Pavit Ramnarain Given the volatile nature of local markets in recent years, smooth bonus funds have increased in popularity among cash-strapped South Africans seeking a more stable ride to retirement. This most likely shows that South Africans, especially those who are most vulnerable, are opting for all the protection from market volatility that they can get. The results from the latest Momentum / UNISA Consumer Financial Vulnerability Index (CFVI) reveal a worsening trend across all indicators of financial vulnerability. In light of this, Pavit Ramnarain, Actuary at Momentum Corporate, believes that employers and retirement fund trustees could protect retirement fund members by offering them the best possible investment solution for their retirement savings – both in terms of capital guarantees and highly competitive fee structures. “We believe that a combination of low financial literacy and capability levels, as well as poor consumer financial behaviour, are the core under...

As South Africa prepares to put the spotlight firmly on workers’ rights around Workers Day on May 1, Steven Nathan, 10X Investments chief executive officer, says it is absolutely crucial that financial transformation is achieved at the basic worker level. The founder of the disruptive asset management company says broader economic participation is a hot topic at the highest levels in politics and business, but it is also critical that practical change takes place at grassroots level. In support of these goals, 10X Investments has joint venture agreements with trade union-controlled companies, Numsa Financial Services and BIG Employee Benefits, which is majority owned by Fawu (the Food and Allied Workers Union).  These partnerships advance economic empowerment in general, as well as achieving very practical immediate benefits such as skills transfer. Nathan, says: “Everyone seems to focus on where all the money is, on the assets, but for us it is really about who is deliver...

Retirement is about a lot more than having more time and less money, say the experts at 10X Investments, who add that to be really happy after you have quit working you will most likely have to consider the needs of the mind, the body and the soul along with the practical aspects, such as money and time. “For many people work is not just a source of income, but also of identity, visibility, status, self-esteem, power, belonging, networks, structure and much more,” says Tracey Jensen, chief financial officer at 10X Investments. Finances – making your money last  A critical financial aspect you need to consider is how to ensure you don’t outlive your money. Steven Nathan, chief executive at 10X Investments, recommends starting with making a plan. He says this will force you to confront issues and set objectives with time horizons. “The plan should set out your goals and how you intend to fund them, as well as important financial ‘to-dos’,” says Nathan. “Things such as whe...

Emma Heap As new regulations in the UK tackle the gender pay gap, Emma Heap, head of retail at 10X Investments , says enduring pay inequality between men and women is one of the reasons so many women in South Africa are not able to retire comfortably. New regulations in the UK require that all companies with more than 250 employees report their gender pay gap to the Government Equalities Office by April this year. This shift towards greater transparency will likely put pressure on companies to pay their female and male staff more comparable wages. The problem is far from unique to the UK, however, and South African women face similar, if not worse, struggles. The 2017 Pulse of the People report run by market research firm Ipsos found that, on average, women in South Africa earned 27% less than their male counterparts. The same report, which surveyed more than 3 500 employed South Africans across various occupations and regions, found that this gap becomes even wider when lookin...

Tracy Jensen According to South African Finance Minister, Pravin Gordhan, only about 10% of South Africans enjoy a ‘decent retirement’. For the rest, retirement means financial hardship or, at least, a drop in lifestyle. Tracy Jensen, Chief Product Architect at 10X Investments , says that the problem is that the retirement industry habitually blames savers for these poor outcomes. “They start too late, they save too little, and they do not preserve when they change jobs. Invariably, the call is for more investor education. But, this achieves very little if employees refuse to engage, or take an active interest in the retirement fund. Unfortunately, these employees are in the great majority.” Even committed savers fall short. According to a study by Alexander Forbes, the average final income replacement ratio of long-term retirement members is only around 30% - half the recommended minimum. Jensen points out that retirement fund trustees are unable to regulate their members’ savings...

Chris Veegh, Head of Consulting at 10X Investments For most people, the idea of running the Comrades marathon is as absurd as it is scary. If you can barely manage to circle the block, then the idea of a 90km footrace is as far-fetched as flying to the moon. Clearly, this challenge is not for ordinary people. And yet, every year thousands of very ordinary people take it on and finish before the 12-hour cut-off. The trick is commitment and perseverance, rather than athletic ability. Saving for retirement may appear just as daunting to some: circumstance, financial or personal, might make this goal as improbable as finishing the Comrades. But the same principles that get you over the line at the Comrades will get you to a comfortable retirement. 1. Prime goal: beat the cut-off Other than elite and sub-elite runners, the primary goal for every Comrades runner is to at least finish within the 12-hour cut-off. Many might hope to do better, but getting a medal is the first obje...

Romeo Msipha The new tax laws around retirement funds now enable most employees who are members of a company retirement fund to make bigger tax deductible contributions into their fund every month, which will ultimately boost their retirement savings. Romeo Msipha, Senior Consultant at Old Mutual Corporate Consultants, says that employers should make it as easy as possible for employees to take advantage of this opportunity in order to maximise their retirement outcomes. As of 1 March 2016, the tax laws around retirement fund contributions have changed significantly, with the main changes impacting how much employees can contribute and deduct from their taxable income. “Employers’ contributions to employees’ retirement funds will now be taxed as a fringe benefit” explains Msipha. “However employee members do not need to be overly concerned about this because these employer contributions are now viewed by the taxman as employee contributions for the purposes of claiming dedu...

As a member of an employer-sponsored pension or provident fund your retirement savings are usually on auto-pilot: the monthly contributions flow unseen to the responsible administrator and to your fund managers of choice, or into the default portfolio. This detachment, however, ends when you leave your employer. Suddenly, you have to make all the decisions – and the decisions you make will have a major impact on the quality of your retirement. Chris Veegh, Head of Consulting at 10X Investments , says that more importantly you must choose between preserving your savings or not. “Regrettably, the majority of people cash out, pay unnecessary tax and cause irreparable damage to their retirement lifestyle.”  Veegh says that the sensible option is to transfer your savings, tax-free, to your new employer’s fund, or to a Preservation Fund or Retirement Annuity. “This preserves not just your savings and attached tax benefits, but also keeps your money growing until you do claim.” Given th...

Without a proper retirement savings plan, most South Africans will not be able to sustain their accustomed living standard in retirement. Steven Nathan, CEO of 10X Investments , is particularly concerned about the current generation of people entering the job market. “The Millennial Generation has a different outlook on life, which often manifests in worse savings habits than previous generations. Ideally, people should start saving for retirement from their first pay cheque but few follow this advice.” People may well work longer in the future, but they will still have to retire at some point, so it is important to plan for this, says Nathan. For individuals, a retirement annuity fund is the optimal way to save, as this presents significant tax benefits. For an optimal outcome, he advocates you follow these 4 golden retirement rules: Rule 1: Save 15% of your salary Nathan recommends that all employees save at least 15% of income towards their retirement. “So, for every R100 of your ...

Steven Nathan From 1 March 2016, a number of retirement and tax reforms introduced by National Treasury will take effect. Designed to create a simpler and uniform retirement savings regime, Steven Nathan, CEO of 10X Investments says that the value and purpose of these new laws has not been clearly communicated to the public. Nathan believes this lack of clarity that caused wide spread misperceptions around retirement reforms. Ultimately, it forced Government to postpone the compulsory annuitisation of provident funds at retirement for another two years. “If we don’t tackle these issues now, we’ll be sitting in the same predicament in 2018. It’s important to immediately clarify some of the burning issues related to vested rights, tax deductions on contributions, as well the ability of members to access their fund benefits on resignation or dismissal,” says Nathan. Uniform tax deductions across all types of retirement funds Presently, there are different tax deduction limits on co...