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April 2007
Silke Financial Monitor, Issue 8 |
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Dear "All" Welcome to our monthly Newsletter once again. At Silke Financial Services we pride ourselves on our ability to develop long-term relationships with our clients. We would like to thank and recognise the last twenty years that Mr and Mrs Blignaut have been clients of Silke Financial Services. May we spend as many years with your grandchildren Jesse and Darren. Danie and Anke Blignaut were also seen at our recently held Budget presentation at Allan Grays' new offices. Kenny started offering independent, quality investment and personal financial advice to private investors in 1988. Today, Silke Financial Services has grown to offer the full range of personal financial planning services, with a special focus on sustainable long-term wealth creation. Ken Silke: “Our long-standing relationships with our clients are very important to us and it has always been part of our long-term commitment to ensure clients are well taken care of". Our relationships with our clients has helped Silke Financial Services evolve into an investment house offering:
Kind Regards In this issue
Articles1a Retirement Annuity Explained (RA)– Shane Thom A retirement annuity is an attractive investment vehicle for the build up of retirement savings, mainly because of its versatility and tax efficiency. RAs were introduced to give the self-employed the same tax incentives to save for retirement that members of pension and provident funds enjoy. However, RAs can also be used by people who are members of provident or pension funds. If you have not already contributed the maximum amount on which you enjoy a tax benefit to a retirement fund, contributions to a RA can be tax advantageous. This may also be the case if you earn other income, which is not part of your "pensionable salary". Your pensionable salary is that on which your retirement fund contributions are based, and may exclude allowances, such as those for travel. Here are a couple of reasons to why one should look at a RA as a retirement savings vehicle. Taxation: Tax deductions on RA contributions: Within certain limits, you do not pay tax on the money you contribute to a RA. You defer payment of the tax until you retire and when you are paid the proceeds of the RA. However, in most cases when you retire, your tax rate is lower than when you are working, and so deferring the tax is beneficial. You are entitled to certain tax exemptions on money paid to you at retirement. Maturity and Contribution periods: You cannot draw on, or surrender, a RA until you are 55, unless you are disabled. In other words, 55 is regarded as your earliest retirement date. You can extend the period beyond 55. If you stop paying premiums, the money will remain invested until you are at least 55 years old. Maximum RA contribution period: You can delay your "retirement age" until you are able to get the most beneficial tax rate on your lump sum, that is when your average tax rate is lowest. This is because your "retirement age" in an RA is not necessarily the age at which you stop working. You may not contribute to a RA past the age of 70. Protection from creditors: No-one can claim the money you have invested in a RA. The only time a creditor can lay claim to the money in a RA is when you retire and then only from amounts you are paid, as and when you receive these. For this reason, you cannot borrow against a RA or use it as security for a loan. Remember that SARS may attach your lump sum at retirement if you owe them tax. Control by trustees: A RA fund is the same as any other retirement fund. It must have trustees who set the rules of the fund, ensuring the money in the fund is properly managed and that the benefits are correctly paid out. However, you have no say in the election or appointment of the trustees. Other advantages of a RA:
Useful tips:
Note that if you do require such assurance you will then need to source this separately, but at least you will be clear on what you are paying for. 1b A Stable Fund For All Seasons– Ken Silke In a feature on Investment Options & Derivatives which appeared in the Cape Times on 20 March 2007, an interesting article appeared on a fund which will appeal to persons who are risk-averse and which can weather the storms created by volatile markets. The Allan Gray Stable Fund is a fund which seeks to preserve capital while also producing growth. According to the article, the Fund should ideally achieve these twin objectives in rising, flat and declining market conditions. The Allan Gray Stable Fund has achieved 16.1% per annum since its launch in 2000, against the 7.7% achieved against its benchmark. The Fund's benchmark is the after-tax return on bank deposits plus 2%. According to Director, Mahesh Cooper, the fund's success is due to its portfolio construction. “We use bottom-up stock picking and asset allocation to minimise downside risk while capturing upside turns." Equity selection is managed conservatively, with a particular emphasis on finding shares with limited risk of capital loss, a low correlation to the stock market and high current or prospective dividend yields. The Fund typically has a share exposure of between 20% and 40% at any one time, with a good mix of money market and cash instruments, gold ETFs, bonds and listed property shares and a healthy exposure to foreign assets which acts as a rand-hedge. 1c Are We At The Start Of A Bear Market?– Ken Silke On the whole, SA Fund Managers do not see the recent volatility in markets as the beginning of a bear market. Fund Managers such as Prudential still see the fundamentals supporting the equity market remaining intact. On the other hand Kimon Boyiatjis of hedge fund managers Trident Capital calls for caution stating that there is a lot more volatility ahead and emerging markets will be hit the hardest. Until China's market cracked at the end of February, emerging markets were the darlings of gung-ho investors in developed markets looking for higher returns than in the developed world. Mark Mobius, manager of the $4,9bn Templeton Developing Markets Fund gives sound advice too..." those investors who'd been for a while in emerging markets, it's a good time to take money off the table". Sounds like a casino doesn't it? Many emerging-market investors clearly feel the same. According to US-based firm Emerging Markets Portfolio Funds Research, emerging-markets equity funds experienced a net outflow of $615m in the last week of February. Of this, $205m was out of specialist China unit trusts. SA, however, fared better. Foreigners remained net buyers of SA equity, increasing net portfolio holdings by R4,96bn in the last week of February and by a further R933m in the first week of March. Foreigners now own about 35% of shares listed on the JSE. Let's hope they remain positively inclined towards SA. If not, the consequences could be devastating. Geo-political events, especially in terms of what's happening in Zimbabwe and the Middle East could easily cause foreign investors to quickly disinvest from our market. Our view at Silke Financial Services is also one of caution when investing a lump sum over the medium term. On this basis we still advocate an equity allocation of maximum 25% to 30% in current market conditions. Our Range of ServicesWe offer the following range of services to provide a one–stop service:
Silke Sponsorship Program – Ikwezi Art CentreWe are proud to be the Main Sponsors to the Ikwezi Art Centre situated at the Montebello Design Centre in Newlands, Cape Town.Please feel free to contact Joel Zwane, manager, should you require any further details. Cell: 073 608 9984. Bring this Newsletter to get a 10% discount at the Ikwezi Art Centre. Quote of the Week
Authorised Financial Services Provider FSP No. 12462 Accredited Health Care Broker: BR 3440 |
Editor: Shane Thom, Silke Financial Services FSP No. 12462 · An Authorised Financial Services Provider Copyright © 2007 by Silke Financial Services CC – All Rights Reserved. |
