wealth investment management and insurance
TRANSCRIPT
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Wealth Investment Management and
Insurance The Power of Compounding
29 February 2016
Presenter: Sihle Mfeka
Institute of Municipal Finance Officers Conference
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More than just a bank
Bank. Invest. Insure. Prosper
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What is our current reality?
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1. Each in a different wealth cycle, but similar needs and wants…
2. High inflation• High cost of living – impact on lifestyle
• Declining purchasing power
3. Equity Markets are high but volatile
4. Taxes are increasing
5. Currency depreciation – Rand is weak
6. Pressure on electricity supply
7. Local Unrest and offshore concerns
8. The worst draught ever seen
9. Potential downgrade by rating agencies
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The question is: what should we do?
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2016
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1. Plot your Potential
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Wise word“The main reason people struggle financially is because they have spent
years in school but learnt nothing about money.
The result is that people learn to work for money . . .
…but never learn to have money work for them.”
Robert Kiyosaki, author Rich Dad, Poor Dad
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Life Stages
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2. Organize your Finances
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Level 4 Wealth creation
Level 3Security funds for education and
retirement
Level 2Savings to cover the cost of unforeseen
events
Level 1 Funds to cover basic living expenses
FoundationLife cover, income protection, capital
disability, dread disease cover, short term insurance
Wealth Creation
Security Funds
Emergency Funds
Insurance (Adequate Risk Cover)
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Financial Planning pyramid needs met by Absa
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The Rule of Thumb Budget
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3. Wise up!
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3. Wise up! Inflation is the cancer of wealth
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The Power of Compounding
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The power of compounding
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Saver A • Invested half the
money B did
• Contributed 1/3the time that B
did
• But ended up
with a value
almost doublethat of B!
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Importance of how long and how much
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(Figures shown in the table assumes a starting contribution of R500 per month that escalates by 6% every year and a 10% investment growth per
annum)
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WHY DO WE HAVE RETIREMENT REFORM?
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1. Post retirement realities
• 57% of pensioners felt a drop in their standard of living when they
retired
• 32% of pensioners feel that they are far behind inflation
• 23% currently receive financial assistance from others, making up
almost a quarter of their income.
2. The goal – alleviate old age poverty by ensuring preservation of retirement savings for employees
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Summary of changes applicable 1 March 2016
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1. Contribution deduction by employee increased to 27.5% of the greater of taxable income or remuneration as defined by the 4th Schedule of the Income Tax Act - capped at R350 000 p.a.
•Carry forward unclaimed to next year
•Include Group benefits
•Employer contribution unlimited but treated as a fringe benefit
2. Minimum retirement fund balance requiring annuitisation is R247 500.
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On hold for until 01 March 2018
System development & education of members needed
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1.Two third annuitisation of provident fund
• Vested right – benefit and growth ring fenced
• 55 years and older not impacted at all
2. Transfers between pension and provident funds
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Explore your options
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Pre – Retirement
Long term investment to provide for
retirement.
Products
RA’s
Preservation, Pension & Provident Funds
Unit Trusts or Collective Investment
Schemes (CIS)
Endowments
Bank Investment products
Tax free Investments
In - Retirement
Using your retirement capital, to provide you
with a monthly income.
Products
Life Annuity
Living Annuity
Basic products needed during your life cycle
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Reap your rewards!
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Invest in yourself!
You would be surprised what you can
accomplish when you start with what you’ve got.
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Ngiyabonga
Absa Wealth Investment Management and Insurance
031 366 9226
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