Although they should not be solely re­lied upon, re­tail sav­ings bonds do pro­vide guar­an­tees, whereas eq­ui­ties don’t of­fer the same in times of trou­ble, writes An­gelique Ruz­icka

CityPress - - Business -

If there’s an ex­pense that you fore­see in the fu­ture, say in two to five years’ time (school fees, a round-the-world trip, em­i­grat­ing overseas and so on), you may want to con­sider in­vest­ing your money in RSA Re­tail Sav­ings Bonds, which are of­fered by Na­tional Trea­sury.

This in­vest­ment is an at­trac­tive op­tion if you are a medium-term saver and of­fers you the op­por­tu­nity to lock your money away for a rea­son­able rate of be­tween 7.75% and 8.25% (see

box be­low). Ob­vi­ously, the longer you are pre­pared to put your money away, the more in­ter­est you will get un­der this gov­ern­men­tap­proved sav­ings scheme that was launched in 2004.

When it comes to in­ter­est, it beats most of the ba­sic sav­ings and money mar­ket ac­count rates of­fered by banks. Ned­bank’s JustIn­vest money mar­ket de­posit ac­count, for ex­am­ple, of­fers rates of be­tween 5.50% and 6.75%. How­ever, the 5.50% rate with the JustIn­vest de­posit ac­count only kicks in if you have at least R5 000 in the ac­count.

There are also cash de­posit fees that may ap­ply to the JustIn­vest ac­count, whereas you don’t pay this if you in­vest in re­tail bonds.

And while some banks are of­fer­ing more com­pet­i­tive fixed de­posit rates, like Stan­dard Bank, which is cur­rently of­fer­ing a pro­mo­tional rate of 10% for its 60-month (five-year) fixed de­posit ac­count (of­fer ends July 31 2017), there are of­ten ma­jor min­i­mum in­vest­ment strings at­tached. For ex­am­ple, Stan­dard Bank’s of­fer is only avail­able to in­vestors that can de­posit be­tween R50 000 and R5 000 000.

If you in­vest in re­tail bonds there are no charges, com­mis­sions or other costs that eat into your cap­i­tal and you only need a min­i­mum of R1 000 to pur­chase a bond. Your in­vest­ment port­fo­lio may be in­creased at any time by buy­ing more re­tail bonds. Un­for­tu­nately, you can’t in­vest more than R5 000 000 in them.


The down­side of re­tail bonds is that you must lock your money away for some time to ben­e­fit from the at­trac­tive rate and zero fees. A penalty does ap­ply if you want to draw your money early, which you can af­ter 12 months.

“The penalty will de­pend on how much you with­draw and will be cal­cu­lated based on the amount. You can ac­cess your money at any time but a penalty does ap­ply,” ex­plains Lin­dokuhle Ma­tle, di­rec­tor at RSA Re­tail Sav­ings Bonds.

“With re­tail bonds, liq­uid­ity can be an is­sue. With unit trusts on the other hand you can cash them in and ac­cess the money within a cou­ple of days at the most. If you know you are go­ing to be strapped for cash it could not be ideal,” warns El­ize Botha, man­ag­ing di­rec­tor of Old Mu­tual Unit Trusts.


Last month Trea­sury had to ad­mit that it had been ex­pe­ri­enc­ing tech­ni­cal dif­fi­cul­ties over a cou­ple of weeks. It out­lined that it was hav­ing is­sues with its helpline, queries, emails and web­site. When City Press called the re­tail sav­ings bond helpline an au­to­mated voice sys­tem still re­ferred to the tech­ni­cal dif­fi­cul­ties and apol­o­gised to in­vestors.

Trea­sury said the tech­ni­cal dif­fi­cul­ties were be­cause of the RSA Re­tail Sav­ings Bonds di­rec­torate mi­grat­ing to a new back of­fice sys­tem, and Ma­tle re­it­er­ated this.

She added that the web­site was func­tional again, that in­vestors could see their pro­files and that they were also get­ting vi­tal emails with tax cer­tifi­cates at­tached.

Ma­tle said the au­to­mated mes­sage on the helpline would re­main un­til they were 100% con­fi­dent that all tech­ni­cal is­sues had been ironed out, which she hoped would be in six to 12 months’ time.


At present, it’s not pos­si­ble for in­vestors to in­vest in re­tail sav­ings bonds through a tax-free sav­ings ac­count (TFSA). When asked if Trea­sury was miss­ing a trick, Ma­tle said: “We def­i­nitely want to launch a TFSA and it’s in the pipeline. Part of the rea­son we mi­grated onto a new back of­fice sys­tem is so we can launch new prod­ucts.”

Ma­tle says Trea­sury also wants to launch a topup bond into which in­vestors can put as lit­tle as R500 and top it up in R100 in­cre­ments: “When you cur­rently in­vest, each in­vest­ment is treated dif­fer­ently with a dif­fer­ent start and ma­tu­rity date. With the top-up bond we want to give in­vestors the abil­ity to con­sol­i­date all their in­vest­ments, and there will be other fea­tures too.”

Ma­tle hopes that the top-up bond will ap­peal more to lower-in­come earn­ers, younger in­vestors and stokvels.


The ma­jor­ity of re­tail bond in­vestors are pen­sion­ers – with 80% of in­vestors aged 50 years and over. Pen­sion­ers tend to be cau­tious in­vestors, but this may not al­ways be a good strat­egy be­cause even in re­tire­ment you could still have many years ahead of you.

Sav­ings need to stay ahead of inflation, which is cur­rently at around 5.3%, ac­cord­ing to the SA Re­serve Bank.

How­ever, for re­tirees, inflation can be higher as med­i­cal costs make up a sig­nif­i­cant por­tion of monthly spend and the pre­mi­ums of­ten in­crease way above inflation.

Com­men­ta­tors agree that re­tail bonds are a good in­vest­ment, but they shouldn’t be solely re­lied upon.

“If in­ter­est rates aren’t go­ing to in­crease while you are in­vested in re­tail bonds then it’s a good in­vest­ment. How­ever, an eq­uity port­fo­lio will def­i­nitely out­per­form the re­tail bonds’ per­for­mance in the long term but per­haps not over the short to medium term. It all de­pends on your cir­cum­stances,” says Botha.

But RSA Re­tail Sav­ings Bonds do pro­vide guar­an­tees, whereas eq­ui­ties don’t of­fer the same in times of trou­ble. In spite of the “junk” sta­tus be­stowed on South Africa by two rat­ings agen­cies, Ma­tle main­tains that these bonds are safe. “If you were to save to­day we will guar­an­tee that cap­i­tal and the in­ter­est that you’ve been awarded, re­gard­less of the eco­nomic en­vi­ron­ment and any changes that may come,” she says.

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