I am sure that everyone agrees that the world, including all of us here in South Africa has been through the mill in the last 10 months. My sincerest condolences go out to everyone who has experienced the loss of a loved one and my heartfelt thanks go to all of those in the front line for what they have done in this time and what they will still go through in the months ahead. In the meantime, please be safe and follow the set down protocols so that we can meet again and enjoy a cup of coffee under improved conditions.
In the meantime, it has been good to see the markets rebounding after the disaster towards the end of March , beginning of April 2020. I am not going to expand on this as I am sure that other articles in this publication will do a better job of it than me. One thing that I will add is, please remember that we are in the long-term investing game and to this extent we do our best to ensure growth over an extended period.
Lessons Learned in 2020
The year 2020 will be remembered as a year during which many lessons were learnt, and in which change had to be embraced. Two of these many lessons need to be highlighted.
1. Most people have unfortunately seen their income shrink and have been forced to take a good look at their monthly budgets. Generally, when this happens one of the first things that gets discarded is their insurance policies. We at Morebo, have experienced a number of instances where clients who have cancelled risk policies, contracted COVID and have not survived or have been incapacitated as a result of this disease. The circumstances for those left behind, or for the individual who has been incapacitated for a number of months, have been dire. Where the life cover, dread disease cover or income replacement cover has been cancelled, financial disaster has taken its place. Please do not despair. There are alternatives that can be considered to ensure that the policies remain in force. So, please do not be hasty. Speak to your Financial Planner before you make any decision, so that alternatives can be explored.
2. Morebo has published many articles on the importance of drawing up a Last Will and Testament. If someone dies without a will in South Africa, their estate will be administered in terms of the Intestate Succession Act 81 of 1987. ‘Intestate succession’ means that your property and money will be passed on according to the “States will”. In other words, your property and assets will be passed on in one of the following ways:
If you had a spouse, but no children, your spouse will inherit everything. If there is a spouse and children, your estate will be divided among them according to a specific formula. Your spouse will inherit R250 000 or a child’s share, whichever is greater. To make matters even worse, the child may be a minor and the State may insist that the child’s share will be held by the State until such a time that the child reaches majority.
I am not going to go into this any further except to simply say; If you want everything that you have worked for your entire life to go to the people that you want it to go to, then have a will drawn up. Once again, we at Morebo can assist with this. Do not delay, stay in control.
Upcoming Retirement Reforms
From 1 March 2021, retirement benefits from provident funds will be treated in the same way as pension funds for the part of the benefit based on contributions. This means that members will have to buy a pension (annuity) from a registered insurer with at least two-thirds of their retirement benefit.
There are some exceptions to be noted.
1. If the total benefit is R247 500 or less, the whole amount can be taken in cash.
2. Vested rights will apply. Retirement savings will be ring-fenced as follows before the new legislation takes effect:
- Any provident fund balance saved before 1 March 2021 plus the future growth on this until retirement won’t be affected and can be taken in cash on retirement. Remember that there is a sliding scale of tax to be paid on this amount. Any contributions made after 1 March 2021 will be termed non-vested and will be subject to the change.
- Members who are 55 years or older on 1 March 2021 will not be affected by this change at all if they stay a member of the same provident fund (or provident preservation fund, as proposed in the draft Taxation Laws Amendment Bill until retirement. This means that the retirement benefit will be treated in the same way as it is currently being treated when these members retire. If these members transfer to another fund, they will still have vested rights, but contributions and growth on this to the new fund will require them to buy a pension with two-thirds of their retirement benefit.
That’s it from me for this quarter. Wishing you and yours well and all the best for 2021. Please remember that we at Morebo are there for you and appreciate the relationship that we have with all our clients.
Regards and stay safe