Stepping out offshore
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