Congratulations to Bestsure for the Santam Gold Award
in photo above from left Mr Ian Kirk( CEO Santam),Rocco Du Toit / Riaan van Wyk (Bestsure) and Saggy Pillay (Regional Manager Santam)
Friday, November 25, 2011
Wednesday, November 2, 2011
Would you pay more for a restaurant meal than a Will?
It would appear that some South Africans are prepared to pay a couple of hundred rands for a restaurant meal, yet are not happy to pay an expert the equivalent to draft their Will, a vital document that speaks for you when you are gone.
Recent affluent[1] and high net worth[2] market research commissioned by Glacier Fiduciary Services, a division of Glacier by Sanlam, revealed a startling disparity in the public’s understanding of the importance of having a professionally drafted Will. Furthermore, many affluent and high net worth individuals do not recognise the expertise required to draft a Will that you can trust to have the consequences you intend. The necessary area of expertise required to draft a competent Will includes not only estate planning in the narrow sense, but also marriage law and planning, insolvency law and asset protection, the intestate succession rules, the administration of deceased estates, all areas of tax law, trust law, exchange control etc.
Wills are drafted by a wide range of organisations and service providers, including attorneys, banks, accountants and financial advisers. Members of the public should ensure that the person they consult to draft their Will is properly qualified and experienced to do so. One’s Will dictates the manner in which your assets will be divided and your dependants looked after when you are not around to help them or remedy any mistakes or misunderstandings. Accordingly, anyone with dependants or with assets they wish to leave behind, needs to take the process seriously and not simply focus on getting a Will drafted as cheaply as possible, or free for that matter.
The objectives of the Glacier research were to provide detailed information about the current behaviour of its target market of affluent and high net worth (HNW) individuals with regard to Wills, family trusts, offshore trusts and estate planning advice, as well as to explore attitudes towards the concept of “free advice”.
The questions asked about Wills in particular revealed a huge disparity in market perceptions and expectations. Ninety-eight percent of respondents had a Will. However, only 33% overall said their Will was updated in the last year (39% HNW; 28% Affluent); 21% updated it one to two years ago; 21% updated it three to five years ago; and 25% updated it more than six years ago (17% HNW; 32% Affluent). Nominated executors are most commonly relatives (29%) or banks (25%). Attorneys are more commonly used by HNW individuals (22%) than affluent individuals (8%). When asked who drafted their Wills, an alarming 17% said that they had drafted their own Wills or a relative had drafted their Wills. The majority (63%) had Wills drafted by their attorneys or accountants.
The respondents were asked how much they paid for their Wills and how much they would expect to pay today. The fees paid ranged from nothing (44%) to between R15,000 and R20,000 (2%). 15% of respondents paid less than R1,000 and the balance (20%) paid between R1,000 and R15,000. Those who paid less than R1,000 are likely to fall into the category of people who have not updated their Wills for a very long time. The research also revealed a disparity between what people paid, and what they would expect to pay now. As regards what they expected to pay today – only 20% said that they expect a Will to be for free; 18% expected to pay less than R1,000; 8% between R1,000 and R2,500; 28% expect to pay between R2,500 and R5,000; and 12% expect to pay between R5,000 and R15,000.
The glaring difference between clients’ perceptions was highlighted in their answers to the following questions. Firstly, the respondents were asked why they would not expect to pay for a Will.
“I did not pay for my Will as part of the service of a private bank client and the bank will make money out of the estate when they have to wind it all up one day. However, I did expect to pay for it!”
“It is part of the bank service. Banks and all financial institutions make so much money from their clients, the least they can do is to provide a free Will. After all, it takes only one hour to ’cut and paste’ in preparation for Wills.”
“A Will should be part of the service I am being offered either by my private banker or my financial adviser. The cost of the Will should be included in the fees that I pay my private banker or financial adviser every year.”
But when the researchers asked, “How do you feel about people who are willing to pay more for a restaurant meal than a Will?” The response was very different.
“You're being stupid because you are gambling with lots of money. You don't want the family to sit with problems after you die. You get what you pay for. Cheap/free Wills are not worth the paper they are written on.”
“It would then appear as if there is no value perception to the Will. Wills usually need specific tailoring when assets are involved and the various beneficiaries and not just the run of the mill type Will. If it is simple and a standard template type of Will with no effort put into it, then it could be a modest meal. But I think it is foolhardy. I am willing to pay far more for a Will than a meal because I want proper professional advice that I can trust regarding tax consequences, asset details, etc.”
Regardless of whether you are paying R10,000 for your Will or if the cost is included in other fees you are paying to your adviser, just make sure that it is drafted by a properly qualified expert in Will drafting, estate planning and the related tax issues. Furthermore, don’t be misled into thinking that a relatively small estate necessarily requires less Will drafting complexity or is easier to wind up when you pass on, than a large estate. A R3.5 million estate with private company shares, children from two marriages and a usufruct attached to a property would be more complex than a R20 million estate with equities, cash and a house.
Article by Tanya Cohen (FA News)
Recent affluent[1] and high net worth[2] market research commissioned by Glacier Fiduciary Services, a division of Glacier by Sanlam, revealed a startling disparity in the public’s understanding of the importance of having a professionally drafted Will. Furthermore, many affluent and high net worth individuals do not recognise the expertise required to draft a Will that you can trust to have the consequences you intend. The necessary area of expertise required to draft a competent Will includes not only estate planning in the narrow sense, but also marriage law and planning, insolvency law and asset protection, the intestate succession rules, the administration of deceased estates, all areas of tax law, trust law, exchange control etc.
Wills are drafted by a wide range of organisations and service providers, including attorneys, banks, accountants and financial advisers. Members of the public should ensure that the person they consult to draft their Will is properly qualified and experienced to do so. One’s Will dictates the manner in which your assets will be divided and your dependants looked after when you are not around to help them or remedy any mistakes or misunderstandings. Accordingly, anyone with dependants or with assets they wish to leave behind, needs to take the process seriously and not simply focus on getting a Will drafted as cheaply as possible, or free for that matter.
The objectives of the Glacier research were to provide detailed information about the current behaviour of its target market of affluent and high net worth (HNW) individuals with regard to Wills, family trusts, offshore trusts and estate planning advice, as well as to explore attitudes towards the concept of “free advice”.
The questions asked about Wills in particular revealed a huge disparity in market perceptions and expectations. Ninety-eight percent of respondents had a Will. However, only 33% overall said their Will was updated in the last year (39% HNW; 28% Affluent); 21% updated it one to two years ago; 21% updated it three to five years ago; and 25% updated it more than six years ago (17% HNW; 32% Affluent). Nominated executors are most commonly relatives (29%) or banks (25%). Attorneys are more commonly used by HNW individuals (22%) than affluent individuals (8%). When asked who drafted their Wills, an alarming 17% said that they had drafted their own Wills or a relative had drafted their Wills. The majority (63%) had Wills drafted by their attorneys or accountants.
The respondents were asked how much they paid for their Wills and how much they would expect to pay today. The fees paid ranged from nothing (44%) to between R15,000 and R20,000 (2%). 15% of respondents paid less than R1,000 and the balance (20%) paid between R1,000 and R15,000. Those who paid less than R1,000 are likely to fall into the category of people who have not updated their Wills for a very long time. The research also revealed a disparity between what people paid, and what they would expect to pay now. As regards what they expected to pay today – only 20% said that they expect a Will to be for free; 18% expected to pay less than R1,000; 8% between R1,000 and R2,500; 28% expect to pay between R2,500 and R5,000; and 12% expect to pay between R5,000 and R15,000.
The glaring difference between clients’ perceptions was highlighted in their answers to the following questions. Firstly, the respondents were asked why they would not expect to pay for a Will.
“I did not pay for my Will as part of the service of a private bank client and the bank will make money out of the estate when they have to wind it all up one day. However, I did expect to pay for it!”
“It is part of the bank service. Banks and all financial institutions make so much money from their clients, the least they can do is to provide a free Will. After all, it takes only one hour to ’cut and paste’ in preparation for Wills.”
“A Will should be part of the service I am being offered either by my private banker or my financial adviser. The cost of the Will should be included in the fees that I pay my private banker or financial adviser every year.”
But when the researchers asked, “How do you feel about people who are willing to pay more for a restaurant meal than a Will?” The response was very different.
“You're being stupid because you are gambling with lots of money. You don't want the family to sit with problems after you die. You get what you pay for. Cheap/free Wills are not worth the paper they are written on.”
“It would then appear as if there is no value perception to the Will. Wills usually need specific tailoring when assets are involved and the various beneficiaries and not just the run of the mill type Will. If it is simple and a standard template type of Will with no effort put into it, then it could be a modest meal. But I think it is foolhardy. I am willing to pay far more for a Will than a meal because I want proper professional advice that I can trust regarding tax consequences, asset details, etc.”
Regardless of whether you are paying R10,000 for your Will or if the cost is included in other fees you are paying to your adviser, just make sure that it is drafted by a properly qualified expert in Will drafting, estate planning and the related tax issues. Furthermore, don’t be misled into thinking that a relatively small estate necessarily requires less Will drafting complexity or is easier to wind up when you pass on, than a large estate. A R3.5 million estate with private company shares, children from two marriages and a usufruct attached to a property would be more complex than a R20 million estate with equities, cash and a house.
Article by Tanya Cohen (FA News)
Please click here should you need assistance with your will.
Security hints for this festive season
If you are thinking of going on holiday this festive season, please ensure that the following security measures are in place:
1 Make sure your alarm system is still in a working condition.
2 Press your panic button to test if your alarm system sends a message to the control room.
3 Please note that the battery of your alarm sytem has a normal lifespan of 24 months. Should your battery not have been replaced in the last 24 months, please call the technical division.
Perimeter protection:
These days, having an alarm system may not be enough. Please invest in perimeter protection such as an electric fence, beams and outdoor passives. Stop the criminal before he gets onto your property.
General security tips:
Have an automatic light switch installed, which will activate certain lights at night and switch off during the day time.
Have your post collected, if delivered at home, and stop all newspaper subscriptions.
If possible, have someone visit your premises frequently, to check if everything is still in order.
Ensure that your security company has all your contact details, in case of an emergency.
Once you have checked all of the above, enjoy your holiday and please remember to buckle up.
PLEASE CLICK HERE ON ALL YOUR SECURITY NEEDS
1 Make sure your alarm system is still in a working condition.
2 Press your panic button to test if your alarm system sends a message to the control room.
3 Please note that the battery of your alarm sytem has a normal lifespan of 24 months. Should your battery not have been replaced in the last 24 months, please call the technical division.
These days, having an alarm system may not be enough. Please invest in perimeter protection such as an electric fence, beams and outdoor passives. Stop the criminal before he gets onto your property.
General security tips:
Have an automatic light switch installed, which will activate certain lights at night and switch off during the day time.
Have your post collected, if delivered at home, and stop all newspaper subscriptions.
If possible, have someone visit your premises frequently, to check if everything is still in order.
Ensure that your security company has all your contact details, in case of an emergency.
Once you have checked all of the above, enjoy your holiday and please remember to buckle up.
PLEASE CLICK HERE ON ALL YOUR SECURITY NEEDS
Defective design or construction can cause claims rejection
Herewith an article courtesy of FA News and Abrie Janse van Rensburg, Manager, Claims, Alexander Forbes Insurance.
Homeowners should not confuse an insurance contract with a guarantee or warranty. If there is a defect in the design of your home or it is poorly constructed, or both, your insurance claims may be rejected.
"Insurance is there to protect people against any sudden and unforeseen events. It is not a contract to pay for maintenance work on your home, or to fix damage resulting from defective design, materials or workmanship" says Abrie Janse van Rensburg, Manager, Claims Alexander Forbes Insurance.
Upon receiving a claim it is standard procedure for insurers to investigate the cause. If poor workmanship, defective construction, or defective design is identified as a significant factor in causing the damage, the claim may well be rejected.
For example, if your boundary wall was defectively built your insurer will be entitled to reject the claim. This would remain the case even if the event that destroyed the wall was sudden and unforeseen. So, "regardless of whether a freak storm or flood destroyed the wall, if it was poorly designed or built, the insurer would be unlikely to pay out" cautions Janse van Rensburg.
Common causes of claims rejection that Janse van Rensburg encounters on a daily basis include:
- Tiles lifting due to poor adhesive
- Tiles cracking due to insufficient spacing preventing normal contraction and expansion
- Houses built against slopes without underpinning or adequate compaction supporting the foundation, allowing movement and causing cracks.
- Retaining or boundary walls not built to regulation, for example single course brick walls built higher than 1.8m without either supporting piers, weep holes, brick force or adequate foundations
- Inadequate roof pitch preventing water flowing freely off the roof. Water pooling on the roofs will penetrate buildings causing damage.
- Ceilings without brandering, or inadequately spaced roof supports, will sag and collapse
- Poorly damp proofed foundations allow rising damp to gradually penetrate the building
So, if you are buying a home, make sure that you have it thoroughly inspected. You need to know if any one of the structures are not built to regulation and what it will cost you to remedy the problem.
"To avoid claims being rejected at a later state, you safest course is to check first before you buy, and if you are going to do alterations, use approved providers from the outset" advises Janse van Rensburg.
If you already own a home but are uncertain about whether the building was built in accordance with national building regulations, you can still appoint a qualified professional to check.
"It is better to know and remedy your risks upfront before damage becomes a problem, or you try to off-set damages on your insurer" warns Janse van Rensburg.
Even though building regulations have been in force for about 60 years, structures like boundary and retaining walls are still routinely built without compliance.
As such it is important that homeowners ensure that the contractors they appoint to carry out maintenance or construction work are properly qualified, have the necessary certificates and come highly recommended.
Moreover, consumers themselves should look out for any design or construction short comings, no matter how small or unseemingly unimportant, and report these to their insurer.
Certainly, "it won't help to keep quiet about these problems in the hope that when damage occurs your insurer will just pay up" concludes Janse van Rensburg.
For a quote or advise on your sectional title insurance please click here
Insurance implications of unpredictable weather conditions
The recent spate of unexpected tornados that have swept through South Africa have wreaked havoc across the country, leaving hundreds of residents in Gauteng and the Free State homeless, seriously injured or mourning the loss of loved ones.
According to Christelle Fourie, Managing Director of MUA Insurance Acceptances, while the full extent of the damage from the tornadoes is still unknown many homeowners may be under the most pressure as they had either no, or inadequate, insurance in place.
“The severe level of underinsurance and lack of insurance in many instances in South Africa is worrisome. The government may provide financial assistance to those who have suffered loss from the unpredictable storm; however, it is unlikely to fully cover the total cost of the damage caused to homes.”
Fourie says that for those consumers who did not have home insurance policies in place, they could be looking at severe financial repercussions in order to restore their homes to its original liveable condition.
“As a rule of thumb, we are very fortunate in South Africa as property insurance policies tend to be fairly comprehensive in nature. As a result, most policies will automatically cover the damage caused by unforeseen weather conditions, so there is no need to take out specific cover against damage caused by storms such as tornadoes.”
“For example, if one looks at Mozambique, a country that experiences frequent tropical storms, the premium charged to cover against damage from weather conditions is far more expensive than in South Africa and cover against storms of this nature is usually excluded.”
Fourie says if South Africa were to see an increase in these types of destructive storms the overall risk exposure for the country would increase and could potentially result in the requirement for a specific cover against damage caused by severe weather conditions or a possible increase in property insurance premiums.
“One factor that does play a role in determining property insurance premiums, however, is the type of material used to construct the building. For example, buildings that incorporate wood or thatch are far more expensive to repair, which will mean higher premiums compared to a traditional brick house.’
“Those consumers who currently do not have property insurance policies in place should take this matter seriously and speak to a financial advisor immediately about the options most suitable for them. These types of storms could become more frequent in South Africa as weather conditions all over the world have become increasingly erratic and unpredictable,” concludes Fourie.
Article by Christelle Fourie (FA News)
According to Christelle Fourie, Managing Director of MUA Insurance Acceptances, while the full extent of the damage from the tornadoes is still unknown many homeowners may be under the most pressure as they had either no, or inadequate, insurance in place.
“The severe level of underinsurance and lack of insurance in many instances in South Africa is worrisome. The government may provide financial assistance to those who have suffered loss from the unpredictable storm; however, it is unlikely to fully cover the total cost of the damage caused to homes.”
Fourie says that for those consumers who did not have home insurance policies in place, they could be looking at severe financial repercussions in order to restore their homes to its original liveable condition.
“As a rule of thumb, we are very fortunate in South Africa as property insurance policies tend to be fairly comprehensive in nature. As a result, most policies will automatically cover the damage caused by unforeseen weather conditions, so there is no need to take out specific cover against damage caused by storms such as tornadoes.”
“For example, if one looks at Mozambique, a country that experiences frequent tropical storms, the premium charged to cover against damage from weather conditions is far more expensive than in South Africa and cover against storms of this nature is usually excluded.”
Fourie says if South Africa were to see an increase in these types of destructive storms the overall risk exposure for the country would increase and could potentially result in the requirement for a specific cover against damage caused by severe weather conditions or a possible increase in property insurance premiums.
“One factor that does play a role in determining property insurance premiums, however, is the type of material used to construct the building. For example, buildings that incorporate wood or thatch are far more expensive to repair, which will mean higher premiums compared to a traditional brick house.’
“Those consumers who currently do not have property insurance policies in place should take this matter seriously and speak to a financial advisor immediately about the options most suitable for them. These types of storms could become more frequent in South Africa as weather conditions all over the world have become increasingly erratic and unpredictable,” concludes Fourie.
Article by Christelle Fourie (FA News)
Are you correctly insured? Let Bestsure assist you
For a competitive quote on your motor and household or business insurance please click here
Wednesday, August 18, 2010
Repair Damaged Ceiling Onus on Body Corporate or Owner
By Donovan Schreuder on Mon, 16 Aug 2010 at 14:57
Hi.
My wife and I have been living overseas and returned to SA in July 2010.
My wife owns a flat and there was damage to the roof in December 2009. A special levy was paid in respect of the repairs needed to the roof. On returning we inspected the flat and noted there was water damage to the ceiling, which was caused as a result of the damage to the roof. We spoke to the chairlady of the BC, whose unit is adjacent to ours and she stated that she and our neighbour had had the repairs covered by the BC's insurance policy and that we needed to get a quote and submit it to the BC. We actioned this and upon submitting this the BC has stated that we need to pay in full for the repairs as they have now changed insurers and the tenant should have made them aware of the need for repair.
Now, I do not believe that it is fair for the two units on either side of ours (who are owned by members of the BC) to be repaired and for ours not to be. The tenant is a young African lady and would not have been aware of what to do, the BC was in full knowledge that we were not located in SA and never mentioned any issues in other correspondence with us regarding damage to any units in respect of the damaged roof.
Am I mistaken? I would appreciate any advice in this respect.
Replies
Mike Addison replied on Tue, 17 Aug 2010 at 08:02
Hi Donavan
It would seem that the insurer at the time agreed to pay for resulting damage (will have to have been sudden damage/one event). Since the roof damage is being paid by way of special levy, it can be assumed that the roof needed maintenance repair ie lack of maintenance was probably the actual cause of the damage.
It is reasonable that the insurer cannot be expected to pick up a tab months down the line, no matter who the insurer is, old or new. I feel that the owner should take responsibility for damage ie any damage for an insurance claim (usually a condition of the policy) must be reported within 30 days and if tenanted, I feel that the owner or his/her agent should regularly inspect the premises or alternatively, hold their tenant responsible.
If there was damage, and reported immediately, and the insurer would not pay for reasons of say it being maintenance related, then you would look to the body corporate to reimburse you if your loss is result of the bcorps negligence in not keeping the roof in a good state of repair. (Also debatable - lets leave that argument for the legal experts).
In your case, I think 8 months after the event might be pushing it ie can you reasobaly expect the bcorp to come to the party when the damage was not reported within a reasobale time? My view is that 30 days or so is a reasonable time, especially if tenanted.
This is purely my opinion and not directly an insurance question, however, this sort of scenario is so common - we deal with these matters / debates almost daily.
Mike Addison
Please contact Willie van Wyk on 0861101220 for any advice and quotes on Sectional Title Insurance or visit our website on www.bestsure.co.za
Monday, August 16, 2010
Retirement will cost you lots - survey
The cost of retirement is far greater than most pensioners believed at retirement it would be. Only 40 percent of pensioners now believe they saved enough for retirement.
But the message is getting through to retirement fund members - 75 percent of active members now believe they need to start saving for retirement at age 20, although 19.4 percent are of the opinion that it can be left until age 30.
However, only half of active members say they are on track for a financially secure retirement.
These are two findings of the Sanlam Employee Benefits Benchmark annual retirement survey.
For the 2010 survey Sanlam included extensive research on the attitudes and experience of both active retirement fund members and pensioners.
The pensioners surveyed have a message for those people still saving for retirement: you must start checking whether you are saving enough money for retirement more than 20 years before you retire.
Even those pensioners who believe they saved enough are worried that their money may run out if they are in retirement for an extended period because of increased longevity.
About 30 percent of the surveyed pensioners, whose average age was 67, indicated that they are already experiencing financial difficulties and are being forced to cut back on non-essential items.
Almost 75 percent of the pensioners get a pension of less than R10 000 a month. Against this, the average amount active members who were surveyed earn now is R15 449 a month.
The survey confirms earlier research by Alexander Forbes, which showed that retirement fund members are going into retirement without having saved for long enough and are compounding the effects of their lack of savings by retiring too early. And most pensioners find they have not taken sufficient account of the costs of retirement, particularly medical expenses.
Of the 250 pensioners surveyed, the average period of contributing to a retirement fund (an occupational fund or a retirement annuity) was 26.6 years.
The average age of retirement was 59, with almost 60 percent having no choice about retiring early because of retrenchment or disability. Consequently, their pensions are lower than expected.
Most active members expect to have retired by the age of 61.
Other facts revealed by the pensioner survey include:
• The vast majority say if they could have done anything differently before retiring it would have been to plan better and save more;
• More than half the pensioners believe you have to save a capital amount for retirement in excess of 10 times your final annual income.
• In worst-case scenarios, 12.1 percent of the pensioners forced into early retirement say that early retirement had "huge financial implications" for them, with 16 percent depending on others for additional income, 3.4 percent having to sell their homes and 5.2 percent having to give up their medical scheme membership;
• Almost six percent of the pensioners live with relatives;
• Many pensioners go into retirement having to use lump sum payments from their retirement savings or other savings to pay off debt, and almost six percent continue to pay off a home loan;
• About 35 percent of the pensioners had to cut back on spending because of the economic recession;
• About 54 percent of the pensioners have other investments apart from their pensions;
• Of the surveyed pensioners, 16.4 percent changed jobs at some stage, and of these 44 percent cashed in their retirement savings, leaving them worse off in retirement;
• More than 40 percent of the pensioners received pre-retirement advice from employers;
• Of those who received financial advice before retiring, 71 percent received advice based on a financial analysis, with the vast majority then understanding their needs in retirement;
• Most pensioners spent lump-sum payments received at retirement within 30 months; and
• There are 27 percent of pensioners who still manage to save money every month.
Risk cover vs savings
There is a slow increase in the number of retirement funds offering flexible death and disability benefit life assurance options.
This is despite the fact that the combined retirement savings and death benefits of most young retirement fund members will not be adequate to meet the financial requirements of their dependants without the member taking out additional individual risk policies.
The Sanlam survey has found that the level of death benefits has slowly increased, from 3.2 times your annual pensionable salary in 2006 to 3.6 times this year.
The majority of retirement fund members (67.1 percent) say risk benefits are equally as important to them as retirement savings.
Of those funds that allow you to decide how much life assurance you require (reducing the amount that goes to retirement savings), the compulsory average minimum benefit is down to 2.3 times annual salary from 2.5 times last year.
Members who do have this choice have chosen a level of 3.7 times annual salary on average - down from 4.7 times last year.
The average cover for a lump-sum disability benefit is down to 2.6 times annual salary from 2.7 times last year.
The number of funds with capped premiums for death benefits, reducing the benefit, has dropped from 45 percent in 2008 to 33 percent this year.
Funeral assurance is now offered by 62 percent of funds, up from 50 percent in 2006.
You might be paying for choice, even if you're not using it
You are probably paying more in investment costs than you need to because of the investment choices occupational retirement funds offer.
The Sanlam survey has found that 55 percent of funds now offer members investment choice - up from 45 percent in 2006.
But 65 percent of members do not make active decisions themselves. They rely on a default choice offered by most funds or the choice is made on their behalf by retirement fund trustees.
Only 25 percent of members of large retirement funds - those with 5 000 members or more - take advantage of investment choice.
But 88 percent of funds that offer investment choice charge all members a flat fee for the right to choose. So members not exercising their choice are subsidising those who do.
About nine percent of funds surveyed limit investment choice to certain categories of members, who are considered better equipped to deal with the choice.
The majority of funds that offer choice normally have a range of four or five options, and only 6.4 percent of surveyed funds offer more than 10 options. Only one fund offered a complete fruit salad of almost unlimited choice through a linked investment product services platform.
The number of funds offering a sharia-compliant portfolio has increased from 17.3 percent last year to 23.6 percent this year.
The number of funds which deliberately invest money in socially responsible investments (SRI) has increased from 16.5 percent in 2008 to 17.5 percent. An average of 9.3 percent of the total assets of these retirement funds are earmarked for SRI.
The survey also reveals there is a trend to allow retirement fund members to switch investment options more often. This year, 34.5 percent of funds allow daily switching, which is more than double the figure of two years ago, while 22.7 percent of funds allow monthly switching. A once-a-year restriction is down to 28.2 percent of funds - from 31.9 percent in 2006.
The top investment choice for members is in what are called lifestage portfolios. These are portfolios that gradually decrease the proportion of assets held in equities to reduce volatility risk (the risk that markets could crash shortly before your retirement).
The next most popular choice (47 percent) is smoothed bonus portfolios, which guarantee all or part of your capital and smooth returns over good and bad years.
According to the survey, the lifestage portfolios are becoming more sophisticated. A few years ago these portfolios moved everyone into the same asset class mix at the end stage. The survey has established that 43 percent of lifestage funds now offer multiple end-stage profiles, with the profile being aligned to the type of annuity you will purchase.
For example, if you intend to purchase a guaranteed annuity (pension) - where a life assurance company takes the risk of paying you a pension for life - the end stage of your lifestage portfolio will have a lower amount invested in riskier equities than the end stage if you intend to purchase an investment-linked living annuity (illa),
With an illa you choose the underlying investments and take the risk that you will have a sustainable pension for the rest of your life.
Currently, 59 percent of people reaching retirement prefer illas.
Most lifestage portfolios (39 percent) are 100 percent in cash by the time your retire, and a further 30 percent have a conservative 30 percent of assets in equities.
• The Sanlam survey comprises four separate studies, which this year involved getting the opinions of 200 retirement fund principal officers, 100 participating employers of umbrella retirement funds, 750 active fund members and 250 pensioners. It involved 200 stand-alone retirement funds and all nine major umbrella funds offered by the financial services industry. The survey is conducted annually.
But the message is getting through to retirement fund members - 75 percent of active members now believe they need to start saving for retirement at age 20, although 19.4 percent are of the opinion that it can be left until age 30.
However, only half of active members say they are on track for a financially secure retirement.
These are two findings of the Sanlam Employee Benefits Benchmark annual retirement survey.
For the 2010 survey Sanlam included extensive research on the attitudes and experience of both active retirement fund members and pensioners.
The pensioners surveyed have a message for those people still saving for retirement: you must start checking whether you are saving enough money for retirement more than 20 years before you retire.
Even those pensioners who believe they saved enough are worried that their money may run out if they are in retirement for an extended period because of increased longevity.
About 30 percent of the surveyed pensioners, whose average age was 67, indicated that they are already experiencing financial difficulties and are being forced to cut back on non-essential items.
Almost 75 percent of the pensioners get a pension of less than R10 000 a month. Against this, the average amount active members who were surveyed earn now is R15 449 a month.
The survey confirms earlier research by Alexander Forbes, which showed that retirement fund members are going into retirement without having saved for long enough and are compounding the effects of their lack of savings by retiring too early. And most pensioners find they have not taken sufficient account of the costs of retirement, particularly medical expenses.
Of the 250 pensioners surveyed, the average period of contributing to a retirement fund (an occupational fund or a retirement annuity) was 26.6 years.
The average age of retirement was 59, with almost 60 percent having no choice about retiring early because of retrenchment or disability. Consequently, their pensions are lower than expected.
Most active members expect to have retired by the age of 61.
Other facts revealed by the pensioner survey include:
• The vast majority say if they could have done anything differently before retiring it would have been to plan better and save more;
• More than half the pensioners believe you have to save a capital amount for retirement in excess of 10 times your final annual income.
• In worst-case scenarios, 12.1 percent of the pensioners forced into early retirement say that early retirement had "huge financial implications" for them, with 16 percent depending on others for additional income, 3.4 percent having to sell their homes and 5.2 percent having to give up their medical scheme membership;
• Almost six percent of the pensioners live with relatives;
• Many pensioners go into retirement having to use lump sum payments from their retirement savings or other savings to pay off debt, and almost six percent continue to pay off a home loan;
• About 35 percent of the pensioners had to cut back on spending because of the economic recession;
• About 54 percent of the pensioners have other investments apart from their pensions;
• Of the surveyed pensioners, 16.4 percent changed jobs at some stage, and of these 44 percent cashed in their retirement savings, leaving them worse off in retirement;
• More than 40 percent of the pensioners received pre-retirement advice from employers;
• Of those who received financial advice before retiring, 71 percent received advice based on a financial analysis, with the vast majority then understanding their needs in retirement;
• Most pensioners spent lump-sum payments received at retirement within 30 months; and
• There are 27 percent of pensioners who still manage to save money every month.
Risk cover vs savings
There is a slow increase in the number of retirement funds offering flexible death and disability benefit life assurance options.
This is despite the fact that the combined retirement savings and death benefits of most young retirement fund members will not be adequate to meet the financial requirements of their dependants without the member taking out additional individual risk policies.
The Sanlam survey has found that the level of death benefits has slowly increased, from 3.2 times your annual pensionable salary in 2006 to 3.6 times this year.
The majority of retirement fund members (67.1 percent) say risk benefits are equally as important to them as retirement savings.
Of those funds that allow you to decide how much life assurance you require (reducing the amount that goes to retirement savings), the compulsory average minimum benefit is down to 2.3 times annual salary from 2.5 times last year.
Members who do have this choice have chosen a level of 3.7 times annual salary on average - down from 4.7 times last year.
The average cover for a lump-sum disability benefit is down to 2.6 times annual salary from 2.7 times last year.
The number of funds with capped premiums for death benefits, reducing the benefit, has dropped from 45 percent in 2008 to 33 percent this year.
Funeral assurance is now offered by 62 percent of funds, up from 50 percent in 2006.
You might be paying for choice, even if you're not using it
You are probably paying more in investment costs than you need to because of the investment choices occupational retirement funds offer.
The Sanlam survey has found that 55 percent of funds now offer members investment choice - up from 45 percent in 2006.
But 65 percent of members do not make active decisions themselves. They rely on a default choice offered by most funds or the choice is made on their behalf by retirement fund trustees.
Only 25 percent of members of large retirement funds - those with 5 000 members or more - take advantage of investment choice.
But 88 percent of funds that offer investment choice charge all members a flat fee for the right to choose. So members not exercising their choice are subsidising those who do.
About nine percent of funds surveyed limit investment choice to certain categories of members, who are considered better equipped to deal with the choice.
The majority of funds that offer choice normally have a range of four or five options, and only 6.4 percent of surveyed funds offer more than 10 options. Only one fund offered a complete fruit salad of almost unlimited choice through a linked investment product services platform.
The number of funds offering a sharia-compliant portfolio has increased from 17.3 percent last year to 23.6 percent this year.
The number of funds which deliberately invest money in socially responsible investments (SRI) has increased from 16.5 percent in 2008 to 17.5 percent. An average of 9.3 percent of the total assets of these retirement funds are earmarked for SRI.
The survey also reveals there is a trend to allow retirement fund members to switch investment options more often. This year, 34.5 percent of funds allow daily switching, which is more than double the figure of two years ago, while 22.7 percent of funds allow monthly switching. A once-a-year restriction is down to 28.2 percent of funds - from 31.9 percent in 2006.
The top investment choice for members is in what are called lifestage portfolios. These are portfolios that gradually decrease the proportion of assets held in equities to reduce volatility risk (the risk that markets could crash shortly before your retirement).
The next most popular choice (47 percent) is smoothed bonus portfolios, which guarantee all or part of your capital and smooth returns over good and bad years.
According to the survey, the lifestage portfolios are becoming more sophisticated. A few years ago these portfolios moved everyone into the same asset class mix at the end stage. The survey has established that 43 percent of lifestage funds now offer multiple end-stage profiles, with the profile being aligned to the type of annuity you will purchase.
For example, if you intend to purchase a guaranteed annuity (pension) - where a life assurance company takes the risk of paying you a pension for life - the end stage of your lifestage portfolio will have a lower amount invested in riskier equities than the end stage if you intend to purchase an investment-linked living annuity (illa),
With an illa you choose the underlying investments and take the risk that you will have a sustainable pension for the rest of your life.
Currently, 59 percent of people reaching retirement prefer illas.
Most lifestage portfolios (39 percent) are 100 percent in cash by the time your retire, and a further 30 percent have a conservative 30 percent of assets in equities.
• The Sanlam survey comprises four separate studies, which this year involved getting the opinions of 200 retirement fund principal officers, 100 participating employers of umbrella retirement funds, 750 active fund members and 250 pensioners. It involved 200 stand-alone retirement funds and all nine major umbrella funds offered by the financial services industry. The survey is conducted annually.
Please contact Jooste Henning at Bestsure on 0861 10 12 20 for great retirement planning.
Editor : Bruce Cameron
Subscribe to:
Posts (Atom)