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| Issued November 2024 |
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| In this newsletter... |
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Benchtest 10.2024 – guiding investors through uncertain times, familiarity risk and your administrator and more... |
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| IMPORTANT NOTES AND REMINDERS |
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NAMFISA levies
- Funds with October 2024 year-ends must submit their 2nd levy returns and payments by 25 November 2024;
- Funds with March 2024 year-ends must submit their 1st levy returns and payments by 25 November 2024; and
- Funds with November 2023 year-ends must submit their final levy returns and payments by 29 November 2024.
NamRA due to refund tax credit balances
NamRA issued a press release on 13 November urging all taxpayers to complete their income tax and update their tax records and banking details for a refund. Download the media release here...
Repo rate unchanged in November
The repo rate remains unchanged since the last reduction in October to 7.25%. The interest rate on funds’ direct loans will reduce to 11.25% from 1 November 2024. |
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Registered service providers
Certain pension fund service providers must register with NAMFISA and report to NAMFISA. Download a list of service providers registered as of June 2024, here...
Retirement calculator
Use our web-based retirement and risk shortfall calculator for your personal retirement planning. Find it here...
If you need help with your financial planning, get in touch with
- Annemarie Nel (tel 061-446 073)
- Christina Linge (061-446 075)
- Dennis Fabianus (061-446 098)
Toolbox for trustees
RFS provides comprehensive support for trustees. Find a list of download documents to assist with governance and management of private funds, registered as of June 2024, here... |
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| IN THIS NEWSLETTER... |
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In this newsletter, we address the following topics:
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In 'Tilman Friedrich's industry forum' we present...
- Monthly review of portfolio performance – 31 October 2024
- A guide for investors through uncertain times
- The familiarity risk and your fund administrator
- Remuneration packages and your pension fund
- Our safety net for our clients
In Compliments, read...
- A compliment from a former fund member
In ‘Benchmark: a note from Günter Pfeifer’, read about…
- Important circulars and notices issued by the fund
In 'News from RFS', read about...
- RFSFA sponsoring schools' soccer
- The Retirement Compass
- Important circulars issued by RFS
In 'News from NAMFISA', read about...
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In 'Legal snippets', read about...
- The Employment Equity Bill vs the Affirmative Action Act
- djudicator Determination in HT Mashaba vs ABSA Pension Fund and Others
In 'Snippets for the pension funds industry,' read about...
- Is your retirement plan sustainable?
- Should I invest in an annuity or property for a better return
In ‘Snippets of general interest', read about...
- The importance of holistic retirement planning
- Life and living annuities – what you must know
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!
Regards
Tilman Friedrich |
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| TILMAN FRIEDRICH'S INDUSTRY FORUM |
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Monthly Review of Portfolio Performance
to 30 November 2024 |
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In October 2024, the average prudential balanced portfolio returned -0.2% (September 2024: 1.8%). The top performer is NAM Coronation Balanced Plus Fund, with 0.08%, while Allan Gray Namibia Balanced Fund, with -0.5%, takes the bottom spot. NAM Coronation Balanced Plus Fund took the top spot for the three months, outperforming the ‘average’ by roughly 1.7%. Allan Gray Namibia Balanced Fund underperformed the ‘average’ by 2.0% on the other end of the scale. Note that these returns are before (gross of) asset management fees
The Monthly Review of Portfolio Performance to 31 October 2024 reviews portfolio performances and provides insightful analyses. Download it here... |
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| A guide for investors through uncertain times |
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When you live in Namibia, the biggest portion of your wealth is invariably in Namibia, a bit in South Africa, and the balance is likely in the traditional offshore investment markets. If you have liquid capital you want to invest, you should be concerned about a major confrontation looming between the 'global West' and the 'global East' as evidenced by the war in Ukraine and the conflict in the Middle East. Should it come to a global conflict between the West and the East, your offshore capital will become inaccessible because of capital controls. Your offshore investment could also face severe impairment from war causes, for being invested in countries that are a party to the global conflict.
Hopefully, southern African countries will not become parties to the global conflict which will likely happen in the next five years. It would conceivably carry on for about five years. The outcome would be -
- a stalemate between the parties resulting in the establishment of a more balanced new world order not dominated by the US, while global multilateral institutions such as the UN, the IMF and the World Bank would emancipate from the US hegemony;
- the global West and the US hegemony prevail and would more forcefully impose the capitalist system and the US hegemony on the rest of the world.
- the global East prevails and would forcefully impose its economic interest on the rest of the world, implying a new international economic order being established over many years as the existing global multilateral institutions would be restructured and re-orientated.
Given the current geopolitical landscape, approaching one’s investments focusing on regional stability, defensive asset classes, and sectors that may remain resilient is prudent...
Read paragraph 6 of the Monthly Review of Portfolio Performance to 31 October 2024 for our views on investment markets and global political developments. It also reviews portfolio performances and provides insightful analyses. Download the Monthly Review of Portfolio Performance to 31 October 2024, here... |
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| The familiarity risk and your fund administrator |
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NAMFISA regularly expresses concern about service provider familiarity, as regulatory scrutiny over long-standing relationships aims to ensure objectivity, transparency, and compliance. Its focus on familiarity risk emphasises avoiding potential conflicts of interest or lapses in objective oversight. Familiarity risk is the risk that, due to a long or close relationship with the service provider, the fund will become too sympathetic to the service provider's interests or too accepting of the service provider's work or product.
While a long-standing relationship with the fund administrator poses a familiarity risk, the rotation of the fund’s administrator also poses risks. Trustees should certainly not rotate their administrator, believing it would please NAMFISA. Trustees have a duty of care towards their fund and its members, and only a court may adjudicate if they have complied with this duty.
This article aims to help trustees manage the familiarity risk of retaining their administrator and the diverse risks of rotating the administrator.
- The familiarity risk in perspective
- Trustee Turnover: Regular elections bring in new trustees, naturally introducing fresh perspectives and oversight, helping mitigate familiarity risk. New trustees can contribute independent insights, enhancing the administrator's scrutiny.
- No In-House Staff: Without in-house staff, the fund relies heavily on its administrator for operational continuity. This dependence heightens the importance of choosing a high-performing administrator, as the internal capacity to manage transitions or oversee day-to-day operations is limited.
- External Oversight: The annual external audit and statutory valuator review provide additional layers of objective scrutiny, which helps offset familiarity risk. These independent assessments ensure compliance and give the trustees external assurances of the administrator's performance.
- The board vs the trustee: In practice, familiarity often exists between a trustee and the service provider or one of its staff. The rotation from one service provider to another could create new familiarities that may not be apparent when deciding to appoint the service provider. However, the board moderates the individual trustee’s familiarity.
- Pros and Cons of Regularly Rotating the Administrator
- Pros:
- May address NAMFISA’s concerns on familiarity.
- Allows periodic market testing to ensure competitiveness and relevance.
- Could lead to an improved service experience for the fund and its members.
- Could lead to a cost reduction.
- Could dismantle inefficiencies and inaccuracies in processes, procedures and policies.
- Cons:
- Disruptions could be more severe given the fund’s reliance on external administration and the absence of internal staff.
- New administrators may not provide the same level of service quality, risking data loss or delays in meeting compliance requirements and resulting penalties.
- Loss of corporate memory, particularly if the fund does not have in-house staff and because of frequent changes in the board composition.
- Avoids the risk of poor service delivery.
- Could introduce inefficiencies and inaccuracies into processes, procedures and policies.
- Could increase costs due to incorrect or inadequate tender specifications.
- Enhanced Familiarity Risk Mitigation
- Leveraging Annual Audits and Valuations: The fund undergoes thorough annual reviews from an external auditor and a statutory valuator. These external reviews assure compliance and performance, supplementing the need for regular administrative rotation.
- Encouraging New Trustee Involvement: With each trustee election, the board could have the new trustees more actively involved in the review of the administrator. This approach directly brings fresh oversight into the administrative relationship, reducing familiarity risk from within the board.
- Structured Administrator Reviews: Since the fund lacks internal staff, trustee evaluations of the administrator should be rigorous, with structured performance reviews based on criteria such as service quality, regulatory compliance, and responsiveness. This structured approach enables trustees to objectively assess the administrator’s suitability without undue reliance on familiarity.
- Reporting: The frequency and transparency of the service provider’s report provide an essential tool to the trustees for mitigating their risks.
- NAMFISA’s Concerns
- Providing Evidence of Independent Oversight: Annual third-party audits and reviews could mitigate familiarity concerns effectively without necessitating disruptive administrator changes. Trustees should document the annual external audit and valuator findings as part of the fund’s compliance reports. This documentation can demonstrate to NAMFISA that familiarity risk is managed through rigorous, regular, independent evaluations.
- Policy Communication: Consider preparing a policy summary for NAMFISA that outlines the fund’s reliance on structured annual reviews by independent third parties to mitigate familiarity risk.
- Policy on Fund Administration Outsourcing
- Formal Regular Review Process: The policy should establish a regular structured review of the administrator, inviting new bids. Regular evaluation criteria should include performance, compliance, and market competitiveness.
- Familiarity Risk Mitigation Mechanisms: The policy should note that familiarity risk is managed through trustee turnover, annual audits, and statutory valuation to address NAMFISA’s concerns without unnecessary rotation.
- Final Recommendation: Retain the high-performing incumbent administrator if they continue to meet the fund’s high standards. Rely on the policy’s structured review process, independent annual evaluations, and trustee turnover to satisfy regulatory expectations and maintain robust governance practices
Conclusion
The Namibian retirement funds market of stand-alone funds (excluding the GIPF) of merely 50,000 members is too small to sustain one fund administrator. Together with the stand-alone umbrella funds, the 140,000 members do not provide a viable business basis for more than three administrators. The viability of the pensions industry will worsen further due to the dramatically increasing compliance requirements and associated costs of the FIMA. The National Pension Fund, with compulsory participation, will shave off around one-half of the industry’s current membership (i.e. leaving around 70,000 members), adding to the woes of the industry and its service providers. It will scarcely offer an economically viable base for one administrator, and there will be little space left for effective competition.
Over the past thirty years since Namibia’s independence, the number of administrators has always reverted to three, despite hopeful aspirants entering the market now and then, only to fade away again. There are six administrators, of which one-half will likely disappear in the next five years.
Trustees would be short-sighted not taking these constraints of the Namibian retirement funds market into account and how their decision could impact the industry and remove the only remaining competitor. The FIMA standards text-book approach to good corporate governance does not consider this' bigger picture', yet it is highly relevant to the fund and its members. |
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| Remuneration packages and your pension fund |
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IIn recent years, changes to how employees are compensated have gradually reduced the effectiveness of retirement benefits, leaving employees at risk of insufficient retirement income. Many employees don't realise this issue when they are young and healthy and frequently change jobs. Often, they only recognise the importance of a well-structured retirement plan later in life — when it is much harder to correct past choices.
This is where employers play a critical role. Employers can protect their employees from the consequences of underfunded retirement accounts by taking a proactive, long-term approach to retirement benefits. Without this guidance, employees might later blame their employer despite their control over their financial choices.
To ensure retirement goals are met, we recommend employers calculate retirement contributions based on an employee’s total guaranteed compensation package — not just base salary. The traditional retirement structure, designed over the past century, aims to provide a decent income replacement for retirement, death, or disability. This goal generally requires a total net contribution towards retirement of around 15% of remuneration throughout employment.
A balanced contribution model would include 10 to 11% from the employer and about 7% from the employee. This ‘market standard’ helps fund retirement benefits effectively without putting excessive strain on employees’ take-home pay.
For employers already contributing more than the typical total contribution rate of 17%, the standard of 100% of the employee’s compensation package could be reduced slightly. For example, suppose the employer contributes around 20% of income. In that case, they might set the contribution based on 85% of the employee’s compensation package to achieve a well-funded retirement plan without impacting employees’ current pay.
This topic is essential for both trustees and employers to discuss with their retirement consultants to ensure they’re meeting both today’s and tomorrow’s needs for their employees. |
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| Our safety net for our clients |
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By sound business practice, we confirm that we have just renewed the following covers through our brokers until 30 June 2025. Details were forwarded to all clients under separate cover.
- Fidelity cover of N$ 9,5 million, excess of N$ 250,000.
- Professional Indemnity cover of N$ 95 million, excess of N$ 250,000.
- Directors' personal liability cover of N$ 5 million per director, no excess.
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| COMPLIMENT |
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Compliment from a former fund member
Dated September 2024
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“Dear Ms. Visser,
I trust this email finds you well. Wow, what can I say? Thank you very much for your prompt response and assistance, even thinking ahead and providing us with more information for ease of reference. People like you make a difference and positively impact the world. People like you are rare in today's world. I appreciate your kindness and helpfulness. May you have a wonderful day and weekend ahead.
Kind regards,
Junin Buys”
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Read more comments from our clients, here...
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| BENCHMARK: A NOTE FROM GÜNTER PFEIFER |
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| Important circulars issued by the Fund |
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The Benchmark Retirement Fund issued the following new circulars:
- Announcement 202402 – Risk benefits provided via the fund.
- Announcement 202403 – Benchmark default portfolio developments.
- Announcement 202404 – Benchmark default portfolio annual review.
Clients are welcome to contact us if they require a copy of any circular. |
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| NEWS FROM RFS |
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| RFSFA sponsors schools' soccer |
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RFS Financial Advisors proudly supports the development of talents and the growth of our community. Its recent sponsorship of the Future Stars Football Academy has enabled the acquisition of essential soccer kits for young players, marking a significant milestone.
Acknowledging the sponsorship, the trainer said, "On behalf of Future Stars Football Academy, I would like to express our sincere gratitude for your generous sponsorship of our soccer kits.”
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| The RETIREMENT COMPASS |
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RFS Fund Administrators sponsor this newsletter as part of its social responsibility and its initiatives to support the retirement fund industry. It aims to provide members of funds managed by RFS Fund Administrators and other parties in their network with retirement funding and planning-related news and insights presented understandably.
Read the latest Retirement Compass here... |
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| Important circulars issued by RFS |
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RFS issued no new circular after RFS 2024.10-07: Confirmation of professional indemnity and fidelity insurance cover.
Clients are welcome to contact us if they require a copy of any circular. |
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| NEWS FROM NAMFISA |
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| Cyber security |
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NAMFISA issued Circular RPS/01/2024, dated 24 September 2024, requesting financial institutions to submit documentation on their cyber security arrangements. Specifically, it requests information by 18 October on the following aspects:
- The cyber security risk management program.
- The risk register.
- Report on penetration testing.
- Cyber security risk training.
- Business continuity and contingency funding management plan.
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| LEGAL SNIPPETS |
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The Employment Equity Bill vs the Affirmative Action Act
(a contribution by Carmen Diehl) |
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General approach
- The Bill seeks to establish a more responsive, comprehensive, and effective system for preventing, reporting, enforcing, and monitoring employment discrimination and to advance the implementation of affirmative action through an effective administrative system.
- The Bill envisages the repeal of the current Act in its totality and renames it the ‘Employment Equity Act’. This is to recognise the ultimate objective of implementing affirmative action in employment and to address and dispel the notion that employment equity is a short-term or time-bound project.
Definitions
- Add a few new definitions to enhance the interpretation of the Bill: Definitions such as bullying, gender-based violence and harassment, impractical, Namibian citizen, reasonable accommodation, reporting date, review cycle, review period, and violence and harassment were added.
- The definition of disabilities is also improved, considering several questions raised by the Commission over the years on this aspect.
Administration
- The Bill establishes the Employment Equity Commission as a separate juristic person. Currently the Employment Equity Commission resorts under the Ministry of Labour.
- Under the Bill, the Commissioner is no longer responsible for the administration of the Commission but is limited to being the chairperson accountable for overseeing the activities of the Commission.
- Provision is made for appointing an administrative head, the Executive Officer, and the necessary staff members for the proper administration of the Commission.
Employment equity
- It adds “Marginalised/Indigenous groups” to the definition of designated groups, namely the San, Ovatua and Ovatjimba as a new group of designated groups. Also, the Minister is empowered to increase or decrease this list over the years and as the need arises through a Government Notice, avoiding the need to amend the Act.
- The aspect of eliminating discrimination did not enjoy the necessary prominence in the current Act. It is therefore introduced in the Bill to address this oversight.
- Equal Remuneration for Work of Equal Value: Addressed in a separate section in the Bill as it is an area the Commission needs to place specific focus on in the future.
- Employers not required to take specific measures: This section creates the balance in affirmative action implementation by assuring employers that they are not required to create new employment positions, hire or promote an arbitrary number of persons, hire or promote persons who are not suitably qualified and take employment decisions that act as an absolute bar on the recruitment or promotion prospects of a person who does not belong to a designated group.
Identification and duties of employers
- Duties of relevant employers: Section 26 is introduced to capture essential duties under one section.
- Confirmation of non-relevant employer status: Regarding the Public Procurement Act 15 of 2015, the Commission must prove to employers below the threshold that such employer is irrelevant. The Bill provides that the Commission may exercise discretion to only issue this confirmation of non-relevant employer status upon paying a small fee.
Employment equity plan and report
- Key provisions are retained. The main amendment is to provide some form of flexibility in the content and form of the affirmative action plan and report to enable the Commission to accommodate smaller entities and changes in the content that present realities may necessitate.
- The Bill in section 33 seeks to provide additional clarity to what is meant and required under equitable representation and establishment of numerical goals.
- The Bill provides for self-identification by persons with disabilities. This is principally based on individuals’ involvement and not a unilateral exercise by the employer.
- The Bill requires employment equity plans to demonstrate reasonable progress toward implementing employment equity. The Bill pushes for the need to give more attention to the implementation coupled with regular monitoring and evaluation of affirmative action plans.
- Submission of employment equity reports: The current 18 months after designation as a relevant employer is shortened to 15 months.
- Employers are obliged to, on filing an employment equity report with the Commission, also provide their employees’ representatives with a copy of the report.
- Electronic filing: The Bill makes provision for electronic submissions of affirmative action reports.
- Public inspection of employment equity reports: The provision that every employment equity report must be available for public inspection at a designated place remains unchanged. The Bill provides that any person may obtain a copy of any of the reports from the Commission on payment of a prescribed fee. Further, on the application of an employer, the Commission may withhold the employer’s report from public inspection for a period not exceeding one year if, in the opinion of the Commission, particular circumstances warrant the withholding.
- The employment equity compliance certificate is valid 12 months from the issue date.
Compliance
- Compliance audits: The Bill provides for compliance audits to be carried out by compliance officers if there are reasonable grounds to believe or suspect that a relevant employer has not complied with the provisions of the Bill. Currently, the Commission only has powers to investigate and enforce compliance when a report is before it for review.
- Employer undertaking: Where a compliance officer believes that an employer is non-compliant with the Act as listed in section 50(a) to (h), the compliance officer must inform the employer of the non-compliance and shall attempt to negotiate a written undertaking from the employer to take specified measures to remedy the non-compliance. This is a redirection from the current Act, in which all contraventions are treated as criminal.
- Under the Bill, an employer could correct any shortcoming identified during the review of an employment equity report after the disapproval and before a review panel. This is not the case currently.
Monetary penalties
- The Bill removes specific charges from criminal contraventions and creates a regime of assessment and penalties concerning these contraventions, naming them violations rather than contraventions. The following violations will attract penalties in terms of the Bill:
- Failure to submit the employment equity report by the due date
- Submission of incomplete employment equity report
- Providing false or misleading information; and
- Failure to correct shortcomings within the period provided.
Miscellaneous
- The Commission will keep a public register of designated employers that have submitted affirmative action reports for purposes of transparency and to enable the public to know and be able to inform the Commission of possible non-compliance.
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| Adjudicator Determination in HT Mashaba vs ABSA Pension Fund and Others |
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1. Introduction
This case involves an interpretation of section 37D(1)(b)(ii) of the South African Pension Funds Act, which allows for withholding a member’s pension benefits under certain circumstances. Specifically, it involves whether a pension fund may lawfully withhold benefits when an employee faces unresolved criminal charges of fraud against their employer.
2. Background to the Case
The case involves:
- Complainant: HT Mashaba (the Employee).
- First Respondent: ABSA Pension Fund (the Administrator).
- Second Respondent: ABSA Consultants & Actuaries (Fund Consultant).
- Third Respondent: ABSA Bank Limited (the Employer).
Mashaba’s complaint to the Pension Funds Adjudicator (PFA) arose after her pension withdrawal benefit was withheld following her dismissal from ABSA Bank. Mashaba's employment was terminated after she was suspected of being involved in fraud, which resulted in financial losses for ABSA. The employer requested the fund administrator to withhold her pension pending the outcome of ongoing criminal investigations.
3. Complaint Details
Mashaba argued that her pension benefit should not be withheld as she had no involvement in the alleged fraud. She noted that although she had been cleared of some suspicions by the police, the employer still held onto her benefit, citing the unresolved criminal case. Mashaba requested the PFA to order the pension fund to release her benefits immediately.
4. Respondents’ Argument
- Fund Consultant (Second Respondent): Confirmed that the employer had requested withholding of Mashaba’s benefit, in line with section 37D, because the criminal proceedings were still ongoing.
- Employer (Third Respondent): Although given the opportunity, the employer did not submit any response to the Tribunal, leaving the Fund Consultant’s submission as the primary evidence.
5. Legal Provisions and Pension Fund Rules
The determination of the case hinges on section 37D(1)(b)(ii) of the Pension Funds Act. Generally, section 37A protects members' benefits from being reducible or executable. However, section 37D(1)(b)(ii) provides an exception, allowing pension funds to deduct amounts for compensation due to the employer where:
- The employee has admitted liability in writing, or
- A court judgment for compensation has been made against the employee.
In this case, Mashaba’s benefits were withheld on suspicion of fraud, not on the grounds of a written admission of liability or a court judgment. However, the South African case Highveld Steel and Vanadium Corporation Ltd v Oosthuizen permits a purposive reading of section 37D(1)(b)(ii), allowing for discretion to withhold benefits pending the outcome of related legal proceedings.
6. Analysis and Adjudicator’s Rationale
The PFA examined whether this withholding was lawful under both the Pension Funds Act and the rules of the ABSA Pension Fund:
- Pension Fund Rules: Rule 8.11 of the ABSA Pension Fund aligns with section 37D(1)(b)(ii), permitting withholding of benefits for losses suffered due to an employee’s theft or misconduct, provided there is written admission or a court judgment.
- Fund’s Discretion: The rules allow the fund trustees to exercise discretion, considering factors such as the employer establishing a prima facie case and ensuring the delay in payment is reasonable.
The Adjudicator acknowledged that prolonged legal proceedings could prevent an employer from recovering potential losses, and thus, withholding benefits aligns with the fund’s purpose. However, it also emphasised that this withholding should not unfairly prejudice Mashaba, who asserts her innocence. The PFA noted that the employer should assist in resolving the criminal case promptly to avoid unnecessary delays.
7. Conclusion and Order
The Tribunal dismissed Mashaba’s complaint, concluding that withholding benefits was justified under the Act and the fund’s rules. However, it mandated that if the National Prosecuting Authority (NPA) finds no grounds for prosecution and the employer does not pursue a civil claim, the pension fund must release Mashaba’s benefit.
This case emphasises the balance pension funds must maintain between protecting employers’ rights to recover losses and safeguarding employees’ rights to timely access to their benefits.
Read the Pension Fund Adjudicator’s determination here... |
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| SNIPPETS FOR THE PENSION FUND INDUSTRY |
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| Is your retirement plan sustainable? |
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To assess the sustainability of your retirement plan based on Erin White's advice, here’s a summarised approach:
- Create a Realistic Retirement Budget:
- Carefully analyse current and future expenses. Include likely costs in retirement (e.g., medical expenses, travel) and exclude items that might reduce or disappear (e.g., mortgage or child-related costs).
- Consider where you plan to live, family support needs, and lifestyle changes that could impact expenses.
- Project Retirement Income Against Expenses:
- Estimate your retirement income sources (e.g., pensions, investments, rentals).
- Factor in inflation and taxes, as these will continue in retirement and affect your net income.
- Test if your projected income will meet your retirement budget by simulating living on it for some time — ideally a year or more rather than just a month or two.
- Identify and Address Gaps or Red Flags:
- Note any significant gaps between current spending and planned retirement income. If the difference requires a significant lifestyle adjustment, reassess your budget or look for ways to bridge the gap.
- Ensure your investments are structured for reliable income. For example, if you rely on rental income, have a backup plan for potential vacancy periods.
- Plan for longevity and unexpected healthcare needs.
- Course-Correct if Needed:
- If your income is projected to fall short, consider ways to supplement it, such as part-time work, reducing living expenses, or potentially downsizing your home.
- Involve family in your planning, and discuss financial support options earlier rather than later.
- Work with a Financial Planner:
- Regularly revisit and update your retirement plan with a certified financial advisor. They can guide you on investments and help adjust your strategy as economic and personal circumstances evolve.
By periodically testing and adjusting your plan, you can stay on track and feel more secure about your retirement readiness.
Read Buitomelo Ntsoko’s interview with Erin White of Crue Investments in Moneyweb of 8 November 2024 edition here… |
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| Should I invest in an annuity or property for a better return? |
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This article discusses how, despite the dominance of the "Magnificent 7" technology stocks in 2023, many other global stocks and sectors have outperformed them. While these tech giants—Nvidia, Apple, Microsoft, Alphabet, Amazon, Meta, and Tesla — have had strong returns, many other companies, particularly in sectors like utilities and financials, have achieved even better returns.
Lamont emphasises the importance of recognising a broader range of investment opportunities beyond just these tech leaders, noting that many companies in Europe, Japan, and emerging markets are expected to deliver substantial earnings growth in the coming year. He warns that equity investors may be overly concentrated in a few stocks, posing risks and limiting exposure to potentially undervalued companies.
The article also critiques the rise of passive investing, which tends to allocate assets based on market capitalisation, favouring these large tech stocks and neglecting smaller, potentially lucrative investments. Lamont suggests that historical trends indicate that periods of high concentration in a few stocks often precede underperformance relative to the broader market.
Finally, the article briefly discusses various stock market valuation measures, such as forward P/E and trailing P/E, highlighting the complexities and limitations of these metrics in guiding investment decisions. Lamont concludes by advising investors to be cautious and consider a diverse range of opportunities in today's market landscape.
Read the full article by Duncan Lamotte of Schroders in Cover of 6 November 2024 here… |
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| SNIPPETS OF GENERAL INTEREST |
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| The importance of holistic retirement planning (to be continued) |
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Retirement should be more than just a financial milestone; it’s a significant life transition requiring comprehensive planning. A recent survey reveals that a staggering 76% of retirees struggle to adapt, with many facing identity loss, loneliness, and mental health challenges.
This article emphasises the need for a holistic approach to retirement planning that encompasses emotional, social, and physical well-being alongside financial security.
Retirement coaching offers a proactive way to cultivate a fulfilling lifestyle, encouraging individuals to prepare for economic stability and embrace a life filled with purpose and joy.
Join us as we delve into the complexities of retirement in the coming weeks, exploring its evolution, the impact of longevity, and the essential elements of a rewarding retirement experience. Don’t let your retirement be the end of your journey—make it the start of an exciting new chapter!
As life expectancy increases, the landscape of retirement is rapidly evolving. No longer just about financial stability, retirement planning now requires a holistic approach that addresses health, social connections, and a renewed sense of purpose.
Baby Boomers, the largest and most active generation, face unique challenges as they navigate this transition, influenced by historical shifts from defined benefit plans to individual savings responsibility. With retirees potentially enjoying decades of life post-career, it’s crucial to rethink retirement as a time for personal growth and engagement rather than mere leisure.
The upcoming article delves into the historical context of retirement, the significance of social structures, and the concept of the "two curves of life"—the shift from youthful ambition to a stage focused on wisdom and service. As we prepare for these changes, thoughtful planning that encompasses emotional, social, and physical well-being is essential for a fulfilling retirement.
The following article addresses the implications of longevity in retirement planning!
Source: Moneyweb, article series by Jaco Fouché, Jenwil Blue Star. |
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| Life and living annuities – what you must know |
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The article by Devon Card from Crue Invest discusses the critical decision retirees face when choosing between life and living annuities, outlining their main differences, benefits, and risks.
- Nature of Annuities: A life annuity is an insurance policy that guarantees a fixed income for the annuitant's lifetime, while a living annuity is an investment allowing the annuitant to manage their income withdrawals, which can range from 2.5% to 17.5% [between 5% and 20%in Namibia] annually.
- Longevity Risk: Life annuities transfer longevity risk to the insurer, ensuring income for life, whereas living annuities place the onus on the annuitant to manage withdrawals sustainably to avoid depleting their capital.
- Investment Risk: The insurer assumes all investment risks in a life annuity, making it suitable for risk-averse individuals. Conversely, living annuities expose the annuitant to market fluctuations, necessitating careful investment strategy planning.
- Inflation Protection: Life annuities, albeit with a lower initial income, can be linked to inflation. Living annuity holders must actively choose investments that outpace inflation to preserve purchasing power.
- Flexibility: Living annuities offer greater investment flexibility, as annuitants can select their investment strategies without the limitations imposed by pension regulations.
- Income Structure: Income from life annuities is predetermined, while living annuity holders can adjust their drawdown annually, requiring careful calculation to avoid outliving their capital.
- Beneficiary Considerations: Life annuities typically do not allow beneficiary nominations, while living annuities can pass on remaining capital to beneficiaries, providing immediate access to funds.
- Estate Planning and Tax Implications: Living annuities benefit estate planning as their proceeds do not form part of the estate, allowing for quicker access by beneficiaries. However, both types of annuities are subject to taxation on the income received.
The choice between life and living annuities significantly impacts financial security and requires careful consideration of personal financial goals and risk tolerance.
Read the full article by Devon Card, Crue Investments, in Moneyweb of 7 November September 2024 here…
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| AND FINALLY... |
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| Wise words from wise men |
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"Coming together is a beginning; keeping together is progress; working together is success." ~ Henry Ford |
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Disclaimer
Whilst we have taken all reasonable measures to ensure that the results reflected herein are correct, Benchmark Retirement Fund and RFS Fund Administrators (Pty) Ltd do not accept any liability for the accuracy of the information and no decision should be taken on the basis of the information contained herein before confirming the detail with the relevant portfolio manager. |
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