Friday, 07 March 2014 - 20:00
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Seed Weekly - Retirement Annuities
Every February I write an article about why people should use Retirement Annuities as part of their investment portfolio, but if I could get R 1 000 for every time a client, family member, friend, or acquaintance has told me that “Retirement Annuities are a waste of money”, I would be retired now and not writing this article. I have heard many stories about Mr X or Mrs Y, whose retirement annuities were inadequate to fund their retirement despite the fact that they had been contributing to them for many years.
Unfortunately many people use these stories as an excuse not to make any retirement provisions at all.
What are the main reasons for Retirement Annuities not giving sufficient Retirement Capital:
• The first and most obvious reason is that people do not put away enough money each month. If you worked for a big corporate, the total of your contributions and the employer’s contribution to retirement is often in excess of 15%. This means that somebody earning R 10 000 pm has a monthly retirement contribution in excess of R 1 500. As his salary increases, his retirement contributions also increase. People working for themselves, or for smaller companies, rarely spend this much on their retirement annuities. The problem is exacerbated when people have “traditional retirement annuities” which have life cover and other risk benefits attached to them. These risk costs radically reduce amounts available to the retirement fund.
• The second problem is the length of time people invest for. It is not uncommon for people to only start saving when they are 40 and then want to retire when they are 55. This does not leave much time for the wonder of compound interest to weave its magic.
The above problems are best illustrated by the following example. We have a client who started saving for his retirement 30 years ago into two policies – one of R 116 pm and the other R 35 pm. At that time, the contributions were probably close to 15% of his taxable income. The premiums remained unchanged until December 2007 when the client increased the R 35 pm policy to R 2 500 pm and has increased it by 10% pa since then. The total premiums paid on the R 116 policy to date are R 42 224, while the fund value is a staggering R 702 114. This equates to a return of 14.2% pa. The other policy has total premiums paid to date of R 295 516 but, because the real effects of compound interest are yet to kick in on the increased contributions, the fund value is R 574 706. This still equates to a return of 12.98% pa. It must be borne in mind that the huge tax advantages (up to 45% at one stage) have not been taken into account.
One of the major drawbacks of the “traditional” retirement annuity is the fact that it is costed upfront, i.e. your first number of premiums go towards the payment of costs and you only start increasing your retirement value after a while. Now days we have many products available where no upfront fees are accrued and very low ongoing fees are paid.
One of the major advantages of Retirement Annuities that people tend to forget is that your tax rate is usually higher pre-retirement than post retirement. Remember that post retirement you usually have lower income, higher rebates (after 65) and all medical expenses are allowed as a deduction (after 65). So the tax savings generated by the contributions are higher than the future liability created.
Do I think retirement annuities are the alpha and omega of retirement planning? Definitely not. You also need property, equities and offshore exposure in discretionary savings products, but retirement annuities definitely have their place and are ignored at your peril.
Kind regards,
Barry Hugo
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
Fri, 07 Mar 2014
Top News
Gold tumbled more than 1 percent
on Friday after stronger-than-expected U.S. jobs data helped
soothe fears of an abrupt slowdown in the world's biggest
economy. Full story
South African stocks ended a see-saw session virtually unchanged on Friday, pulling back from record high set earlier in the day as investors digested the widely watched U.S. jobs data. Full story |
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President
Vladimir Putin rebuffed a warning from U.S. President Barack
Obama over Moscow's military intervention in Crimea, saying on
Friday that Russia could not ignore calls for help from Russian
speakers in Ukraine. Full storyPresident Barack Obama on
Thursday ordered sanctions on people responsible for Moscow's
military intervention in Ukraine's Crimea Peninsula, including
travel bans and freezing of their U.S. assets, and said a
referendum by the region to join Russia would violate
international law. Full storyTurkey's president on Friday
ruled out any ban on Facebook and YouTube after Prime
Minister Tayyip Erdogan said the sites could be shut to stop his
foes anonymously posting audio recordings purportedly exposing
corruption in his inner circle. Full story |
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Markets | European shares fell on Friday,
amid growing tension over Crimea, as investors tried to shield
themselves from the impact of any confrontation between. . . Full story | | Britain's main share index fell
to a three-week closing low on Friday as a landmark corporate
bond default in China, the world's top. . . Full story | | U.S. equities and other risk
assets pared gains on Friday as uncertainty over Ukraine
tensions outweighed stronger-than-expected U.S. jobs growth,
leading investors to pull. . . Full story | | U.S. stocks rose modestly on
Friday after an unexpectedly strong payrolls report in February,
although gains were curbed by lingering tensions in Ukraine,
with. . . Full story |
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| The S&P 500 hit a fresh
intraday record high on Friday after more jobs than expected
were created in February and January's figure. . . Full story | | U.S. stock index futures added
to gains after a better-than-expected reading on employment data
for February.. . . Full story | | Britain's top shares fell on
Friday with investors expected to avoid strong bets before U.S.
jobs data that could sway the near-term direction. . . Full story | | World shares were at a six-year
high and heading for a fifth week of back-to-back gains on
Friday as the ongoing tug-of-war over. . . Full story |
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SA Business | South Africa's rand lost ground against the dollar on Friday after stronger than expected U.S. nonfarm payrolls data.. . . Full story | | South African power utility Eskom said on Friday the power supply remained "constrained but stable" the day after it imposed rolling. . . Full story | | Gold held steady on Friday after its sharp overnight rise to trade near a four-month high and was poised to log. . . Full story | | Gold rose on Thursday,
boosted by the European Central Bank's decision to not take
fresh action to inject liquidity into the euro zone. . . Full story |
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| Economic growth in Nigeria will accelerate this year, driven by sectors outside its dominant energy industry, while inflation will continue its. . . Full story | | Europe's antitrust chief
Joaquin Almunia, whose approval is required for Telefonica's
two merger deals in Germany and Ireland, said on Friday
that he. . . Full story | | South Africa sold 3.685 billion rand worth of three-month Treasury Bills at an average yield of 5.83 percent on Friday, from. . . Full story | | A hamstring injury will keep South African fast bowler Dale Steyn of out of the first two Twenty20 internationals against Australia. . . Full story |
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| Diversified mining group African Rainbow Minerals reported a 66 percent rise in headline earnings on Friday as higher prices and a weaker rand boosted its ferrous unit.. . . Full story | | The Chinese yuan is still expected to
appreciate modestly this year, buoyed by continued foreign
capital inflows, despite the central bank's recent moves to
weaken the currency to punish speculators, a Reuters poll
showed.. . . Full story | | South Africa's net gold and foreign exchange reserves beat expectations in February, rising to $45.337 billion from $44.918 billion in January, Reserve Bank data showed on Friday.. . . Full story |
World Markets (Spot Prices)
Name | Time | RP | Move | % Move | JSE Overall | 17:00 | 47786.77 | -32.76 | -0.07% | JSE Top 40 | 17:00 | 43206.26 | -29.87 | -0.07% | JSE Gold | 17:00 | 1524.95 | 17.69 | 1.17% | JSE Financial | 17:00 | 33968.08 | 153.77 | 0.45% | JSE Industrial | 17:00 | 62368.27 | 238.70 | 0.38% | JSE Indust 25 | 17:00 | 55261.10 | 266.56 | 0.48% | JSE Resource | 17:00 | 56036.35 | -785.16 | -1.38% | DJ Futures | 06/03 | 14432.00 | 16.00 | 0.11% | DJ Ind | 19:58 | 16449.19 | 27.30 | 0.17% | SP 500 | 19:54 | 1877.17 | 0.14 | 0.01% | Nasdaq | 19:58 | 4332.69 | -19.44 | -0.45% | FTSE 100 | 18:29 | 6717.47 | -71.02 | -1.05% | DAX | 19:08 | 9350.75 | -192.12 | -2.01% | CAC40 | 19:08 | 4366.42 | -50.62 | -1.15% | Nikkei | 08:36 | 15274.07 | 139.32 | 0.92% | Shanghai | 09:28 | 2057.91 | -1.67 | -0.08% | Hang-Seng | 10:28 | 22660.49 | -42.48 | -0.19% | All Ords | 07:39 | 5477.00 | 17.30 | 0.32% | NZSE 50 | 06:28 | 5125.65 | 10.86 | 0.21% |
| | Name | Time | RP | Move | % Move | Gold $ | 19:59 | 1338.28 | -11.86 | -0.88% | Gold R | 19:59 | 14343.58 | 21.22 | 0.15% | Gold R/kg | 19:58 | 461084 | 2472 | 0.54% | Silver $ | 19:59 | 20.8900 | -.5320 | -2.48% | Platinum $ | 19:59 | 1481.70 | 3.20 | 0.22% | Palladium $ | 19:58 | 777.75 | .95 | 0.12% | R157 | 15:34 | 7.05 | -.02 | -0.28% | R186 | 15:34 | 8.50 | -.01 | -0.12% | R204 | 15:34 | 7.84 | -.14 | -1.76% | R207 | 15:34 | 8.08 | -.04 | -0.55% | Brent Crude | 19:58 | 108.76 | 1.00 | 0.93% | Rand / Dollar | 19:59 | 10.7188 | 0.1113 | 1.05% | Rand / Pound | 19:55 | 17.8991 | 0.1720 | 0.97% | Rand / Euro | 19:55 | 14.8772 | 0.1737 | 1.18% | Rand / NZD | 19:59 | 9.0707 | 0.0805 | 0.90% | Rand / AUD | 19:55 | 9.7298 | 0.0939 | 0.97% | Yen / Dollar | 19:59 | 103.3110 | 0.2390 | 0.23% | Euro / Dollar | 19:59 | 0.7208 | -0.0072 | -0.99% | Dollar / Euro | 19:59 | 1.3875 | 0.0015 | 0.11% | Pound / Dollar | 19:55 | 0.5977 | 0.0005 | 0.08% |
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Click here for the Sharenet Spot Price page
The JSE Today
Trading Statistics
Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
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07/03/2014 | 188 | 188 | 70 | 446 | 187,641,820 | R14,225,576,507 | 158383 | 348124 | 06/03/2014 | 220 | 138 | 58 | 416 | 201,584,426 | R15,537,671,662 | 157346 | 262660 | 05/03/2014 | 177 | 152 | 78 | 407 | 204,111,799 | R14,478,231,354 | 149026 | 1075920 | 04/03/2014 | 229 | 141 | 59 | 429 | 227,257,004 | R17,308,156,388 | 175117 | 1055491 | 03/03/2014 | 173 | 196 | 66 | 435 | 164,138,776 | R13,273,854,889 | 146336 | 672763 |
* Includes all listed instruments on the JSE
Index Summary Index Name | RP | Move | % Move | Top 40 | 43,206.26 | -29.87 | -0.07% | Industrial | 62,368.27 | 238.70 | 0.38% | Mid Cap | 58,980.57 | -97.43 | -0.16% | Small Cap | 51,218.52 | 179.22 | 0.35% | Resource 20 | 56,036.35 | -785.16 | -1.38% | Industrial 25 | 55,261.10 | 266.56 | 0.48% | Financial 15 | 13,029.36 | 75.80 | 0.59% | Financial & Ind. 30 | 58,556.30 | 304.81 | 0.52% | All Share | 47,786.77 | -32.76 | -0.07% | Oil & Gas | 44,042.59 | 603.88 | 1.39% | Mining | 33,440.24 | -652.54 | -1.91% | Gold Mining | 1,524.95 | 17.69 | 1.17% | Platinum Mining | 49.23 | -.47 | -0.95% | GENERAL MINING | 9,630.17 | -241.59 | -2.45% | Oil & Gas Producers | 23,680.89 | 324.70 | 1.39% | Basic Materials | 29,768.81 | -533.75 | -1.76% | Chemicals | 24,497.38 | -103.73 | -0.42% | Forestry & Paper | 32,919.84 | -85.09 | -0.26% | Industrial Metals | 23,758.39 | -423.51 | -1.75% | Industrials | 41,602.24 | -148.60 | -0.36% | General Industrials | 129.77 | -.34 | -0.26% | Consumer Goods | 57,286.69 | 272.76 | 0.48% | Automobiles & Parts | 9,940.97 | -113.23 | -1.13% | Household Goods | 367.04 | 5 | 1.50% | Health Care | 74,403.31 | 427.99 | 0.58% | Beverages | 178.42 | .40 | 0.22% |
| | Index Name | RP | Move | % Move | Food Producers | 63,804.11 | -269.41 | -0.42% | Personal Goods | 1,051.40 | 7.69 | 0.74% | Consumer Services | 11,900.80 | 27.55 | 0.23% | General Retailers | 56,375.56 | 26.87 | 0.05% | Travel & Leisure | 5,329.10 | -52.99 | -0.98% | Media | 289.52 | 1.72 | 0.60% | Support Services | 2,592.33 | -27.89 | -1.06% | Telecommunications | 9,807.63 | 126.98 | 1.31% | Financials | 33,968.08 | 153.77 | 0.45% | Banks | 57,472.99 | 233.44 | 0.41% | Non-life Insurance | 47,726.53 | 1020.89 | 2.19% | Life Insurance | 33,333.47 | 325.89 | 0.99% | General Financial | 3,342.58 | 20.22 | 0.61% | Technology | 44,334.41 | 70.92 | 0.16% | SHARIAH TOP40 | 4,131.94 | -25 | -0.61% | FTSE/JSE SHARIAH ALL | 4,219.26 | -23 | -0.53% | COAL MINING | 18,836.22 | -63 | -0.33% | FTSE JSE Fledgling | 6,548.54 | -8 | -0.11% | FTSE/JSE Alt X | 1,184.84 | 2 | 0.21% | SA LISTED PROPERTY | 481.54 | | -0.05% | CAPPED PROPERTY | 423.14 | | -0.08% | RESOURCE | 30,656.51 | -408 | -1.31% | DIVIDEND PLUS | 209.15 | 1 | 0.36% | FTSE/JSE RAFI 40 | 9,519.67 | -27 | -0.29% | Capped Top 40 | 22,873.28 | -3 | -0.01% | Capped All Share | 24,195.07 | -12 | -0.05% | JSE TABACO | 7,588.10 | 32 | 0.42% |
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Click here for the Sharenet Index Summary page
Latest Consensus Changes** Code | Company Name | Status | Updated | FSR | FIRSTRAND LIMITED | HOLD | 06/03/2014 | IPL | IMPERIAL HOLDINGS LTD | SELL | 06/03/2014 | BTI | BRITISH AM. TOBACCO PLC | BUY | 05/03/2014 | RBP | ROYAL BAFOKENG PLATINUM L... | BUY | 04/03/2014 | APN | ASPEN PHARMACARE HLDGS | BUY | 04/03/2014 |
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Results Expected** Expected | Company Name | Fin. Date | 10/03/2014 | A-V-I | December 2013 (Interim) | 10/03/2014 | A-V-I-P | December 2013 (Interim) | 10/03/2014 | BEE-SASOL | December 2013 (Interim) | 10/03/2014 | S.OCEAN | December 2013 (Final) | 10/03/2014 | SASFIN | December 2013 (Interim) |
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Recent Dividends** Share Name | Dec-Date | LDT | Pay-Date | Amount | STANBANK | 06/03/14 | 04/04/14 | 14/04/14 | ZAR 3.0000 | RMIH | 06/03/14 | 20/03/14 | 31/03/14 | ZAR 0.4600 | EXXARO | 06/03/14 | 04/04/14 | 14/04/14 | ZAR 3.1500 | SANLAM | 06/03/14 | 04/04/14 | 14/04/14 | ZAR 2.0000 | FAIRVEST | 06/03/14 | 20/03/14 | 31/03/14 | ZAR 0.0675 |
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Ex Div** Share Name | Dec-Date | LDT | Pay-Date | Amount | KUMBA | 11/02/14 | 07/03/14 | 17/03/14 | ZAR 19.9400 | ASSORE | 12/02/14 | 28/02/14 | 10/03/14 | ZAR 4.5000 | DSY B PREF | 20/02/14 | 07/03/14 | 17/03/14 | ZAR 4.2849 | HUDACO | 31/01/14 | 28/02/14 | 10/03/14 | ZAR 3.1000 | TRUWTHS | 20/02/14 | 07/03/14 | 17/03/14 | ZAR 2.1600 |
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Upcoming AGMs** Code | Company Name | Date | Status |
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