It has been just over a year since our lives were turned upside down by the arrival of the COVID-19 Pandemic. I do not think that there is one person reading this article who can say that they have not been affected in one way or another. To those who have lost loved ones and to those who may still be suffering from the lingering effects of the illness, we, the management, and staff of Morebo wish you and yours all the best for the future. 

For us at Morebo the last 12 months have been an interesting ride. We have experienced every type of emotion possible as we lived through total shutdowns, markets falling like a SUV down a mine shaft, staff members falling ill or losing family members as well as clients passing away or becoming desperately ill, not to mention the restructuring of our office environment and ensuring that staff could work remotely. 

Due to the falling interest rates, we have had to advise and assist many clients who were reliant on the interest from money market or cash investments to find alternative financial strategies and have also had to restructure many portfolios for clients who, suddenly, required a higher income due to having to assist children who became unemployed. This time last year the future looked bleak. 

In this regard, please allow me the indulgence of paying tribute to our amazing management and staff in the next few lines. I am sure that I speak for all the Shareholders and Directors of Morebo when I say a huge thank you for staying positive and doing everything in your power to ensure that the service to our clients was not interrupted or compromised in any way. 

We all had to learn new ways of doing things and I know that for many, working from home was a challenge. Children had to be taken care of and hours of home schooling became the norm. Yet, you all persevered, took it in your stride and with pride, ensured that everything was attended to. 

Our thanks must also go to all our service providers. Your staff were always just a WhatsApp call or a Zoom meeting away and did their best to ensure that it was business as not-so-usual. 

Over the last few months, we have been running social media campaigns providing information on all things important for financial wellbeing. If you missed the videos, they are available for viewing on our website or on YouTube. Just search for Morebo. There has also been a vast amount of media coverage on the changes to the Pensions Fund Act and many articles on “how to retire properly”. I am not going to regurgitate all of that, but I think that it is prudent to recognize the difference between voluntary and compulsory savings or investments. 

Voluntary investments are made using after tax money. Depending on the investment vehicle used, tax efficiencies can be maximized when structuring the investment. There will always be tax of one sort or another on the growth, except for “tax-free investments”, which are limited to an annual contribution of R36 000 with a lifetime contribution limit of R500 000. 

In some types of investments, tax is deducted at source and the individual receives a lump sum at maturity. Do not be fooled into thinking that your proceeds are tax free. They are not…. you just do not see it. At the end of the investment period, or on withdrawal from a voluntary investment, you will receive a lump sum payment. Should you pass away whilst the investment is still in force, if it is an assurance wrapped, beneficiaries should have been nominated and they will receive their entitlement within a short period. If it is not assurance wrapped, for example invested with a 

Collective Investment (Unit Trust based), the proceeds will fall into your deceased estate and be taxed accordingly. 

Compulsory investments are made with before tax money. These are contributions into retirement funding vehicles such as retirement annuities, pension, and provident funds. Contributions are tax deductible, up to a limit. As an aside the tax deduction really boosts the return on these investments. 

Here are the big differences! 

1. Compulsory investments are protected by law. You cannot lose them in the case of insolvency, but you also cannot cede them or use them as collateral or security. Just a little something to note… you are liable to lose as much as 50% of it in the case of a divorce. 

2. When you reach your retirement date there is a limit on the amount that you will be able to take as a lump sum and this will be taxed on a sliding scale. You will have to purchase an annuity (pension) with the balance of the proceeds, and this pension is taxed as normal income according to the PAYE tables. 

3. Last, but not least and this is a big point. Should you pass away, the proceeds do not become part of your estate but pass on to your beneficiary. So, in the case of a Living Annuity the proceeds can be passed on down the generations with very little formality. Having said this please note that the first right to the proceeds of a compulsory investment are dependents. To give you an example. If you are divorced and have remarried but are paying maintenance to the ex, he or she will have a claim against the proceeds even if you have stated in a beneficiary document that the beneficiary is your new spouse. 

One other suggestion and I know that I have harped on it before; please make sure that your Last Will & Testament is up to date. 

Unfortunately, we have not received the MPowered Fact Sheets at the time of me typing this note, but I am sure that the numbers together with a bit of commentary will appear elsewhere in the Morebo In Touch. 

The numbers have been good and according to the gurus, the local markets still have plenty to offer for the foreseeable future. 

On behalf of all of us Moreborites, wishing you and yours well and hope that you receive your vaccination in the not-too-distant future. 

Regards and stay safe.