Step­ping out off­shore

Finweek English Edition - - UNITTRUSTS -

IT’S NOT OF­TEN a jour­nal­ist gets to say he’s about to come into a “chunk of change” but that was the sce­nario I was faced with last week. So I de­cided to in­vest some time look­ing at op­tions to diver­sify my hum­ble off­shore port­fo­lio. The first les­son I’ve learnt about in­vest­ing over­seas is that there’s a sig­nif­i­cant dif­fer­ence in the price of get­ting into a US dol­lar-de­nom­i­nated prod­uct as op­posed to a rand-de­nom­i­nated one. Sec­ond, fees still make it pro­hib­i­tive for many smaller re­tail in­vestors to get a foot in the off­shore door.

Be­ing a Dis­cov­ery client, I thought I’d check out its of­fer­ing from Dis­cov­ery In­vest as a start­ing point. Be­ing near 30 it now makes sense to look at some form of re­tire­ment or en­dow­ment prod­uct and the one that jumped out at me was the Dis­cov­ery In­vest Off­shore En­dow­ment Plan. The prod­uct ap­peals to me be­cause it in­te­grates with my ex­ist­ing Dis­cov­ery Life in­surance prod­uct through its Off­shore Up­front In­vest­ment In­te­gra­tor, which will pro­vide me with a boost of 10% of my ini­tial lump sum pre­mium. Af­ter five years I have the op­tion of with­draw­ing 50% of the Off­shore Up­front In­vest­ment In­te­gra­tor, plus growth, or rein­vest­ing it into its Off­shore En­dow­ment Plan. Af­ter 10 years I can cash in the bal­ance.

Kenny Rab­son, deputy CEO at Dis­cov­ery Life, notes the en­dow­ment pro­vides tax ad­van­tages: any in­ter­est in­come earned as en­dow­ments is taxed at 30% rather than some­one’s mar­ginal tax rate of up to 40%. “Al­though less flex­i­ble in terms of be­ing able to ac­cess funds in the first five years, the tax ben­e­fits are worth pur­su­ing if you don’t need full ac­cess to your money. Even where ac­cess is re­quired, you can make one with­drawal in the first five years of your cap­i­tal and growth capped at 5%/year,” says Rab­son.

The as­pect that did ap­peal to me was the fact the plan at­tracts rel­a­tively low fees and is also tax friendly. There’s a 0,5%/year Dis­cov­ery In­vest an­nual


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