supercharge your annual salary increase! · supercharge your annual salary increase! update from...
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Supercharge your annual salary increase!
Update from the Principal Officer
MEMBER NEWSLETTERJuly 2014
It is that time of the year when your employer talks to you about a salary increase. This is an exciting time for all, as even the smallest increase prompts thinking of the possibilities of what to do with the extra cash you will have.
Dear members
In keeping with our aim to help you
plan for a comfortable retirement,
this quarter’s newsletter themed
“Supercharge your annual salary
increase” will provide you with some
tips on achieving the retirement of
your dreams. This year has seen
some exciting developments, with
Government proposing many
changes – all aimed at improving the
retirement fund industry – which will
ultimately benefit you.
This edition of The NestEgg also
covers the latest industry and
regulatory developments as well as
the Fund’s investment performance
for the first quarter of 2014.
Be sure to look out for all Fund
communication in the months ahead.
Fund regards
Lynn van der Merwe
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By all means, reward yourself for your hard work by spending a small portion of this extra money on things you enjoy, but do try to save a portion of your increase as well.
However, if you have been getting by okay, then it would be far wiser to continue living as if you’re still earning the same salary (as before your increase) and to supercharge the additional money by contributing more towards your retirement fund.
Since you are only allowed to increase your contribution rate at the start of each year when you restructure your salary package, we thought we’d let you know that you can also bump up your retirement savings by making “Additional Voluntary Contributions” (also referred to as AVCs).
Did you know?
• Thereisno limit to this AVC amount.
• Intermsofcurrenttaxlaws,R150permonth(R1800peryear)willbetax
deductible.
• Youhavetheflexibility to save as much as you choose and this will be deducted
directly from your monthly salary via the payroll.
• Thereareno costs deducted from this amount. The full amount is allocated
directly to your fund credit.
• Itisinvestedinthesame investment portfolio as your monthly retirement
savings contributions.
• Lastly,youareabletostop this deduction at any time.
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Supercharge your annual salary increase!
Investing just a little bit extra each month could have a massive impact
on the level of income you can expect in retirement
Thismeansthatyouaresavinginacost-effectivewayand,becauseyouareinvestingintheMedia24RetirementFund,youareinvestingindirectlywithAllanGray,Coronation,Foord,Investec,SanlamandOldMutual.Inaddition,youwillbetakingadvantageoftheinstitutional fees that apply to investments, instead of the far higher fees which are related to retail products (e.g. unit trusts, retirement annuities etc.).
Forsome,retirementmaybemanyyearsaway,butinvestingjustalittlebitextraeachmonthcouldhaveamassiveimpactonthelevelof income you can expect in retirement, due to the power of compound growth (i.e. earning interest on interest).
Formoreinformationonincreasingyourretirementfundcontributions,pleasevisittheFund’swebsitebyclickinghere. The website also offers various tools, including the “RetirementProvisionCalculator”, which can help you see how much you need to save on a monthly basis towards your retirement.
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INDUSTRY UPDATE ONRETIREMENTREFORM
Overthelastfewyears,Governmenthasbeenstudyingandrevisingthelawswhichimpact
the retirement fund industry. These retirement reforms are widespread and aim to ensure that
yousaveenoughforretirementandthatyoursavingsareprotected.Youwillrememberthat
theMinisterofFinanceannouncedproposalsinthe2013BudgetSpeechthatwereaimedat
improving the industry.
AsastartsomeoftheseproposalswereacceptedandtheTaxationLawsAmendment
Act,2013,wassignedintolawon12December2013.Thesechangeswillbeeffectivefrom1
March2015(referredtoas“T-Day”)andwillbringaboutkeychangestothetaxtreatment
of retirement fund contributions and benefits. We will discuss this in great detail in the next
editionofTheNestEgg.
In this edition, we share with you the areas which were identified, in a set of discussion papers
issuedbyNationalTreasuryon14March2014,asprioritiesforimprovingtheretirementfund
industry as follows:
• Introducing a compulsory retirement savings system.
• Improving preservation of retirement savings so that members do not withdraw cash lump sums from their retirement funds every
time they change jobs.
• Improving fund disclosure of charges that apply to financial services products such as retirement funds in South Africa. Currently, there
is no definite fee disclosure policy for retirement funds.
• Implementing fund defaults so that funds use their size and bargaining power to negotiate better terms giving individuals easy access
to financial services and products (such as pensions or annuities at retirement) instead of individuals having to purchase financial
products without help in the retail market. This is aimed at helping members make sufficient provision for retirement in a cost-effective
way.
• Consolidating and standardising the structure, investment and benefit offerings of retirement funds to increase effectiveness and
economies of scale, and to ensure that these benefits are passed on to members.
• Simplifying retirement savings products and making it is easier for members to move from one product or service provider to
another. Simpler products will lead to more similarity or standardisation making it easier for members to understand, and will increase
market competition while reducing costs.
• Ensuring effective financial advisory services so that brokers / financial advisors are paid in a way that does not create conflicts
between their own interests and their duties to their customers.
• Providing tougher regulation of market conduct and more effective supervision in order to protect members and to improve market
conductpractices(basedonimportantlessonslearntfromthe2008globalfinancialcrisis).
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FUND CONTACT DETAILSTel 021 406 3326 | Fax 086 721 3447 | Email [email protected] http://yourfund.co.za/media24
REGULATORY UPDATE
After a long process the Financial Services Laws General Amendment Act, 2013 was signed into law on 16 January 2014 and brought about the following changes:
Fund operations
The non-payment of a member’s retirement fund contributions by an employer is now a criminal offence. The responsible person/s as well as the directors and others with direct involvement may be held personally responsible to face a fine of up to R10millionand/orimprisonmentforupto10years.Retirementfundsarerequiredto confirm the names of the responsible persons at the employer.
Benefits paid
Members’ or beneficiaries’ benefits may be paid to a third party if they prove that they are unable to open a bank account.
Thetaxrequiredtobedeductedorwithheldfromamember’sbenefitmaybededucted by the retirement fund from the member’s benefit.
Divorce orders
Retirementfundsneedtoaddinvestmentgrowthonadivorceclaimpayabletotheex-spouseofthememberfrom120daysaftertheex-spouserequestedpaymentofthe benefit.
Payment to an ex-spouse of a member is also allowed in terms of a court order in respect of the division of assets of an Islamic marriage.
A benefit older than 24 months that is not claimed by the ex-spouse of the member may be treated as an unclaimed benefit. (Similarly, a death benefit not paid to a beneficiary within 24 months may be treated as an unclaimed benefit.)
Trustees and fund management
Trustees, administrators, valuators, auditors and principal officers must inform the Registraronbecomingawareofanymatterthatcouldhaveamajornegativeeffecton the fund or members.
Registrar
The registrar, who is responsible for the regulation of retirement funds, has been given greater powers of inspection and investigation relating to retirement funds.
The Consumer Protection Act
Witheffectfrom28February2014,the
Consumer Protection Act does not apply to
mattersregulatedbytheFinancialServices
Board. It will not apply to registered retirement
fundsliketheMedia24RetirementFund.
The Protection of Personal Information Act
(PoPI)
TheProtectionofPersonalInformationAct,No.
4of2013,wasfinallygazettedon26November
2013butwillonlycomeintooperationona
date still to be determined by the President.
There will be a transitional period of one year
from the commencement date. Thereafter, the
processing of personal information will have to
conform to the Act.
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HISTORICAL PERFORMANCE OF THE FUND
INVESTMENT PERFORMANCE REPORT QUARTER2OF2014
PERFORMANCE SUMMARY AS AT 30 JUNE 2014
PORTFOLIO / INDEX
QUARTER YTD 1 YEAR 3 YEAR 5 YEAR DEC 2000
Growth 5.36% 9.90% 25.43% 17.17% 16.29% 15.63%
Balanced 4.71% 8.32% 19.72% 14.45% 13.69% 12.63%
Stable 3.50% 5.58% 12.17% 10.72% 10.10% 9.35%
Money Market
1.46% 2.79% 5.54% 5.54% 6.15% 7.64%
CPI 0.74% 3.89% 6.41% 5.82% 5.35% 5.88%
Click on the links below to access the following additional information:
InvestmentManagers’Outlook and Strategy Update
Website Investment Page
GlobalmarketsimprovedinJuneastheMSCIWorldIndexrose1.8%inUSdollarterms.Emergingmarketsoutperformeddevelopedmarketsbyclimbing2.7%inJuneand6.7%forthequarterindollarterms,asmeasuredbytheMSCIEmergingMarketsIndex.ThedownwardadjustmentoftheUSgrossdomesticproduct(GDP)suggestedthattheireconomyhasshrunk,even though the rate of unemployment decreased and inflation remained under control, whichallowedforUSFederalReserveBanktapering(reductioninbondpurchasesaimedatimproving the conditions for economic growth) to continue. In Europe, low inflation and the threat of deflation remain a concern.
South Africa finds itself in a stagflation environment, experiencing low growth and rising inflation,withinterestratesnearinghistoriclows.Nonetheless,thelocalmarket’sstrongperformance shows that many of South Africa’s largest companies’ earnings are driven by offshore developments, indicating a global economic recovery. The different income streams of local companies also boost South Africa’s risk profile and attractiveness for global investors.
MARKETOVERVIEW
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TOPTENDOMESTICSHAREHOLDINGSASPENPHARMACAREHOLDINGSLIMITED(6.18%) SABMILLERPLC(5.19%)
SASOLLIMITED(5.93%) BHPBILLITONPLC(5.12%)
STEINHOFFINTERNATIONALHOLDINGSLIMITED(5.59%) STANDARDBANKGROUPLIMITED(4.61%)
BRITISHAMERICANTOBACCOplc(5.29%) FIRSTRANDLIMITED(4.06%)
CFRICHEMONTSA(5.22%) CORONATIONFUNDMANAGERSLIMITED(3.73%)
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FUND CONTACT DETAILSTel 021 406 3326 | Fax 086 721 3447 | Email [email protected] http://yourfund.co.za/media24
ASSET ALLOCATION PER PORTFOLIO
MANAGER PERFORMANCE (GROSS RETURNS) AS AT 30 JUNE 2014
The portfolio managers who have been selected to manage the underlying asset classes have strict mandates and performance targets that are monitoredregularly.Thetablebelowreflectstheannualisedperformanceforeachassetclassandeachmanager,exceptthequarterlyreturns,which represent the actual performance.
ASSET CLASS MANAGER DATE APPOINTED
QUARTER 1 YEAR 3 YEARS 5 YEARS SINCE INCEPTION
SHARES Allan Gray 01/10/2002 8.03% 32.34% 21.59% 21.83% 24.07%
Coronation 01/02/2007 5.90% 34.31% 24.61% 25.38% 16.54%
Foord 01/07/2013 7.72% 34.65% N/A N/A 34.65%
Investec 01/12/2000 4.21% 43.24% 8.83% 13.91% 17.89%
FTSE/JSE Free Float Index (ALSI) 7.18% 32.74% 20.62% 21.64% 18.40%
BONDS Coronation 01/08/2010 2.98% 7.19% 10.77% N/A 10.31%
Old Mutual 01/12/2000 2.57% 6.10% 9.82% 10.65% 11.62%
BEASSA All Bond Index (ALBI) 2.46% 5.48% 8.69% 9.45% 10.94%
INFLATION-LINKED BONDS Prescient 01/03/2011 5.18% 10.80% 9.94% N/A 10.00%
CASH Investec 01/12/2000 1.54% 5.91% 5.87% 6.47% 8.84%
Sanlam 01/12/2000 1.57% 5.90% 5.97% 6.46% 8.74%
STeFI Composite Index 1.42% 5.45% 5.46% 6.02% 8.35%
INTERNATIONAL Allan Gray 01/10/2002 3.75% 20.54% 26.54% 14.16% 10.26%
Foord 01/07/2013 3.41% 19.18% N/A N/A 19.18%
Investec 01/02/2007 6.43% 25.84% 23.94% 18.14% 9.78%
Morgan Stanley Capital International All Country World Share Index (MSCI) 6.26% 33.65% 30.67% 23.27% 7.79%
Growth Balanced Stable Money Market
Local Shares International Local Bonds Local Inflation-linked Bonds Local Cash