Fast Fatty the Second (#226)

We use my long-awaited holiday to catch up to some user questions for the next three weeks. We hope you enjoy the shorter episodes as much as I plan on enjoying my break!

Suzanne

After finding your podcast during hard lockdown, I have been binge listening …..and can honestly say: You have changed my life! Thank you! I have kicked Sanlam and their 5.4% TIC under the arse, and moved my Retirement Annuity to OUTvest. 

The buggers charged me a R30,000 exit fee; but thanks to OUTvest's amazing product – within 5 months I made up the loss; ½ coming from my contributions, and ½ from real returns!

Following Nerina Visser's fantastic presentation, I am also spreadsheeting everything, but have run into a bit of a snag and hope you can help.

As a medical professional, I hold a PPS Policy which includes a sickness- and disability benefit, as well as life cover.

Thanks to Stealthy Wealth, I now know that 'PPS is a mutual society, and doesn't operate like a normal company. They distribute any profit they make back to the policyholders'.

These profits are linked to the above policy, and deposited annually into my PPS Profit Share Account. Annually, PPS provides me with a current Rand value, for the value of my PPS Profit Share Account – and I am happy to say it has been growing steadily.

On my policy statement it further states that 'These accounts do not vest until the policy holder reaches 60 years;….and on this date the Profit Share Account can be taken TAX FREE as a cash lump sum'.

Can I safely count this Rand value, and the projected growth, towards my retirement planning? And if so, any suggestions on what would be the best (tax efficient) way to do it?

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Brett

If you take out a life policy of a R1 000 000 and nominate a beneficiary.

-Then SARS assesses you and says you owe them R800 000.

-You don't pay the debt due to SARS.

-Can SARS nominate the Insurance Agency as a 3rd party in terms of the Tax Administration Act to collect the outstanding debt from the Insurance provider?

-In other words whose money is it/The beneficiary or the policyholder.

-I have looked into this a bit and it seems that creditors cannot access life policies which would indicate it belongs to the beneficiary and not the policyholder.

Kobus

I have offshore funds in a Bank account earning nothing at the moment.

I am considering  investing this in the Sanlam Glacier Global Life plan and will do this without a FA to save on costs.

What other reputable companies in SA offer this service where you can invest directly without the help of an intermediary?

Rudolph

I have a decision to make that I am a little confused about. I am wondering about the order that I should give preference to. I am currently first trying to max out my RA for the Tax benefit, but keeping myself from accessing the funds till I am 65. Then I try to max out my TFSA and Finally I allocate the remainder of my extra money to my house bond to pay it off quicker. I am not sure if this is the best order to give preference to.

Ken

We used to contribute to Little Eden and St Bernhards Hospice as part of our monthly tithe. But with our aging parents, and their lack of retirement savings, we are anticipating needing to help them out in the years to come. So we are diverting our tithe savings into a Allan Gray money market account (lowest fees on the market from what I can tell). But I often have a pang of regret when I think that we are no longer supporting these companies that are working so hard to help others. I wonder. if by no longer supporting them, we have resulted in them having to turn somebody away.

My idea is a Charity "ETF". like the "top 40" of non profit worthy (researched and vetted) organisations that are helping others. The Charity "ETF" fact sheet will look a little bit different, with links to all of the top 40 organisations websites and a brief description of what they do. I was daydreaming about it popping up as an option when you are submitting a trade on Easy Equities (like the R2 KFC thing). There would be a management fee for whoever was running the "ETF" I suppose, but ideally all of the contributions go directly to the top 40 organisations. 

The main thought behind having the Charity "ETF" is that it may seem silly wanting to send, a once off, R100 to one of these organisations. And even sillier to try and split that R100 up into smaller amounts to spread the contribution to multiple companies. But that is what an ETF does best! take a little bit of everybodies money, combines it into one big pot and distributes it to the top 40 organisations.

What would really be nice is if Easy Equities could provide you with a section 18A receipt at the end of the financial year as part of all the other tax certificates they provide.

Greta

Having recently been paid a lump sum (divorce agreement), and needing to live off the yield of my investments for the rest of my life, I have educated myself on personal wealth. I have a pretty sound understanding of my options and how I would like to invest - again based on sound investing principles that you and Simon live by.

My question now is a completely practical one: I have the investment pots - one for growth, one for emergencies, one for income. But how do I give myself a monthly income drawdown (I am not a retiree or of retiree age - still 13 years to go). 

What investment vehicles are my options to hold my three years of expenses in from which I will draw my monthly income - is it a bank account? Or is there some other investment vehicle I can use to invest my 3-year-expenses money in and get a monthly income drawdown from? 

Robin

I'm interested to understand how Bonds work as an investment vehicle. 

Can you and Simon dive into when and why one should invest in bonds? Should they be SA or Int. Bonds, and which Bonds should one consider? 

In the next month, I will have a maturing fixed investment, where I was getting a reasonable 7.58% compounded return. I want to re-invest these funds. However, with the decline in interest rates this year the bank will now only provide 4% compounded return, which doesn't help my cause at all. 

I have Tax Free savings in place, I have a Living Annuity that I recently moved from an RA as I can allocate the full investment to offshore equities rather than on 30% as per Reg 28, where the 2.5% compulsory payout of which I re-allocate to my TFS. 

I have a diversified SA ETF portfolio (SYGUK; STXNDQ, STXCHN, GLODIV, ETFPLD, ETFGRE, ETFIT, CSPROP, CSP500, STXEMG, STXRES, STXWDM, SYG4IR SYGEU, all in equal allocations) which I am building on (waiting for lower prices to allocate more funds). I also have an offshore Investment portfolio that I actively manage in both Offshore Equities and ETFs.

 My goal is to increase growth over the next three years, therefore I have taken an active investment approach. (I am 57 years old and I live abroad, therefore having both an SA and Overseas Investment Portfolios serves me well)

Any pearls of wisdom where I can invest the funds that will be freed up next month? Taking all of the above into consideration.