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 The Sharenet Daily 
Tuesday, 29 April 2014 - 20:00
Top News
SA Business
Company News
Company Results
World Markets (Spot Prices)
JSE Today
JSE Trading Statistics
Major Moves
Index Summary
Latest Consensus Changes / Results Expected
Recent Dividends / Ex Div
Upcoming AGMs
Stock Exchange News Service (SENS)

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Seed Weekly - Aspen ? Living Annuities: Caveat Emptor

This report follows on from Ian’s report on Investment Risks (15 April 2014) and considers, in more depth, inflationary risks.

Living annuities have become a commonly used vehicle to provide a compulsory annuity (pension income) to people retiring from retirement products (retirement annuities, pension and provident funds, etc). They have the advantages of flexible investment choice, flexible income choice, the transfer of full income to spouse, and the transfer of the fund value to your dependents on the death of you and your spouse (capital retention). Probably the most common reason given for the use of living annuities is the fact that, whilst they do not “guarantee” a specific income, the use of living annuities is the most effective way of safe guarding a retiree’s income against inflation.

I have done a very basic exercise looking at the effects of different drawdown percentages on the capital and income on living annuities. For the purposes of this calculation I have assumed an inflation rate of 7% pa, a return (after costs) of 11% pa, and a constant drawdown percentage.

The first chart looks at the monthly drawdown (based to 100) from a naïve point of view – i.e. not taking inflation into account. From this chart it appears that an investor’s income would be nearly 6 times greater after 30 years of retirement in the case of a 5% drawdown, and that an investor can even withdraw 10% on an annual basis and still have income growth in retirement – both rosy pictures for the naïve investor. Unfortunately this isn’t the case in reality.

A more accurate, and necessary, approach is to consider the effects of inflation when looking at how various levels of withdrawal affect the sustainability of an income into retirement. The following chart repeats the above, but takes into account the effects of inflation – the correct approach to financial planning – and as can be seen the picture isn’t as pretty. Whilst a number of financial advisors would say that their portfolios have achieved returns way in excess of 11% pa, it is my opinion that budgeting for returns far in excess of 4% above inflation (after all costs) are not sustainable over the long term for retirees.

It is a very sobering picture that even using a drawdown percentage of 5% (I’ve been told by linked product companies that the average draw down percentage is much higher than this), both your capital balance and your income do not keep up with inflation. When we move up to a drawdown percentage of 7.5%, both your capital and income have more than halved in real terms over 30 years.

What many pensioners do, in order to maintain their living standards, is increase their drawdown percentage during retirement. Increasing your drawdown percentage from a marginal/breakeven position unfortunately has disastrous effects on the capital value of the portfolio and seriously puts into jeopardy the sustainability of any income for a reasonable retirement period.

So, whilst living annuities are still the best product available in many circumstances for the provision of retirement income, they need to be sold with the words caveat emptor “let the buyer beware”. Both income levels chosen and real returns achieved will drastically affect the living annuity’s ability to protect the retiree from the ravages of inflation.

Investors should endeavour to have their starting drawdown (as a percentage of total assets) as low as possible to ensure that the returns from the living annuity are able to cover (in real terms) the majority of the drawdown. In this way investors will maximise the probability of not being left high and dry.

Kind regards,
Barry Hugo

021 914 4966

Tue, 29 Apr 2014
Top News
South African regulators are investigating possible insider trading in shares of technology firm Pinnacle Holdings prior to the announcement of an executive's arrest, a senior official said on Tuesday.  Full story

Local markets  Full story
Hundreds of pro-Russian separatists stormed government buildings across one of Ukraine's provincial capitals on Tuesday and opened fire on police holed up in a regional headquarters, a major escalation of the rebellion in defiance of new Western sanctions.  Full story
Prime Minister Tayyip Erdogan said on Tuesday he would ask the United States to extradite an Islamic cleric he accuses of plotting to topple him and undermine Turkey with concocted graft accusations and secret wire taps.  Full story
At least 30 people across six states were killed in tornadoes unleashed by a vicious storm system that levelled towns and was threatening to cause more mayhem in heavily populated parts of the U.S. South on Tuesday.  Full story
U.S. stocks rose on Tuesday, helped by upbeat results from companies including Merck & Co and Sprint, as well as more deal activity. . .  Full story
World stock indexes rose on Tuesday on solid company earnings, while the euro slipped as weaker-than-expected German inflation data kept alive chances of more. . .  Full story
European shares rose on Tuesday, led by technology stocks as results from chipmaker Infineon and telecommunication gear maker Nokia brightened the outlook for. . .  Full story
The dollar rose against the euro on Tuesday as weaker-than-expected German inflation data drove speculation in currency markets that the European Central Bank may. . .  Full story

Britain's blue chip shares hit a 7-1/2 week closing high on Tuesday, bolstered by upbeat corporate earnings reports from oil major BP and. . .  Full story
U.S. stocks opened higher on Tuesday, lifted by a round of positive earnings reports, including from Dow component Merck & Co.. . .  Full story
Gold fell below $1,300 an ounce on Tuesday as the market focused on the U.S. Federal Reserve's policy meeting and expectations for strong. . .  Full story
Mainland stocks surged in the final hour of trading on Tuesday, with the Shanghai Composite Index climbing one percent over the final hour. . .  Full story
SA Business
Members of South Africa's striking mining union AMCU have rejected the latest wage offer from the world's top three platinum producers, its president said on Tuesday, extending a crippling 14-week stoppage.. . .  Full story
South Africa's rand strengthened against the dollar early on Tuesday, tracking an upbeat euro and as emerging market currencies got some breathing space from Ukraine-related selling.. . .  Full story

Platinum's price stability in the face of the longest miners' strike in South Africa since the end of apartheid is testament to the. . .  Full story
South African regulators are investigating possible insider trading in shares of technology firm Pinnacle Holdings prior to the announcement of an executive's arrest, a. . .  Full story
Aquarius Platinum Ltd, the world's fourth-largest platinum miner, reported a fall in quarterly revenue and core operational earnings as a prolonged strike in South. . .  Full story
Aquarius Platinum Ltd, the world's fourth-largest platinum miner, reported a fall in revenue and core operational earnings for the third-quarter from. . .  Full story
World Markets (Spot Prices)
NameTimeRPMove% Move
JSE Overall17:0048935.3624.460.05%
JSE Top 4017:0043875.7724.600.06%
JSE Gold17:001543.44-20.99-1.34%
JSE Financial17:0036339.2721.350.06%
JSE Industrial17:0063051.43178.600.28%
JSE Indust 2517:0055609.56179.190.32%
JSE Resource17:0057110.54-193.99-0.34%
DJ Futures19:0216485.0088.000.54%
DJ Ind19:5816546.3597.610.59%
SP 50019:581878.739.300.50%
FTSE 10017:356769.9169.751.04%
All Ords08:405466.90-49.20-0.89%
NZSE 5007:485148.2932.490.64%
NameTimeRPMove% Move
Gold $19:591295.10-.59-0.05%
Gold R19:5913656.6113656.610.00%
Gold R/kg19:58439349-4539-1.02%
Silver $19:5919.4760-.0710-0.36%
Platinum $19:591427.509.500.67%
Palladium $19:59804.755.720.72%
Brent Crude19:58108.97-1.36-1.23%
Rand / Dollar19:5910.5432-0.0700-0.66%
Rand / Pound19:5517.7178-0.0963-0.54%
Rand / Euro19:5514.5671-0.1378-0.94%
Rand / NZD19:599.0221-0.0420-0.46%
Rand / AUD19:559.7807-0.0539-0.55%
Yen / Dollar19:59102.58500.10900.11%
Euro / Dollar19:590.72420.72420.00%
Dollar / Euro19:591.3810-0.0040-0.29%
Pound / Dollar19:550.5941-0.0006-0.10%

Click here for the Sharenet Spot Price page
The JSE Today

Trading Statistics
* Includes all listed instruments on the JSE
Major Moves Up
SharenameSaleMove% MoveVolume
1 NUWORLD  195024914.64.%1051
2 ADVHLTH  1582014.49.%3676509
3 INFRASORS  1201514.29.%224041
4 RESN  5606012.00.%46637
5 WCC  1431511.72.%73159
6 S-OCEAN  1101010.00.%51000
7 MMG  900657.78.%19572
8 LITHA  200136.95.%59660
9 PETMIN  272166.25.%39700
10 SEARDEL  180105.88.%33000
11 KEATON   248114.64.%35212
12 ADVTECH  847374.57.%319374
13 HULAMIN  715304.38.%126609
14 CONTROL  14053.70.%7540
15 PUTPROP  750253.45.%700
16 SA-CORP  411133.27.%457171
17 ITLTILE  799243.10.%69188
18 CBH  335103.08.%17415
19 AFROX  2079592.92.%25110
20 SANTAM  208005822.88.%11652

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Major Moves Down
SharenameSaleMove% MoveVolume
1 TRUSTCO  130-25-16.13.%568738
2 OANDO  117-13-10.00.%12200
3 ADAPTIT  780-80-9.30.%1113728
4 AQPN  145-13-8.23.%798070
5 PINNACLE  1319-105-7.37.%1746738
6 ARB  640-45-6.57.%8300
7 ACCELERAT  480-30-5.88.%3366
8 CSG  244-14-5.43.%9218
9 CADIZ  102-5-4.67.%30500
10 POYNTING  441-19-4.13.%109486
11 ARM   19350-771-3.83.%1039062
12 NASPERSN  103500-3500-3.27.%1855649
13 OSIRIS  1500-50-3.23.%100
14 ASCEN_A  475-15-3.06.%269312
15 NORTHAM  4085-120-2.85.%294778
16 EHSV  914-26-2.77.%1446
17 RCL  1550-42-2.64.%107885
18 HARMONY  3405-92-2.63.%935515
19 ASSORE  40704-1096-2.62.%85483
20 SIBANYE  2603-66-2.47.%3702651

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New Highs
SharenameSaleHighMove% MoveVolume
1 ADVHLTH  1581682014.49.%3676509
2 PETMIN  272272166.25.%39700
3 SANTAM  20800215255822.88.%11652
4 SABMILLER  572385747514592.62.%1276959
5 REINET  24822482522.14.%1485886
6 COMAIR  480480102.13.%147520
7 PSG  10285104001851.83.%26234
8 TRENCOR  746074951301.77.%90301
9 INVPLC  923692751071.17.%915573
10 BATS  61631620806861.13.%519382
11 BIDVEST  28994291213161.10.%1208412
12 JSE  96209700700.73.%83869
13 INVLTD  92549260560.61.%453430

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New Lows
SharenameSaleLowMove% MoveVolume
1 AQPN  145140-13-8.23.%798070
2 OSIRIS  15001500-50-3.23.%100

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Index Summary
Index NameRPMove% Move
Top 4043,875.7724.600.06%
Mid Cap63,620.50-27.35-0.04%
Small Cap52,982.93165.920.31%
Resource 2057,110.54-193.99-0.34%
Industrial 2555,609.56179.190.32%
Financial 1513,858.29-15.57-0.11%
Financial & Ind. 3059,354.42113.730.19%
All Share48,935.3624.460.05%
Oil & Gas 44,420.9733.300.08%
Mining 34,143.48-181.59-0.53%
Gold Mining1,543.44-20.99-1.34%
Platinum Mining50.41-.82-1.60%
GENERAL MINING9,851.53-29.93-0.30%
Oil & Gas Producers 23,884.3317.900.08%
Basic Materials 29,988.12-187.36-0.62%
Chemicals 24,074.30-169.10-0.70%
Forestry & Paper 29,144.63-457.97-1.55%
Industrial Metals 20,809.69-379.52-1.79%
Industrials 45,385.51140.940.31%
General Industrials 143.84.430.30%
Consumer Goods 60,152.49561.210.94%
Automobiles & Parts 9,601.30.000.00%
Household Goods368.74-5-1.36%
Health Care 77,879.02429.530.55%
Beverages 195.234.932.59%
Index NameRPMove% Move
Food Producers 70,412.2524.610.03%
Personal Goods 1,062.58-1.70-0.16%
Consumer Services 10,799.34-186.20-1.69%
General Retailers 62,292.70104.260.17%
Travel & Leisure 5,724.28-1.72-0.03%
Media 226.08-7.62-3.26%
Support Services 2,566.6521.680.85%
Telecommunications 10,232.41200.802.00%
Financials 36,339.2721.350.06%
Banks 62,522.57-496.06-0.79%
Non-life Insurance 53,086.191485.392.88%
Life Insurance 34,416.2974.630.22%
General Financial 3,824.5732.340.85%
Technology 42,054.98-405.95-0.96%
SHARIAH TOP40 4,197.2220.05%
FTSE/JSE SHARIAH ALL4,306.93-2-0.04%
COAL MINING18,014.50160.09%
FTSE JSE Fledgling 6,710.11260.39%
FTSE/JSE Alt X 1,212.02-9-0.70%
RESOURCE 31,230.34-131-0.42%
DIVIDEND PLUS224.6400.16%
FTSE/JSE RAFI 409,843.8170.07%
Capped Top 4023,219.31170.07%
Capped All Share24,775.18140.06%
JSE TABACO 7,875.36881.13%

Click here for the Sharenet Index Summary page
Latest Consensus Changes**
CodeCompany NameStatusUpdated
Results Expected**
ExpectedCompany NameFin. Date
30/04/2014CONDUITFebruary 2014 (Interim)
30/04/2014INDEQTYMarch 2014 (Interim)
30/04/2014INDEQTYPMarch 2014 (Interim)
30/04/2014INDEQTYPAMarch 2014 (Interim)
30/04/2014INDEQTYPBMarch 2014 (Interim)

Recent Dividends**
Share NameDec-DateLDTPay-DateAmount
REBOSIS24/04/1416/05/1426/05/14ZAR 0.4850
CLICKS24/04/1427/06/1407/07/14ZAR 0.5350
CMH23/04/1406/06/1417/06/14ZAR 0.5000
PSG16/04/1409/05/1419/05/14ZAR 0.9000
BLACKSTAR16/04/1430/04/1430/05/14GBP 0.0080
Ex Div**
Share NameDec-DateLDTPay-DateAmount
ASTRAPAKP04/04/1423/04/1405/05/14ZAR 4.0049
VIVIDEND04/04/1423/04/1405/05/14ZAR 0.2400
ILIAD11/03/1423/04/1405/05/14ZAR 0.2000
ZEDER07/04/1423/04/1405/05/14ZAR 0.0450

Upcoming AGMs**
CodeCompany NameDateStatus
NEDNedbank Group Ltd.02/05/2014Unconfirmed
ABSPAbsa Bank Ltd.02/05/2014Unconfirmed
BELBell Equipment Ltd.05/05/2014Confirmed
MTAMetair Investments Ltd.05/05/2014Confirmed
BGABarclays Africa Group Ltd.06/05/2014Confirmed

Stock Exchange News Service
29/04/201417:31HYPROP INVESTMENTS LIMITED - Dealings in securities by an associate of a directo...
29/04/201417:25INTU PROPERTIES PLC - Notification of Major Interests in Shares
29/04/201416:50VODACOM GROUP LIMITED - Acquisition of Further 17.2% Interest in Vodacom Tanzani...
29/04/201416:15AFRIMAT LIMITED - Trading update for the year ended 28 February 2014
29/04/201415:35DIGICORE HOLDINGS LIMITED - Dealings in securities by a director of a major subs...
29/04/201415:33AFRICA ETF ISSUER LTD (RF) - ETFPLT -Listing of Additional debentures
29/04/201415:31AFRICA ETF ISSUER LTD (RF) - ETFPLD: Listing of Additional: AfricaPalladium debe...
29/04/201415:25DIGICORE HOLDINGS LIMITED - Disclosure of beneficial interest in securities
29/04/201415:20FINBOND GROUP LIMITED - Cautionary announcement
29/04/201414:15INFRASORS HOLDINGS LIMITED - Trading Update for the year ended 28 February 2014
29/04/201414:14AQUARIUS PLATINUM LIMITED - Publication of Supplementary Prospectus
29/04/201414:08SA CORPORATE REAL ESTATE FUND - Update to the financial effects regarding the ac...
29/04/201413:32SYNERGY INCOME FUND LIMITED - Further cautionary announcement
29/04/201413:31MASSMART HOLDINGS LIMITED - Sales Update
29/04/201413:30MASSMART HOLDINGS LIMITED - Integrated Annual Report and Notice of Annual Genera...
29/04/201411:50SYNTHESIS FUNDING LIMITED - Synthesis Funding Limited - New Financial Instrument...
29/04/201411:22ASCENDIS HEALTH LIMITED - Appointment of Sponsor
29/04/201411:01ASSORE LIMITED - Assmang has conditionally subscribed for a 19.9% interest in Ir...
29/04/201411:00AFRICAN RAINBOW MINERALS LIMITED - Assmang has conditionally subscribed for a 19...
29/04/201410:56CAPITEC BANK HOLDINGS LIMITED - Capitec integrated annual report, notice of annu...
29/04/201410:31ACUCAP PROPERTIES LIMITED - Notice of an acquisition of a beneficial interest in...
29/04/201410:30TAWANA RESOURCES NL - High Priority Exploration Targets Delineated at Mofe Creek
29/04/201410:30CORONATION FUND MANAGERS LIMITED - Trading statement for the half year ended 31 ...
29/04/201410:24LABAT AFRICA LIMITED - Salient dates and updated pro forma financial effects of ...
29/04/201410:24SEARDEL INVESTMENT CORPORATION LTD - Seardel rights offer results announcement
29/04/201410:00A E C I LIMITED - Appointment of a Non-executive Director
29/04/201409:52GROUP FIVE LIMITED - Dealing in securities by directors of major subsidiaries
29/04/201409:40GOLD FIELDS LIMITED - Gold Fields announces Form 20-F filing
29/04/201409:30FERRUM CRESCENT LIMITED - The Moonlight Project Updated Mineral Resource estima...
29/04/201409:25FERRUM CRESCENT LIMITED - Quarterly Activities and cashflow Report for the perio...
29/04/201409:25BRITISH AMERICAN TOBACCO PLC - Transaction in own shares
29/04/201409:20BRITISH AMERICAN TOBACCO PLC - Transaction in own shares
29/04/201409:00SACOIL HOLDINGS LIMITED - Changes to the board of directors
29/04/201408:24AQUARIUS PLATINUM LIMITED - Third Quarter 2014: Financial and Production Results...
29/04/201408:00INVESTEC BANK LIMITED - Investec New CLN- IVC030
29/04/201407:30REINET INVESTMENTS S.C.A - Unaudited Net Asset Value of Reinet Fund S.C.A., F.I....
29/04/201407:30COMPAGNIE FINANCIERE RICHEMONT SA - High tech for precision mechanics Richemont...
29/04/201407:10INTU PROPERTIES PLC - Notification of Interim Management Statement
29/04/201407:10OLD MUTUAL PLC - Form 8.3 Disclosure

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