Ad­van­tages of life as­sur­ance in­vest­ments

Weekend Argus (Saturday Edition) - - PERSONALFINANCE -

Ad­van­tages of­fered by life as­sur­ance in­vest­ment prod­ucts in­clude:

◆ In­vest­ment guar­an­tees – al­though some of the guar­an­tees are ques­tion­able. For ex­am­ple, I re­ceived a let­ter from Lib­erty on a re­ally an­cient pol­icy I have, telling me that its smooth bonus pol­icy is “de­signed to pro­tect you against mar­ket vo­latil­ity while still giv­ing you ac­cess to an in­vest­ment in eq­ui­ties and bonds, which should en­sure re­turn in ex­cess of in­fla­tion over time”.

And then Lib­erty tells me that it is grant­ing nonguar­an­teed re­turns of six per­cent from Jan­uary to July and 8.5 per­cent for Au­gust and a guar­an­teed 0.5 per­cent for the full pe­riod. The non-guar­an­teed part can be re­moved if mar­kets go south. This is hardly meet­ing its claim that the prod­uct is “de­signed to pro­tect you against mar­ket vo­latil­ity”, when the in­fla­tion rate is about six per­cent and the only pro­tec­tion I have is for 0.5 per­cent.

◆ Your en­tire hold­ings in life as­sur­ance poli­cies can­not be touched for five years by cred­i­tors if you go bank­rupt. The pre­vi­ous pro­tected amount of R50 000 was made open-ended in re­cent leg­is­la­tion. If your money is in a col­lec­tive in­vest­ment scheme such as a unit trust or ex­change traded fund, it could be claimed by a cred­i­tor.

◆ All life as­sur­ance ben­e­fits, whether for risk as­sur­ance or in­vest­ments, can be paid di­rectly to named ben­e­fi­cia­ries on your death. This means that they will not be sub­ject to ex­ecu­tor fees of 3.5 per­cent plus VAT.

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