In this newsletter:
Benchtest 05.2017, Sanlam Benchmark survey, sharing annuity with a child, the future of provident funds and more...


Dear reader

In this newsletter we provide a brief overview of the key findings from Sanlam’s latest Benchmark survey; we examine whether you may request your pension annuity to be shared with other persons; we examine the future of provident funds in Namibia; we consider the implications of SA based staff participating in a Namibian fund; we provide feedback on the transition to MIP and in our Benchmark Monthly Performance Review of 31 May 2017 we  comment what to consider when all assets represent a bubble.

The topical articles from various media should not be overlooked – they are carefully selected for the value they add to the management of pension funds and the financial well-being of individuals...

...and make a point of reading what our clients say about us in the ‘Compliments’ section. It should give you a good appreciation of who and what we are!

As always, your comment is welcome, so open a new mail and drop us a note!


Tilman Friedrich

Tilman Friedrich's Industry Forum

Monthly Review of Portfolio Performance
to 31 May 2017

In May the average prudential balanced portfolio returned 0.21% (April: 1.95%). Top performer is Momentum (0.79%); while Prudential (-0.24%) takes the bottom spot. For the 3 month period, Momentum takes top spot, outperforming the ‘average’ by roughly 1.0%. On the other end of the scale Investment Solutions underperformed the ‘average’ by 0.8%.

“The everything bubble” – so where do you invest?

Further down this newsletter contains an interesting and somehow frightening article titled ‘the everything bubble’ making the point that just about every asset class in the world today represents a bubble, i.e. it is significantly overprized. This conclusion is corroborated by another article in same newsletter titled ‘Median p: e and forward 10 year returns’ specifically with reference to the US equity market. This article suggests that median returns on equities for the next 10 years are likely to be only around 4.3% per annum only based on the current median p: e ratio of the US S&P 500 of 24 being in the 5th quintile, the highest quintile of historic mean p: e’s.

In the Benchmark Monthly Performance Review of 28 February we presented graphs on the JSE Allshare index and its p: e, currently on 19.3 which is similarly way above its 30 year average of between 13 and 15. SA equities are thus also in ‘bubble territory’.

Read part 6 of the Monthly Review of Portfolio Performance to 31 May 2017 to find out what our investment views are. Download it here...

Sanlam benchmark survey 2017 – how does your fund shape up?

Sanlam recently published the results of its annual survey. Since employee benefits are only a component of an employee’s remuneration package, though an important one, trustees and employer should measure up their funds against what is offered in the market and ascertain that their fund is not left behind when it comes to developments in the employee benefits field.
The sample consisted of:

  • 1,317 consumers of financial services;
  • 10 interviews with professionals;
  • 4 focus group discussions;
  • 16 employee benefits consultants;
  • 100 standalone funds (including 10 union funds);
  • 100 participating employers in umbrella funds.

Here are some of the more interesting findings of this survey in respect of union and stand-alone funds:

  • Key arguments for union funds retaining status as stand-alone funds
    • Loss of control – 8 out of 10;
    • Risk of having all services with one provider – 3 out of 10
    • Don’t believe one provider can offer best solution – 3 out of 10
    • Cost – 3 out of 10
  • Those who structure remuneration on total cost to company –
  • o    30% of union funds, up from 16% in 2016
  • o    56% of Stand-alone funds, up from 49% in 2016
  • o    57% of umbrella funds, down from 64% in 2016
  • Percentage of total remuneration which comprises pensionable earnings –
    • 89% in union funds, up from 78% in 2016
    • 78% in stand-alone funds, down from 80% in 2016
  • 80% in umbrella funds, up from 75% in 2016
  • Contribution rate in union funds –
    • 8.57% by employer, down from 9.6% in 2016
    • 7.35% by employee, up from 6.32% in 2016
  • Total contribution rate –
    • 15.92% by union funds
    • 18.54% by stand-alone funds
  • Break down of contributions –
    • Average life cover:
      • union funds – 1.75%;
      • stand-alone funds – 1.28%
    • Average disability cover:
      • union funds – 1.42%;
      • stand-alone funds – 1.08%
    • Average administrative costs:
      • union funds – 0.81%;
      • stand-alone funds – 0.66%
    • Average towards retirement:
      • union funds – 11.94%;
      • stand-alone funds – 15.52%
  • Risk benefits
    • Standard risk benefit policies would be easier for members to understand
    • Increasing demand for flexible risk benefits in stand-alone funds, but only 1 in 3 union funds offer this
    • 3.25 salary multiple lump sum payable (death and disablement), up from 2.95 in 2016
    • Majority of funds offer disability income benefits as opposed to lump sum benefits
    • 20% of funds offer critical illness benefits
  • Retirement benefits
    • 80% of union funds do not have a targeted pension as net replacement ratio
    • Most important features of default annuity
      • Longevity projections
      • Income to keep pace with inflation
  • Investments
    • 80% of funds offer a trustees’ choice as default
    • 89% of assets invested in default
  • Evolution of employee benefits
    • 9 out of 10 union funds believe it is possible to reduce complexity through standard risk and administration structures
    • Minimum set of benefits according to prescribed risk benefit rules across all product providers

Can you request that your children share in your annuity?

An interesting question came up the other day that is worth sharing with our readers. A member of the Benchmark Retirement Fund passed away leaving a spouse and major children. The deceased completed a beneficiary nomination form at a time the employer participated in another pension fund but did not complete a beneficiary nomination form after the employer moved to the Benchmark Retirement Fund. The investigation by the fund revealed that the major children are employed and are not financially dependent on the deceased and that the spouse is self-employed.

On the basis of these facts the trustees allocated the full benefit to the spouse subject to the spouse applying no less than 51% of the capital to purchase an annuity. Since the needs of the spouse are fully taken care of from her inheritance, the spouse approached the fund whether the capital to be applied can be split up into three portions so that an annuity can be purchased for the spouse and the major children.

The fund informed the spouse that the spouse’s request can unfortunately not be accommodated by it. Section 37A of the Pension Funds Act provides for only 3 exceptions to the general principle that a benefit cannot be reduced, transferred, ceded, hypothecated, executed etc. The first exception is with regard to deductions permitted in terms of the Income Tax Act. The second exception is with regard to deductions permitted in terms of the Maintenance Act. The third exception is with regard to any deduction permitted in terms of section 37D.

Evidently the request by the spouse is not covered by the first two exceptions, but what about section 37D. This section is very specific in terms of what may be deducted. It provides primarily for housing loans and loan guarantees and for amounts due to the employer in respect of compensation for any damage caused to the employer through theft, dishonesty, fraud or misconduct. The section also provides for the deceased’s or a beneficiary’s medical aid or insurance premiums to be deducted as well as anything else for which the Registrar has given specific approval.

Once again the request by the spouse is not covered by any of these exceptions and the fund was hence correct in turning down the request by the spouse.

The situation might have been quite different, had the deceased left a valid beneficiary nomination form. In this instance, the fact that the latest beneficiary nomination form was a form of another fund it could not be taken into account by the trustees of the Benchmark Retirement Fund. Section 37C requires that a beneficiary must be designated in writing to the fund, the operative phrases being ‘in writing’ and ‘to the fund’.

Had deceased nominated the two children, the trustees would have had to consider a fair distribution of the death benefit between the spouse and the major non-dependent children and could have been guided by the a properly substantiated request by the spouse. And a final observation – the spouse of course needed not to be nominated to qualify for a portion of the death benefit being a legal dependent of the deceased through marriage.

The proof of the pudding lies in the eating – do you know what the administrator tendered for?

The crux of a meaningful tender evaluation for fund administration services is the tender specification. If the tender specification does not explicitly provide for all services currently provided by the fund’s incumbent administrator, trustees are unlikely to arrive at an objective conclusion and may feel mislead when they eventually find that the savings they had expected never realised.

The incumbent administrator will have a handicap as it will never be able to offer the argument that certain services were not costed for because they were not specified while prospective service providers will not be aware that certain services are required unless they were specified in the tender.

A while ago we had to accept defeat on two of our prime clients who we had served with an impeccable record for more than 10 years, after we had inherited them in a dire state of affairs as far as their administration was concerned. As we learnt unofficially trustees believed that our tender was more expensive than the successful bidder’s tender.

It has now been proven once again that the proof of the pudding lies in the eating. The savings trustees hoped for through the appointment of another administrator in recent instances never materialised. The tender evaluation was evidently either done improperly or the full facts were not brought to the trustees’ attention.  In the long run this can prove to have been an expensive decision based on a deficient tender specification.

Pension fund governance - a toolbox for trustees

The following documents can be further adapted with the assistance of RFS.

  • Download the privacy policy here...
  • Download a draft rule dealing with the appointment of the board of trustees here...
  • Download the code of ethics policy here...
  • Download the generic communication policy here...
  • Download the generic risk management policy here...
  • Download the generic service provider self-assessment here...
  • Download the generic conflict-of-interest policy here...
  • Download the generic trustee performance appraisal form here…
  • Download the generic investment policy here...
  • Download the generic trustee code of conduct here...
  • Download the unclaimed benefits policy here...
  • Download the list of fund service providers duly registered by NAMFISA here...
Tilman FriedrichTilman Friedrich is a qualified chartered accountant and a Namibian Certified Financial Planner ® practitioner, specialising in the pensions field. Tilman is co-founder, shareholder and managing director of RFS, retired chairperson, now trustee, of the Benchmark Retirement Fund.
Compliment from a trustee

“The Fund’s and my experience with I… is impeccable, friendly, timely service and the most cordial relationship that has given us an enormous amount of comfort in Fund matters and interface with RFS. And all this is reflective of RFS and its excellent work ethic and culture. Thank you to I… and her Team as well as to RFS!”

Read more comments from our clients, here...

Is there a future for provident funds in Namibia?
by Marthinuz Fabianus - Deputy Managing Director

When considering a retirement savings vehicle for employees, an employer can opt for a pension fund or a provident fund. Except for income tax differences between the two which I will deal with further on, the main difference between the two is that members of pension funds are able to only take out a portion of their retirement benefits (currently one-third) in a lump sum upon retirement. The remaining amount (two-thirds) is to be paid as a pension in monthly pay-outs. Members of provident funds can take out as much or all of their benefits as they would like in a lump sum at retirement. Provident funds gained popularity in South Africa in the 70’s with the establishment of homelands and a surge in foreign migrant workers employed in the South African mining and steel industries.  Given our colonial history, Namibia obviously inherited the pension and provident fund concepts in the Income Tax Act.    

My contention is that provident funds have always been less advantageous from an Income Tax point of view compared to pension funds. At retirement, one-third of the lump sum payable from a provident fund is tax free. The balance two-thirds is fully taxable in the hands of the retiring member per his marginal rate of tax. A member of a pension fund on the other hand, may also commute a maximum of one-third tax free in a lump sum. Income Tax is payable on the monthly income (pension) payable from the balance two-thirds. This implies that no tax is currently payable on the first N$50 000 per annum and only the income above this is taxable per retiree’s marginal rate of tax. Moreover, in the event of death of a provident fund member, two thirds of the benefit payable is taxed in the name of the deceased, at the deceased’s marginal rate of tax. Under a pension fund on the other hand, up to 66% of the benefit payable upon the death of a member may be commuted in a lump sum free of tax. The balance 34% is to be paid as income from where Income Tax would become payable in the name of the beneficiary, but again only the income above N$ 50 000 per annum will attract Income Tax at the marginal rate of tax.  

My second point of contention is that very few people (and this holds true for even the most educated) have the ability and discipline to manage retirement capital prudently for their survival during their retirement years. It is to be noted that after the average retirement age of 60 years, a person can still expect to live another 20-30 years. The retirement capital should thus be managed in such a manner that it outlives the pensioner and  still leave something behind for his or her spouse to survive on and/or any other substantive dependents the retiree may still have. To make matters worse, our Receiver of Revenue has recently come to the correct realisation that the entire retirement benefit paid from a provident fund forms part of the gross income and a tax directive is a requirement in all cases even if the member of the provident fund decided to use the two thirds to provide a monthly pension. The relevance of the tax directive requirement is that Inland Revenue can intercept the benefit in case of a delinquent taxpayer. The relevance is also that once a benefit is gross income, a transfer to an insurance product for the purchase of an annuity is a voluntary transaction. This transaction does not enjoy the exemption that is offered if the capital were to be transferred to another approved fund and is fully taxable before transfer to the insurance product.  

We all know that the state old age grant is minimal and cannot be regarded as adequate except for a very low standard of living. This makes the provision of a secured income during retirement age the ever more essential. As an aside, South Africa is currently in the process of doing away with provident funds in that country.

This to my mind makes the future of provident funds in Namibia doubtful.

Marthinuz Fabianus is Deputy Managing Director of Retirement Fund Solutions. He graduated from Namibian University of Science & Technology with a Diploma in Commerce and Bachelors in Business Management. He completed a senior management development programme from University of Stellenbosch and various short courses including a macro-economic policy course which he completed at the International Training Centre of the ILO in Turin, Italy. Marthinuz has 23 years' industry experience.

Kai Friedrich's Administration Forum

Implications of SA staff participating in a Namibian fund

Namibian employers often overlook the implications of starting up a branch or a subsidiary in SA as far as pension fund membership of the SA staff is concerned. Generally it is not a good idea to have SA employees be members of the Namibian fund, primarily because these employees could be subject to both SA and Namibian income tax on any benefit payable.

In as much as the Namibian Pension Funds Act prohibits any person to undertake pension fund business in Namibia that is not registered in terms of the Pension Funds Act, the same principles apply in SA and employers who allow their SA employees to participate in their Namibian fund without registering the Namibian fund in SA as a foreign fund are contravening the SA Pension Funds Act and expose themselves to statutory sanctions.

Members of a Namibian pension fund who are employed by an SA entity would not be allowed to deduct their contributions to a Namibian fund. Of course, SA revenue authorities may not always realize that these contributions were made to a Namibian fund and may have erroneously allowed these to be deducted. SARS may at any time it becomes aware of this error re-open previous tax assessments, disallow such contributions with arrears effect and may go as far as adding penalties and interest.

Where any benefit becomes payable to any of the SA members, it would be taxable both in SA and in Namibia in the first instance.

The Double Taxation Agreement between SA and Namibia would avoid double taxation only in respect of a pension payable and/or the one-third pension commutation. SA legislation provides for a deduction from a taxable benefit, any contributions made that were not tax deductible, or were never deducted for tax purposes in SA. This allowance would not apply to these members where the contributions were indeed deducted for tax purposes in SA. The Namibian Income Tax Act does not have a similar provision as the result of which any taxable benefit would be fully taxed in Namibia, whether or not the member concerned ever deducted any contributions to the fund for Namibian tax purposes.

If the fund credit of the SA members were to be transferred from the Namibian Fund to any other fund approved for tax purposes in Namibia at the instance of the member, such transfer would not be taxed in Namibia based on the concession granted in terms of section 16(1)(z) of the Namibian act. Such transfer, however, would in the first instance be taxable in SA, as a benefit has accrued to the member and as SA taxpayers are taxed on the basis of residence rather than source, as is the case in Namibia.

The fund credit of the member could also be transferred to an SA pension fund approved for tax purposes in SA, or to another person such as an SA insurance company, at the instance of the Namibian fund, by means of a 'section 14 transfer'.

In terms of the general principles of the Namibian Income Tax Act, such transfer should not be taxable in Namibia in the hands of the member as no benefit has accrued to the member. By the same principles, the Namibian tax authority could argue that an income accrues to the SA person from a Namibian source and that the amount is subject to income tax in Namibia. In the instances where such transfers have been affected by us in the past, however, Inland Revenue has never issued a directive to deduct tax. Where neither the members concerned nor their employer ever had the benefit of deducting their contributions for income tax purposes in Namibia, our tax authority should also find it difficult to argue that the amount to be transferred should be taxed in Namibia.

Where an employer intends to transfer the SA members of the Namibian fund to SA, the employer and the members concerned need to settle the arrangement concerning the disposal of the members' fund credit in the Namibian fund either, by transfer to an insurance policy in SA, or by transfer to an approved pension fund in SA, or by payment in the form of a cash benefit subject to income tax in Namibia. If the benefit is N$ 40,000 or less the provisional tax rate will be 18% and will be applied by the administrator without being required to obtain a tax directive.

If the benefit is larger than N$ 40,000, Inland Revenue should theoretically also issue a tax directive applying a provisional rate of 18%, since these members were never registered for tax purposes in Namibia. To avoid unnecessary delays in obtaining a tax directive in Namibia, the employer should issue a letter to Inland Revenue confirming that these members were never registered for tax purposes in Namibia as these members never earned any taxable income in Namibia. This letter should then be submitted together with the request for a tax directive to Inland Revenue. The benefit should be reflected by these members on their SA tax returns and will then be subject to SA income tax as well, to the extent that they are not covered by the Double Taxation Agreement between SA and Namibia.

Kai Friedrich, Director: Fund Administration, is a qualified chartered accountant and a Namibian Certified Financial Planner ® practitioner, specialising in the pensions field. He holds the Post Graduate Diploma and the Advanced Post Graduate Diploma in financial planning from the University of the Free State.

News from RFS

Transition to MIP

We have now been running 3 funds parallel for close to a year in the process of adapting the MIP system to our requirements and the Namibian environment. We have approached the point where we believe that we should be able to run these funds on MIP only. The target date is 1 July and 1 October, respectively. From there on we will continue the process of transitioning our other clients in a controlled fashion and envisage that this process should take around 2 years, provided that we are comfortable that all complexities offered by our various clients can be managed by the MIP system to our satisfaction.

Unfortunately the process is taking a lot longer and our development costs are consequently significantly higher than what we anticipated. However, we are utterly convinced that the future of retirement fund administration lies in web-based administration and are therefore comfortable to invest heavily in this transition for the benefit of our clients.

Staff donate to charity

RFS staff recently showed warmth in the middle of winter, with a donation from staff to three charities. The charities were Hugs 4 Christ, Prayer House Ministries Orphanage and Hospice of Hope

Our staff – the recipe for our success!

A pension fund has a life much, much longer than a human being. As service provider to a pension fund, corporate memory of a service provider vis-à-vis the fund can make an important contribution to the management of the fund. RFS appreciates the importance of this differentiator and therefor makes a point of building and maintaining corporate memory on behalf of our pension fund clients. In this regard a conducive office atmosphere and environment and conducive policies support our effort to retain our staff which is essential in this endeavour.
In addition RFS differentiates itself by the depth of its staff with pension fund relevant qualifications and experience.

The following table presents these key differentiators in figures:
Measure     Number of staff
Number of full-time staff 65
Average years relevant experience 15
Average years of service  6
Under graduate diploma/ certificate holders 22
Degree holders as highest qualification  17
Honours degree holders as highest qualification 6
Post graduate diploma holders 6
Chartered accountants 4
Number of staff who are CFP® practitioners 3

We are proud of this record and extend our sincerest gratitude to those staff members who have faithfully served the company and its clients over more than 10 and more than 15 years and express our sincere gratitude to each one of them for their dedication and commitment to our cause:

Staff with 10-years of service
  • Amei Diener
  • Caroline Scott
  • Lilly Boys
  • Hannes van Tonder
  • Drolina Röchter
  • Alida Venter
  • Hilde Towe
  • Annemarie Nel
  • Ina Jooné-Bester
  • Sharika Skoppelitus
  • Bianca Busch
Staff with 15-years of service
  • Tilman Friedrich
  • Charlotte Drayer
  • Frieda Venter
  • Victoria Nashongwa
  • Joan Böck
  • Rauha Shivute
News from NAMFISA

Industry meeting of 13 March 2017

For trustees and principal officer who have missed the NAMFISA circular distributing its presentation at the industry meeting of 13 March, you can download the presentation here...

And if you missed the minutes of that meeting click here...

NAMFISA quarterly report Q 4 2016

NAMFISA released its latest quarterly report for quarter 4 of 2016. 

Here is a summary, values given in N$ millions:
Total revenue
Total Net Prem / Contrib
Long-term insurance
Short-term insurance
Medical aid funds
Pension funds

If you are interested in key information and statistics on the non-banking financial services industry, click here...

News from the market

The price of fuel – do you know what you pay for?

The latest fuel levy was set in Government Gazette 6325 of 7 June 2017 and reflects an interesting composition of the price of fuel as per below table. The total for Namibia is based on an estimated annual consumption of 1 billion litres of fuel in Namibia.

Composition N$ per litre Total for Namibia
N$ million
Cost based on price per barrel as at end of May 2017 4.11 4,000
Taxes per Gazette 2.993 3,000
Trading margin per Gazette 1.81 1,881
Storage & delivery in Namibia per Gazette 0.1735 174
Theoretical selling price 9.08 9,080
Difference  (delivery SA & refining?) 2.13 2,130
Selling price May 2017 (diesel) 11.21 11,210

Media snippets
(for stakeholders of the retirement funds industry)

The pension problem – too many complexities leave members with poorer outcomes

The products themselves have also grown very complex, which isn’t necessarily to the benefit of members.

Talking as a product provider, it’s very easy to put bells and whistles on everything to make it look sexy and smart, but is that always in the best interests of the member?...I think we need to go back to simplicity, and standardisation so that at the point of retirement members know what they are getting.

Read the full article by Patrick Cairns in Moneyweb of 9 June 2017, here...

Median p:e and forward 10 year returns

In last month’s newsletter we presented an article headed ‘The p/e explained’  with two graphs. The first reflected the growth of the S&P 500 from around 80 in 1965 to its historic high of 2,363 by the end of December 2016. That’s a nominal growth of around 7% per annum. The second graph S&P 500 median price: earnings ratio which stood at 24.1 at December 2016 compared to the median of 17, and thus being currently in expensive territory. So what can this tell us about the US market?
“Median P/E can help us predict what future 10-year annualized returns are likely to be for the S&P 500 Index. Will your future burgers be pricey or cheap? The price at which you initially buy matters.
Here is how you read the following chart. (Data is from 1926 through 2014.):
  • Median P/E is broken down into quintiles. Ned Davis Research looked at every month-end median P/E and ranked the numbers, with the lowest 20% going into quintile 1, the next 20% into quintile 2, and so on, with the most expensive or highest P/Es going into quintile 5.
  • They then looked at forward 10-year returns by taking each month-end P/E and calculating the subsequent 10-year annualized S&P return.
  • They sorted those returns into quintiles and determined that returns were greatest when initial P/Es where low and worse when P/Es were high.

With a current median P/E for the S&P of 24, we find ourselves firmly in quintile 5.That tells us to expect low returns over the coming 10 years. Though it appears that most investors are expecting 10% from equities, history tells us that the market as a whole will have a hard time growing much faster than our country’s GDP does.
Note that 4.3% returns are the average of what happens when stocks are purchased in the top 20% of valuations. That forward return number goes down considerably if we are in the top 10% or top 5%, which is where we are today.”

Read the article in Thoughts from the Frontline by John Mauldin, here...

The everything bubble

And following from the previous article, here is another article that should make every reader concerned about his or her investments.
“It wasn’t always this way. We never used to get a giant, speculative bubble every 7-8 years. We really didn’t.
In 2000, we had the dot-com bubble.
In 2007, we had the housing bubble.
In 2017, we have the everything bubble.

I did not coin the term “the everything bubble.” I do not know who did. Apologies (and much respect) to the person I stole it from.

Why do we call it the everything bubble? Well, there is a bubble in a bunch of asset classes simultaneously, like:
  1. Real estate in Canada, Australia, and Sweden
  2. Real estate in California
  3. Cryptocurrencies
  4. FANG, plus Tesla and a few others
  5. Corporate credit
  6. EM sovereign credit
  7. Autos
  8. Indexing
  9. Dramatic television series
  10. Sports
  11. Animated movies
Read the article by Jared Dillian in Thoughts from the Frontline here...

Media snippets
(for investors and business)

7 Timeless lessons from Vanguard  founder John Bogle

Bogle neatly distills his life's work into seven timeless lessons:
  • Invest you must. The biggest risk facing investors is not short-term volatility but, rather, the risk of not earning a sufficient return on their capital as it accumulates.
  • Time is your friend. Investing is a virtuous habit best started as early as possible. Enjoy the magic of compounding returns. Even modest investments made in one's early 20s are likely to grow to staggering amounts over the course of an investment lifetime.
  • Impulse is your enemy. Eliminate emotion from your investment program. Have rational expectations for future returns, and avoid changing those expectations in response to the ephemeral noise coming from Wall Street. Avoid acting on what may appear to be unique insights that are in fact shared by millions of others.
  • Basic arithmetic works. Net return is simply the gross return of your investment portfolio less the costs you incur. Keep your investment expenses low, for the tyranny of compounding costs can devastate the miracle of compounding returns.
  • Stick to simplicity. Basic investing is simple—a sensible allocation among stocks, bonds, and cash reserves; a diversified selection of middle-of-the-road, high-grade securities; a careful balancing of risk, return, and (once again) cost.
  • Never forget reversion to the mean. Strong performance by a mutual fund is highly likely to revert to the stock market norm—and often below it. Remember the biblical injunction, "So the last shall be first, and the first last" (Matthew 20:16, King James Bible).
  • Stay the course. Regardless of what happens in the markets, stick to your investment program. Changing your strategy at the wrong time can be the single most devastating mistake you can make as an investor. (Just ask investors who moved a significant portion of their portfolio to cash during the depths of the financial crisis, only to miss out on part or even all of the subsequent eight-year—and counting—bull market that we have enjoyed ever since.) "Stay the course" is the most important piece of advice I can give you.
From Market Watch, June 6, 2017.

The Gini Coefficient – what does it mean?

Namibia is pilloried regularly for its poor Gini Coefficient. But do we know what this is actually all about?

Here is a definition: “Gini index measures the degree of inequality in the distribution of family income in a country. The more nearly equal a country's income distribution, the lower its Gini index, e.g., a Scandinavian country with an index of 25. The more unequal a country's income distribution, the higher its Gini index, e.g., a Sub-Saharan country with an index of 50. If income were distributed with perfect equality the index would be zero; if income were distributed with perfect inequality, the index would be 100.”

For interest sake the below table puts the Namibian Gini Coefficient into a bit broader perspective:

Country Gini Coefficient*
Norway 26.8
Swaziland 50.4
Namibia 59.7
Botswana 60.5
South Africa 62.5
Lesotho 63.2
Hong Kong 53.7
Colombia 53.5
* Source : World Factbook

Evidently Namibia has a high Gini Coefficient relative to Norway (and many European countries for that matter). However, relative to our neighbouring countries (and many other African and developing countries for that matter), we actually have a better Gini Coefficient than most.

Why you might want to disinherit your kids

“How would you react if I told you that your children would never speak to each other again because you left your three kids your house? What if the son you designated as your executor or trustee seized control of your assets and was sued by his brothers and sisters? What if the family business you built during your life dismantles the family after you depart?

But you say, “No! Not my family!” To the contrary. In my 35 years of managing wealthy families every day, the incident of permanent damage occurring to a family is most of the time.”

Read the interesting short article by Richard Watts in Marketwatch of 14 June, here...

Preserve your retirement savings

Most people choose the cash option and have their retirement savings paid out when they leave their employer.

“Like Bob, they ask for the value of the fund. In Bob’s case, it is R100,000. He may compare that to the potential R3,100,000 that he could have had after 40 years and think that R100,000 is worth nothing in comparison to the potential end value. He may think that if he takes the R100,000 after the first ten-year period it won’t make much difference, as he plans to carry on saving R500 per month for the next few decades.

But Bob is missing an important point. He will in fact not continue saving at the same rate the next few decades as he has to repeat the first ten-year period. This means that he is not cutting the first ten years of compounding off his money, he will be cutting off the last ten years. In those last ten years the value of his money grows from R1,100,000 to over R3,100,000. This is a difference of R2,000,000. By spending the R100,000 after ten years, he is fact not losing R100,000 – he is losing the R2,000,000’s worth of growth that he could have had.”

The lesson from this is example is that whenever Bob changes jobs, he should do what he can to preserve his retirement savings.

Read the insightful article by Paul Leonard, Citadel, in Cover magazine, June 2, 2017,  here...

And finally...

“I’ve learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.”
~ Maya Angelou
How much will you need when you retire and are you investing enough?
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