Blogs & News
Read our latest news and industry insights.
Should you withdraw your Pension and pay off your home? It's perfectly normal to ask whether you should use your pension to pay off your home when leaving an employer. This decision involves weighing the tax on the withdrawal, the interest saved on your bond, the future growth of your pension fund, and the contributions needed to catch up. Example: Anne is 40 years old with a pension fund worth R3,500,000. She bought a home 10 years ago for R3,000,000 and bonded it over 20 years at an 11% interest rate, with monthly repayments of R30,965. After 10 years, her outstanding bond is R2,258,225. If she withdraws her pension, she’ll receive R2,408,300 after tax—enough to settle the bond and have some cash left over. By paying off the bond early: She saves R1,467,919 in interest. She frees up R30,965 in monthly cash flow. However, if she keeps the money invested, her pension could grow to R37,921,470 by age 65 (assuming 10% annual growth). To match this value after using her pension to pay off the bond, she’d need to invest R28,580 per month for the next 25 years. That’s R2,385 less than her current bond repayment, so she does save monthly—but only for the next 10 years. After that, she’s committed to investing R28,580/month for 25 years to break even. Not everyone’s calculation is the same and there are endless amounts of permutations to this calculation, but it’s important to note that you need to consider all of these factors when making these crucial decisions.
Ons ontleed watter gewoontes meewerk om ’n gelukkige aftrede te verseker. Hierdie maand bespreek ons hoe om gesond te lewe tydens aftrede. Mediese kostes verhoog hoe ouer ons word. Die koste van ’n mediese fonds verhoog jaarliks met meer as die inflasiekoers en mediese uitgawes sal in die toekoms ’n al groter persentasie van ons persoonlike uitgawes vereis. Dit is daarom belangrik om so gesond as moontlik te leef. Hier is verskillende stappe wat gevolg kan word om gesond oud te word: Eet gesond. Moenie oorgewig wees nie. Word sterker deur oefeninge te doen wat jou spiermassa behou. Doen jaarliks mediese ondersoeke om te bepaal hoe gesond jy is. Beskerm jou gewrigte en beenstruktuur deur krag- en rek-oefeninge te doen. Verminder rook en alkohol-inname om jou kanse van kanker en ander siektes te beperk. Indien jy ’n familie-geskiedenis het van siektes soos kanker en hart-toestande. moet jy vir gereelde mediese toetse gaan om vroegtydig te bepaal of jy nie die siektes onder lede het nie. Verbeter jou liggaamsbalans deur oefeninge te doen soos om op een been te staan terwyl jy jou tande borsel. Hierdeur verseker jy dat jy nie gereeld jou liggaamsbalans verloor en val nie. Studies het bewys dat dit help om jou fisieke en geestelike gesondheid te behou deur sewe tot agt ure per nag te slaap. Hou jou brein-funksie of kognitiewe vermoë in ’n goeie toestand deur brein-oefeninge te doen, soos om nuwe stokperdjies te beoefen of memoriseringsoefeninge te doen. Volg ’n aktiewe sosiale lewe. Studies het getoon dat mense met ’n aktiewe sosiale lewe minder geheue-probleme ontwikkel. Hulle het ’n verminderde kans om eensaam te voel en depressief te word (Health Connection, Cooper, University Health Care, 9 September 2024).
We are analysing habits that contribute to a happy retirement. This month we are discussing how to be living healthily to ensure a happy retirement. As we grow older our medical expenses will be increasing. The cost of medical aid increases faster than the rate of inflation every year and will require a bigger percentage of our personal expenses. It is therefore important that we live as healthily as possible. Here are different steps you can take to age in good health: Eat healthily. Avoid becoming overweight. Become stronger by doing muscle-maintaining exercises. Go for annual medical checks to determine how healthy you are. Protect your joints and bone structure by doing strength and stretching exercises. Reduce smoking and alcohol intake to limit your chances of getting cancer and other diseases. If you have a family history of diseases such as cancer and heart disease, you should regularly go for medical checks to ensure early detection of hidden disease. Improve your balance with exercises such as standing on one leg while brushing your teeth. This will help ensure that you don’t lose your balance and fall often. Studies have shown that seven to eight hours’ sleep every night will help you maintain your mental and physical health. Maintain your brain function or cognitive abilities with mental exercises such as taking up new hobbies or memory-boosting exercises. Have an active social life. Studies have shown that people with an active social life develop fewer memory problems. They are less likely to feel lonely and get depressed. (Health Connection, Cooper University Health Care, 9 September 2024).
Structured Investments are pre-packaged investment strategies with predetermined payouts and can be linked to a variety of underlying assets (e.g., equities, indices, commodities, or currencies). Some structured products include downside protection, which can cushion losses in adverse market conditions. By diversifying into different protection levels and structures, you can tailor the risk exposure of your overall portfolio. An autocall investment is a structured note that can end early if the linked index, like the Nikkei 225 or Euro Stoxx Select 30 Dividend Index, performs well enough. It runs for a fixed period of five years but is reviewed once a year. If the asset is at or above a certain level on a review date, the note "autocalls": it ends, you get your original money back, plus a set return. If it doesn’t autocall, it keeps going. At the end, if the asset hasn’t fallen too far, you still get your money back. But if it has dropped below a certain threshold, you could lose money based on how much it fell. Who is this for? Investors looking for offshore exposure with a level of capital protection. Minimum R100 000. Credit risk: Structured products are often issued by banks or financial institutions. Spreading investments across different issuers can reduce exposure to the credit risk of any one issuer. In this example Investec is the issuer, but the credit reference can be any of the following: Commerzbank AG, Credit Agricole, BNP Paribas SA. Protection: In this example, 100% capital protection in Rand provided the index does not end below 70% of Initial Index Level.
We made a podcast, The F Word , but it is all about money. The title "F word" comes from the fact that "money" is seen as a swear word in our society — even more so when people are at home. The truth is that your kids will learn about money somewhere else if you don't teach them. Schools don't teach it very well, and you don't want American media to teach them, because they will learn how to live a life full of debt and buying things. There are only six out of every hundred people who can retire independently in South Africa. We need to give our children the best chance to be one of those six people. There are several concepts you want to teach your children, and you can do so in several different ways: 1) Managing Expenses Kids should learn early on that they can't always get what they want, even if they (you) can afford it. Giving them options is what you want to do. That's why it's a good idea to give them some money to work with. Example: You can get either the new computer game or the new shoes. Choices are what life is all about. 2) Make Extra Money If your child wants the extra pair of shoes and the new video game, that's a good chance for them to learn that if they work hard, they can make extra money and then buy whatever they want. Ideas: Take out the trash Clean their rooms Wash your cars Older kids can learn how to be entrepreneurs so they can sell something or make something of value to earn extra money. 3) Start to Save It's smart to teach your children how to save money by setting aside 20% to 40% of their budget or income for a big expense. This teaches delayed gratification , and if they want something big in the future, they have to forgo short-term pleasures. You can also start to teach them the difference between investment and saving when they are in high school. Examples: Set up a bank account in the child's name and give them "interest" if they save a certain amount each month Open an investment account directly for the child Financial responsibility starts with the parents , and it is never too early to start training your kids to be smart with money. The things you teach your child will have an impact on their life for a long time and will compound , just like investments.
As of from September last year we have seen a change in regulations and the new: “2 Post system” was implemented across all retirement products, whether you belong to a Pension fund, Provident fund, or Retirement annuity. The creation of the 2 new pots, essentially leaves you now with 3 Potts: The Vested Pott: This was the balance of you accumulated fund up until September 2024. This Pott will still be governed as per the old rules of the specific product. The Savings (Emergency) Pot: With a once boost of 10% (up to a Max of R30 000) of your vested pot. The Savings pot is open for you to make one withdrawal per annum. One Third off all your contributions from September 2024 will go into this pot. Very important to note that if you withdraw from this pot, you will be taxed at your marginal income tax rate immediately, whereafter the balance will be transferred to you The retirement Pot: The other two thirds of your retirement contributions from September 2024 will go into this pot. This money cannot be accessed before retirement and an annuity will have to be bought after retirement As of January 31, 2025, the South African Revenue Service (SARS) reported that R43.42 billion had been paid out from the two-pot retirement system's savings pot. This involved 2.4 million applications for tax directives, with 2.4 million directives approved. The remaining applications were declined due to various reasons, including incorrect identification or tax numbers. It is very important to take the long-term effect of any action you take into consideration, and this is where a financial advisor can really add value: To minimise you tax liability and to ensure you have peace of mind in the years leading up to retirement and the years in retirement. Different options are available once retired: Life Annuity Vs. Living Annuity, each with its pros and cons and careful considerations and comparisons should be made before deciding on a retirement product. Kindly contact us for any questions or comments at admin@bovest.co.za Geo Botha CFP® Director and Wealth Manager
Have you ever thought about how small changes can make a huge difference in your life? Small changes feel as if it doesn’t have a profound impact on your life at the start, but over a long period of time these small changes have a way of making a huge difference over an extended period of time. The problem is that we become despondent, and we give up because we don’t see the results we were hoping for right now. The same goes for investing. A lot of us start with an investment, and then after a year or so we give up because we don’t see the growth we were hoping for. This is a behavioral trap we fall into because we don’t see the big picture. Would you rather save R 1581 or R 13 168 to achieve the same goal? This may seem like a very odd question, obviously you would want to save R 1581. The big kicker is, you will need to start sooner. Let’s say Ben and Andy both have the same goal of reaching R 10 million at the age of 60. Ben started investing at the young age of 20. Andy started investing at age 40. Both investors invest in the exact same fund and both of them receive 10% growth on their investments. Ben will only need to invest R 1581 p/m, whereas Andy will need to invest R 13 168 p/m. Start small, start early,and let the miracle of compounding do it’s thing.
Retirees’ needs differ according to their age. The needs of a 66-year-old differ from those of an 86-year-old. Dr Elisabeth Kübler-Ross, an American-Swiss psychologist, has summarised the life journey’s five phases of retirement as follows: The phase of imagination . This period covers the 15 years or more before retirement when people start to imagine or visualise what their retirement will look like one day and how they will enjoy it. This is when they actively plan what finances they will need to enjoy their planned retirement. The phase of anticipation . This period begins about five years before retirement. Excitement increases as the retirement date approaches and more specific plans for enjoying retirement are made. Travels are identified and a possible retirement address is discussed. Appointments are made with a financial adviser to determine whether sufficient retirement funds will be available for the planned retirement. Liberation . The planned day of retirement has dawned and you experience mixed feelings about the freedom of retirement, the loss of the security of a permanent job with an income and your dependence on your retirement income. The excitement of the new freedom accompanying retirement is estimated to last about two years. The phase of reorientation . During this period, the new circumstances of life and opportunities of retirement are enjoyed. These new challenges bring new happiness. Although health and financial issues arise, most retirees enjoy this period which lasts about 15 years. The phase of adaptation : During the following years, adaptation occurs, along with the acceptance of an increase in illnesses and restricted movement as part of the limitations of old age. The increasing loss of loved ones and the resulting grief and longing become a part of your existence. More attention is given to the bequeathing of affluence. Retirement is not a solo journey without the family With retirees now reaching higher ages, even four-generation families including parents, children, grandchildren and great-grandchildren are becoming more common. Multigenerational families living in the same city, town or even household ensure that ageing family members do not become isolated or lonely. This prevents retirement from being a solo journey without social support. Because of the reality that large numbers of young people are leaving South Africa to go work within an established economy internationally, many local retired parents’ children live in other countries. The advanced digital age in which we live, fortunately, makes it easy to maintain contact with overseas family members, but this does not replace personal familial care.
Afgetredenes se behoeftes verskil na aanleiding van hul ouderdom. Die behoeftes van ‘n 66-jarige verskil met dié van ‘n 86-jarige. Dr Elisabeth Kübler-Ross, ’n Amerikaans-Switserse sielkundige het die vyf fases van die lewensreis van aftrede so opgesom: Die fase van verbeelding . Hierdie periode dek 15 jaar of meer voor aftrede waartydens mense begin verbeel of visualiseer hoe hul aftrede eendag gaan lyk en hoe hulle dit gaan geniet. Dit is wanneer daar aktief beplan word oor watter finansies nodig gaan wees om hul beplande aftrede te kan geniet. Die fase van afwagting . Hierdie periode begin ongeveer vyf jaar voor aftrede. Opgewondenheid neem toe met die naderende datum van aftrede en meer spesifieke planne word beraam oor hoe om dit te geniet. Reise word geïdentifiseer en ’n moontlike aftree-adres word bespreek. Afsprake word gemaak met ’n finansiële adviseur om te bepaal of daar genoegsame aftree-geld beskikbaar gaan wees vir die beplande aftrede. Bevryding . Die beplande dag van aftrede het aangebreek en daar bestaan gemengde gevoelens oor die vryheid van aftrede, die verlies aan sekuriteit van ’n vaste werk met ’n inkomste en jou afhanklikheid van jou aftree-inkomste. Daar word gereken dat die opgewondenheid van die nuwe vryheid wat met aftrede gepaard gaan so ongeveer twee jaar duur. Die fase van reoriëntasie . Gedurende hierdie periode word die nuwe lewensomstandighede en nuwe geleenthede tydens aftede geniet. Hierdie nuwe uitdagings bring nuwe geluk. Alhoewel gesondheids- en finansiële kwessies opduik, geniet die meeste afgetredenes hierdie periode, wat ongeveer 15 jaar duur. Die fase van aanpassing : Gedurende die daaropvolgende aantal jare word daar aangepas en aanvaar dat die toename in siektes en die beperking van beweging deel is van die ouderdomsbeperkings. Die afsterwe van geliefdes neem toe en die gevolglike hartseer en verlange word deel van jou bestaan. Die nalatenskap van mense se welvaart geniet meer aandag. Aftrede is nie ’n solo-reis sonder die familie nie Die ouer-wordende afgetredenes veroorsaak dat selfs vier geslagte families met ouers, kinders, kleinkinders en agter-kleinkinders meer algemeen voorkom. Multi-geslag-families in dieselfde stad of dorp of selfs huishouding verseker dat ouer-wordende gesinslede nie geïsoleer word of vereensaam nie. Dit verhoed dat aftrede ’n solo-reis sonder sosiale ondersteuning is. Die realiteit dat groot getalle jongmense Suid Afrika verlaat om in ’n gevestigde ekonomie internasionaal te werk, het tot gevolg dat talle plaaslike afgetrede ouers se kinders in ander lande woon. Die gevorderde digitale era waarin ons leef, maak dit gelukkig maklik om kontak te hou met oorsese familie, maar dit vervang nie persoonlike familie-sorg nie.
The widely anticipated tariffs were announced last night via executive order, on America’s so-called ‘Liberation Day’ and in discussions with our partners at Morningstar, the following should be noted. The sweeping announcement is intended to ‘make America wealthy again’ as tariffs effectively tax foreign producers on their imported goods, as a percentage of their value. The US is currently the largest goods importer in the world and is currently running a trade deficit (imports more than it exports). President Trump has said that he will not negotiate, however, if countries are willing to lower their charges on US goods, the White House will reduce the rate in effect. Market impact US Equities have sold off sharply, particularly those reliant on imported goods, as well as foreign companies that have significant exposure to the US market. At the time of writing, the FTSE 100 was down 1.4% to below 8,500, whilst sterling had appreciated to 1.32 against the dollar. Bond prices have broadly risen as investors have sought perceived safer assets. SA equities and bonds responded negatively after markets opened. The All-Share was down around -3,5% by end of-day with the decline being led by Financials at -4.3%, while both Resources and Industrials were down approximately -2.4%. The yield on the SA 10-year government bond spiked sharply to 11.3%, a move of 0.8% off the previous day's close. The rand remains relatively range-bound between R18.60 – R18.80 despite general US dollar weakness against most major currencies. What we know about the Tariffs: The tariffs that were imposed last night are of a reciprocal nature, meaning that countries are free to retaliate with their own tariffs on the US. Below are some of the standout tariffs that Trump has imposed across the globe: · China 34% · India 26% · Japan 24% · EU 20% · UK 10% South Africa, which currently applies 60% tariffs on the US, was handed a 30% reciprocal tariff. The effective rate is likely to be lower given that key commodity exports, including gold and platinum, are currently exempted. What we don’t know President Trump has not made it clear whether the tariffs will remain in place indefinitely and whether indeed they will remain at the initial level. There are many factors that could impact their longevity, including legal ramifications and future election implications. It is also yet to be seen how and when other countries will react to these changes. Countries may look to increase their current tariffs on the US or indeed may consider reducing them. Additionally, President Trump has stated that the only way to gain exemption from the tariffs is to set up factories and build products in the U.S., so we await to see how countries and companies react to this proposition. What’s next? While volatility and policy uncertainty will likely persist in the short term, we recommend investors keep a cool head. The challenge is to avoid overreacting to the elevated day-to-day volatility and remain focused on your financial plan. Central Banks have been in a holding pattern in anticipation of actions taken by President Trump, and therefore this announcement may have an impact on future Central Bank policy and interest rates. From a longer-term perspective, we may see implications for economic growth across various regions, however, it is too early to tell at this stage. From an investment standpoint, we continue to focus on the fundamentals, maintaining a long-term mindset, whilst paying attention to valuations. Market volatility can provide investors an opportunity to rethink their portfolios and find some better-valued investments with more attractive returns, however, it’s important to note that while selloffs will produce bargains, investors shouldn’t buy simply because stocks look less overvalued. Investment is always full of uncertainty, and therefore the Bovest solutions are constructed with this in mind. Valuations are key in our decision-making process, whereby our research process identifies return drivers from oversold assets, offering investors a high margin of safety. Against that, we also hold defensive assets that can add ballast to portfolios during periods of turbulence, including high quality government bonds and defensive equities such as consumer staples. Diversification continues to be a strong portfolio strategy in these times of uncertainty. Regards, The Bovest Team
