Financial Planner® and Head of the Wealth Creation team at Chartered Wealth Solutions.

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Resetting South Africa

John-Cambell

Some commentators said that the inauguration of the President of South Africa was reminiscent of 1994: a resurgence of hope and an optimism about the future of the country. Certainly, as I watched Cyril Ramaphosa’s swearing in, I felt more positive about the country’s prospects than I had in some time.

While an ANC win was inevitable, the ruling party’s reputation was severely tarnished by the revelations of the depth of state capture and the number of government officials involved in various degrees and manifestations of corruption. I am assured that, had Jacob Zuma still been the President, the ANC vote would have been closer to 50% and they would have lost Gauteng. Voter turnout dropped (65.99% of registered voters, contrasted with 73.5% in 2014), no doubt attributable to disillusionment with any of the political parties’ ability to effect change.

Strong leadership for investor confidence

As I write this, we are awaiting the announcement of the Cabinet by the President. That he will be able to compose this body completely free of any questionable members is unlikely, but he has assured us that it will be a leaner one. During his nine-year tenure, Zuma’s Cabinet swelled to 35, with ministers earning over R2 million a year and their deputies R1.9 million. Tax-payers want to have the confidence that their contributions for the betterment of the country are used for just that – and not for lining the pockets of fat-cats.

In addition, we expect the President to get the economy back on track, with positive gains for the Rand. A stable government with clearly-defined policies will engender investor confidence and encourage more inflows of foreign direct investment and local investment into the country. President Ramaphosa needs to provide clarity on such issues as land appropriation without compensation, and the nationalisation of the Reserve Bank. People only invest when they know that their money will be safe.
Ramaphosa’s ability to get the economy on track and to rid the ANC of individuals tainted by corruption and links to state capture is crucial to a more secure outlook. A stronger economy will generate an environment more conducive to a collaboration between government and the private sector – creating jobs is a priority not to be ignored, both for a thriving economy and to manage an increasingly hopeless unemployed, unskilled South African youth.
Our investment consultants will be watching for political and economic developments, ready to make changes always in the best interests of our clients. While I believe that Cyril Ramaphosa is the man best placed to lead this country to a more prosperous future, that future remains an uncertain one, and we are investing in the wake of a difficult time for both the country and our flagging market.

With so much focus on local happenings, it is worth noting that global factors (such as a weakened UK market and tensions between China and the US) impact equity markets significantly than a local event such as the outcome of our elections.

Matching your vision to your values

I find President Ramaphosa’s vision of “friendship, solidarity and co-operation” a hopeful one. So much can be achieved by a shared goal and solid values. When Barclay and I merged our companies 20 years ago to establish Chartered Wealth Solutions, we had a vision: to create a company committed to serving its clients with excellence.
We little knew that the Chartered team of four at the time would grow to a company of more than 80 staff and would extend our service to include Chartered Tax and Chartered Legacy & Trust. Our recently established Chartered Invest enables us to ensure that our vision of excellent service is consistent through every client interaction. When we receive positive feedback from our clients, we recognise that it is because our values pervade the company.
President Ramaphosa’s vision of “a society in which our worth is determined by how we value others” resonates with me, and I join his call of “Thuma Thina” – Send Us.

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Release what you can’t control

kim-potgieter-blog-imageAs always, it’s a choice

These days, most conversations I’m exposed to revolve around what’s going wrong. Whether I am at an investment feedback event or having a dinner party at home, the chatter eventually spirals down to the negative.

But is it any wonder? We are constantly bombarded by news of volatile investment returns, falling housing prices, unemployment, violence and load-shedding. The recent black-outs reminded us just how fragile we are, and the upcoming elections are clouded with uncertainty. We are literally surrounded by darkness.

So how do we stay optimistic and guard our emotions against the constant influx of bad news? We simply have to find ways to deal with our stress. You are of no use to yourself, or to others, if you allow yourself to become saddened and dispassionate by the events reported on in the media.

Start by analysing what is in your control to change. The truth is that you have no control over many things that happen in life. You also have no control over what stories the media covers, how they are reported and how often they are aired.

This presents you with a choice: do you want to be exposed to negative and bleak news on an hourly or daily basis? Do you want to be discussing the bad news over dinner every night? You can consciously decide what you will expose yourself to every day.

It is impossible to seclude ourselves from what’s going on in the world. A headline or tragic story will certainly catch your eye, but my point is: you and you alone get to decide how much of this you will entertain in your life.

Let go of the things you cannot control, and spend your energy on what you can.

Find a channel to contribute

For me, it starts with the right attitude. Limit your worry time on things you can’t control. Worrying does not change the outcome of events. We often get so stuck replaying negative news and fears over and over in our heads. Acknowledge that these thoughts are not productive and focus more energy on changing behaviour and setting healthy boundaries for yourself.

Be mindful of your health. To be negatively focused on a long-term basis will eventually lead to stress and ultimately impact your health. Instead, direct your energy to feeling good, finding joy and creating precious moments.

I was inspired by a discussion I had with a couple at one of our investment feedback events. Rather than being consumed with all the negativity and bleak news, they decided to engage in a project where they could actually make a real difference. This involves raising money towards building a workshop at their daughter’s special care facility. Their story will be featured in one of our upcoming Inflight publications.

Being positive amidst all the negativity is hard. It’s more than just feeling optimistic and practising positivity with intention. What works for me is doing regular exercises of gratitude. Make a list of everything that you are grateful for. This may just give you the mood boost you need. Another idea is to try starting each new conversation by sharing something that’s positive in your day. That will automatically trigger a more positive response from the person you are chatting to. Cultivating gratitude should always remind us to focus on hope and positivity.

May your gratitude lists overflow with hope this year.

Best wishes,
Kim

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SA and the world: slowing, but growing

SA and the world: slowing, but growing

Recently, I have witnessed my father grappling with illness. He has been in and out of hospital, trying hard to maintain his characteristic strength. 

It has been a unique experience for me to see him dependent on us and on medical staff. To our family, Peter Campbell has always been that man to whom we look for decisive action and a refusal to give up. 

Times of uncertainty tend to highlight our fears, and often prompt personal introspection.  I have been reflecting on my own example set for my children that will help them when they face their own challenges as they grow.

The reality of the South African situation

Uncertainty has certainly been a theme in my past year’s communications.  The passing of the presidential baton to Cyril Ramaphosa, the unearthing of so much dishonesty, the reports of how state-owned enterprises are buckling under the loss of revenue owing to corruption … all of these can leave us wondering where to from here: in the dark (often, literally!).

Another emerging theme, though, in the wake of this year’s SONA and Budget Speech, has been gratitude for the new leadership in contrast to the former Zuma regime – you can read my Budget Speech comment by clicking here

In the words of Investec Asset Management’s Jeremy Gardiner: “One shudders to think how angry and depressed we would have been if we still had Jacob Zuma as President, with the prospect of another five years of the Zuma presidency after elections. We would still have Finance Minister Gigaba running what would be an officially (across all three rating agencies) junk economy and similarly junk currency, probably around R25 to the US dollar.”

Jeremy’s economic update at Chartered earlier this month was entitled: Signs of Spring? (you can read his full article by clicking here). He suggests that many South Africans have reached their ‘capitulation point’ – angry and disillusioned.  Many may feel that they are powerless in the face of rising petrol and electricity prices and further evidence of the crippling of state-owned enterprises. 

The power of perspective

Unsurprisingly, you can find both positive and negative responses to our global and local political and economic context.  Biznews Editor, Alec Hogg, reported on 11 March that “Africa is back in fashion” among global investors, according to the most recent issue of The Economist.  This publication dedicated four pages, including its lead article, to “The New Scramble for Africa”. Hogg himself views the low South African share prices as an opportunity to buy, not despair.

South Africa will lead the pack, says Hogg, “if president Cyril Ramaphosa achieves his objective of making the country the continental gateway”.  Of course, fixing the country remains a priority, especially Eskom, and holding looters to account.

The power of choice

When it comes to that legacy of character I want to leave my children, I turn to the words of Viktor Frankl, Holocaust survivor:  ”When we are no longer able to change a situation, we are challenged to change ourselves.”

In the context of South African – and global – uncertainty, I want to model an attitude that demonstrates the power of personal choice.  We all undoubtedly will find ourselves in circumstances that we cannot control in the course of our lives (illness, the economic and political situation, the markets dipping, corrupt practices), but we still all certainly have the choice regarding how to respond.

In line with this philosophy, I will be casting my vote on 8 May, in the belief that we all have a role to play.  As a Financial Planner, I want my clients to know that there is always more value in having a financial plan than none, especially when there is market uncertainty. 

I am always grateful to clients who express gratitude for and confidence in Chartered and our approach to financial planning. We are committed to seeing each of our clients retiring successfully.

Warm regards,

John

Jeremy Gardiner of Investec Assest Management for Chartered Wealth Solutions

Signs of Spring?

Jeremy Gardiner of Investec Assest Management

A collapsing currency and equity market combined with a rocketing petrol price didn’t help

The point of ‘capitulation’ in economic cycle theory is generally seen as the bottom in any cycle, the point just before ‘things start to improve’. It is unfortunate, and indeed sadly, also generally the point at which most equity investors finally give up and sell, when stocks are at their cheapest, driven entirely by sentiment and emotion rather than investment fundamentals. The investment industry must be one of the few where people are inclined to sell when their asset is cheap, and conversely, when prices rocket, they buy more.

Anecdotally and deviating slightly from economics, the fourth quarter of 2018 for me felt like the point at which South Africans reached their ‘capitulation point’ with our country. Of course, a collapsing currency and equity market combined with a rocketing petrol price didn’t help. The level of political anger and noise seemed unprecedented: everyone was fighting with everyone and with it came a spike in talk about emigration and about having a ‘Plan B’. South Africans are angry, and many seem to have reached the point of ‘giving up’ on Brand SA.

So does that mean then, that things are about to improve?

The point of ‘capitulation’ in economic cycle theory is generally seen as the bottom in any cycle, the point just before ‘things start to improve’. It is unfortunate, and indeed sadly, also generally the point at which most equity investors finally give up and sell, when stocks are at their cheapest, driven entirely by sentiment and emotion rather than investment fundamentals. The investment industry must be one of the few where people are inclined to sell when their asset is cheap, and conversely, when prices rocket, they buy more.

Well, things do feel slightly better this year. It could simply be down to a good holiday and some sunshine. Also, don’t underestimate the impact of rising markets and a strengthening currency in terms of improving the mood. And conversely, don’t underestimate the negative impact of load shedding on ‘darkening’ the mood, so hopefully it doesn’t last.

While one doesn’t want to herald a ‘false dawn’, there are a number of factors that could work in our favour to certainly numb the pain, and perhaps even lighten the mood considerably. Could investors finally be rewarded for the five years of flat returns they’ve had to endure?

First of all, one shudders to think how angry and depressed we would have been if we still had Jacob Zuma as President, with the prospect of another five years of the Zuma presidency coming after elections. We would still have Finance Minister Gigaba running what would be an officially (across all three rating agencies) junk economy and similarly junk currency, probably around R25 to the US dollar

And while the various commissions currently playing themselves out are both fascinating and horrifying at the same time, be very thankful that they’re happening. They certainly wouldn’t be if the Zuma Dynasty were still in control. Hard as they are to watch, as they brutally expose the corruption ‘free for all’ that existed during the Zuma presidency, it is a very necessary process. If we are to right the wrongs of the past, it is important that we know exactly who and when and how everything was done.

Secondly, Donald Trump is in trouble. His government shutdown has – according to polls – plunged his popularity to 34%. He’s got elections in just over 18 months’ time, and stock markets are soggy. He is therefore being much friendlier to the Chinese this year – a reduction of the trade war, and even a discontinuation, would be very positive for emerging markets, including SA.

Don’t underestimate the impact of rising markets and a strengthening currency in terms of improving the mood.

The world is ‘slowing, but still growing’ seems to be the common theme out of Davos this year. The US and China should both remain firm and if the Chinese stimulate more, which they may well, then emerging markets, including SA, will see stronger growth.

‘Slowing, but growing’ means we shouldn’t see unexpected US rate hikes. None are forecast for this year, and some, including previous Fed Chair Janet Yellen, are signalling this may be the peak of the tightening cycle. In addition, a temporary reprieve from balance sheet normalisation should mean the US dollar has probably peaked. That, together with stable US interest rates, are both favourable winds for emerging markets like SA.

Across the pond, Britain will most likely stumble into some sort of deal, and then the world can move on from the noise that is Brexit. While there is an element of schadenfreude in seeing Britain or the US also suffering self-induced pain and political turmoil, we always have to remember that any significant instability in the developed world inevitably sees us (read emerging markets) being punished as well.

So, all of the above, coupled with the fact that emerging market equities, bonds and currencies are reasonably valued, have seen investors starting to shift back towards higher-yielding emerging market assets, including SA.

Some economic tailwinds (as opposed to the headwinds we faced last year), is exactly what Cyril Ramaphosa needs. Add to that a strong mandate from successful elections (and certainly most polls seem to be pointing that way), and 2019 should not only see South Africa lifting from the muddy waters of corruption in which the ‘Zuma lost years’ left us stranded, but investors hopefully finally being rewarded for their patience.

A few photographs of clients attending Jeremy’s presentation:

See more images on our the Retire Successfully Facebook page and remember to join our closed client group.

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The 2019 Budget Speech: planting seeds for a future

John-CambellFinMin Tito Mboweni made his goal for the annual Budget Speech clear by referencing Biblical agricultural imagery.  The message?  To create a prosperous harvest, you must plant anew.  Acknowledging the shortcomings of the past – “despite our best efforts, sometimes, ravages and risks such as pests or rot could attack our green shoots” – the Minister called on South Africans to persevere, reminding them that “we must take the bitter with the sweet. Today, I bring you a seed to prove that if we plant anew, we can return to those plum times.”

Let’s have a look at the detail of what that ‘seed’ is going to mean for us as taxpayers.

Personal income tax

No changes will be made to personal income tax brackets.

Tax thresholds (the amount of income you earn before you need to pay tax) will slightly increase.

  • If you are under 65, and earn up to R79,000 during the tax year, you will not pay any tax on this amount.
  • If between 65 and 75, you will not pay any tax if you earn less than R122, 300.
  • If 75 and older, you will not pay any tax if you earn less than R136,750.

By not adjusting the income tax brackets for inflation, the government will raise R12,8bn.

No adjustments to medical aid tax credits

Medical tax credits have been not been adjusted for inflation, so that means when you pay your income tax, you can still claim R310 (per month) for each of the first two persons covered by the Medical Scheme, and thereafter R209 (per month) for each additional dependent.

Interest exemption

The interest exemption amounts remain the same. If you are under age 65, the annual interest exemption is R23,800, and if you are 65 and older, the exemption is R34,500. So, for example, you have R690,000 in a Money Market fund, earning 5% per annum interest, and you are over 65, you will not have to pay any tax on the R34,500 interest that you earn.

Tax-free savings account contribution

You can still contribute R33,000 per year toward these investments, in which all returns are tax-free.

Dividends Withholding Tax

This remains at 20%.  If you hold shares and a dividend is declared of, for example, R120, R24 will be deducted by the company issuing the dividend, and you will receive an after-tax amount of R96.

Donations Tax

You can donate R100,000 each year to anyone you wish, without attracting Donations Tax.  Amounts in excess of R100,000 attract Donations Tax at a flat rate of 20%.  Donations between spouses are exempt from Donations Tax.

Retirement Fund contribution deductions

There has been no change to the amount that you can claim as a tax deduction towards your retirement funds. The deduction that you can claim is the lower of 27,5% of your taxable income or R350,000 per annum before the inclusion of taxable capital gains.

Capital Gains Tax (CGT)

There has been no change to Capital Gains Tax. Capital gains are triggered by the sale of an asset such as your home or a unit trust.  The maximum effective tax rates are:

  • Individuals and special trusts: 18% (inclusion rate of 40%)
  • Companies: 22.4% (inclusion rate of 80%)
  • Trusts: 36% (inclusion rate of 80%).

The capital gains exemption thresholds remain the same:

  • The annual exclusion stays at R40,000
  • The exclusion amount on death stays at R300,000
  • The primary residence exclusion stays at R2 million.

If, for example, you withdraw R100,000 from your unit trust investment, and you initially invested R20,000, you would have triggered a capital gain of R80,000.  The first R40,000 of this gain is exempt, and thereafter, 40% of the remaining R40,000 is added to your taxable income, and you will have to pay income tax on this.

Estate Duty

Estate Duty remains unchanged.  Duty is levied on the dutiable value of an estate at a rate of 20% on the first R30m and at a rate of 25% above R30m. The Estate Duty abatement (exemption) remains unchanged at R3,5ml for each individual.

Anything left to a surviving spouse does not attract Estate Duty on the death of the first spouse.

Changes to Transfer Duty

There have been no changes to Transfer Duty.

Tobacco, alcohol and fuel

A pack of 20 cigarettes will cost you R1.14 more.  Your can of beer will cost you 12c more, and your can of coke will cost you 0.11 more per gram (sugar tax).  A bottle of wine will cost 22c more, and whiskey is R4.54 more.

General fuel levy increases by 15c per litre and road accident fund levy increases by 5c per litre on 3 April 2019.

A new carbon fuel levy at 9c per litre on petrol and 10c per litre on diesel will be introduced with effect from 5 June 2019.

Conclusion

The burning issue for many South Africans has been, not personal implications, but what stance the government is taking on State-Owned Enterprises such as Eskom, SABC, SAA and Denel.  While R23bn has been set aside per year to support Eskom during its reconfiguration, the FinMin emphasised that the government will not be bailing out these enterprises, but rather curating them more carefully through the appointment of Chief Reorganisation Officers.

Warm regards

Warm regards
John 

Invest_In_Yourself

You are your greatest asset

Kim_Potgieter5It’s time to invest in yourself!

The festive season is approaching, and before you start making lists of all the wonderful gifts to buy for the special people in your life, set some time aside to think about your gift to yourself.

Dr. Seuss says it so well: Today you are You. That is truer than true. There is no one alive, that is youer than you!

I want to remind you today how important you are. You bring something completely wonderful to the world, something unique, something only you can bring. Have you ever stopped to think what your special skill or talent is? What is it about you that has shaped your life so far? And will shape your dreams ahead?

We all have a unique contribution to make, the real question is how to get the most value from your special skill or talent.

While we do, of course, encourage investment in various retirement and annuity portfolios, one of the best investments you will ever make is in yourself. And the sooner you do this, the more valuable you as an asset will become.

 

I love this drawing by Carl Richards: it explains that the longer you wait to invest in yourself, the less valuable you as an asset will become. Put simply, with every year that passes, you have less time to earn money.

The_present_value

Here are my top three considerations to get the most value from yourself:

Invest time and money in your talent

It’s never too late to learn. If you are still in the Wealth Creation phase of your journey, it may be the perfect time to up-skill or even learn a new skill that could benefit you when you retire. Think about how your talent could add value to your life and consider new skills or qualifications that could support you.

I have some wonderful examples that Retiremeant™ clients have shared with me: learning social media skills to promote a new business venture; a bookkeeping course to support a hobby turned into a new career; or a coaching qualification to enhance consulting skills as a mentor coach.

  1. Make your money work for you

You have spent your whole life earning, and possibly still are. Now it’s time that your money works for you. It’s a good idea to keep investing and earning interest, or to use your assets to earn an income – perhaps renting out an extra property or flat on your property. This way your money grows while you are sleeping.

  1. Earn for as long as possible

Consider a parallel life as you near retirement age. Start thinking, and planning, how you can continue earning (even if it’s less than you’re used to) while doing something you love! Many Retiremeant™ clients have started new business ventures in retirement: cake decorating, knitting, building classic cars and even coaching cyclists.

I hope that the next time you look in the mirror, you see yourself through new eyes and remember: You are your greatest asset!

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