Get ready to take con­trol of sav­ing for your golden years

Weekend Argus (Saturday Edition) - - PERSONALFINANCE -

he year is end­ing with a bang – Na­tional Trea­sury has pub­lished the leg­is­la­tion that will es­tab­lish the much- needed new and stricter struc­ture for reg­u­lat­ing the fi­nan­cial ser­vices in­dus­try.

The Fi­nan­cial Sec­tor Reg­u­la­tion Bill is the first piece of leg­is­la­tion that will cre­ate the new “twin peaks” reg­u­la­tory struc­ture for the fi­nan­cial ser­vices sec­tor. In brief, the leg­is­la­tion will place pru­den­tial reg­u­la­tion (mea­sures to stop fi­nan­cial in­sti­tu­tions from go­ing bank­rupt) un­der the Re­serve Bank and mar­ket con­duct (mea­sures to en­sure you are prop­erly treated) un­der a re­con­sti­tuted Fi­nan­cial Ser­vices Board (FSB). This is great news for all. Last year and ear­lier this year, Na­tional Trea­sury pub­lished five dis­cus­sion doc­u­ments on re­tire­ment re­form, high­light­ing many of the prob­lems that un­der­mine our sav­ings.

To me, the big­gest sin­gle cause of the wide­spread prob­lems in the fi­nan­cial ser­vices in­dus­try is the fact that too many in­sti­tu­tions and se­nior ex­ec­u­tives in the in­dus­try do not treat us and our hard-earned sav­ings with the re­spect we de­serve.

Too many think that once they get their paws on our money it is theirs to do with as they please. The year has again been marked by a life as­sur­ance in­dus­try that con­tin­ues to treat its clients with ab­so­lute con­tempt ( for an ex­am­ple, see “A case of cus­tomers still com­ing last?”, right).

While it is great that gov­ern­ment is mov­ing to clean up the broader fi­nan­cial ser­vices in­dus­try, in the end it is you who must take re­spon­si­bil­ity for your fi­nan­cial well­be­ing.

Key to the re­forms is the re­struc­tur­ing of the FSB, which will have a greater re­spon­si­bil­ity for ed­u­ca­tion – the rea­son be­ing that the more aware you are of the is­sues of sound fi­nan­cial plan­ning, the less likely you are to fall prey to buy­ing poorly de­signed in­vest­ment prod­ucts. An ex­am­ple are those sold by the life as­sur­ance in­dus­try, which have onesided con­trac­tual con­di­tions, al­low for the con­fis­ca­tion of your sav­ings if you break your con­tract, im­pose high costs, and cre­ate per­verse in­cen­tives for prod­uct-flog­gers.

One of the most im­por­tant ar­eas of fi­nan­cial plan­ning is re­tire­ment plan­ning. The chances are that you could spend at least 20 years in re­tire­ment – that is, a pe­riod equal to half of your work­ing life.

The pe­riod you could live as a re­tiree is in­creas­ing be­cause of im­proved health and med­i­cal care. It is this in­creased longevity that is be­hind the prob­lems in many de­vel­oped coun­tries where state-spon­sored re­tire­ment plans in par­tic­u­lar are sim­ply run­ning out of money be­cause re­tirees re­quire an in­come for a longer pe­riod.

If a gov­ern­ment can run out of money to fund the pen­sions of its cit­i­zens, so you can run out of money un­less you plan care­fully. In sim­ple terms: ◆ You have to save more for re­tire­ment by sav­ing more and/ or by work­ing longer;

T◆ You have to take ad­van­tage of ev­ery­thing on of­fer – from su­pe­rior re­tire­ment sav­ing and pen­sion-gen­er­at­ing prod­ucts through to tax in­cen­tives – if you want to en­sure that the cap­i­tal you have saved will pro­vide you with a suf­fi­cient in­come flow for life; and

◆ You must not fall prey to poor prod­ucts that are mis-sold to you.

Suc­cess­ful re­tire­ment plan­ning is based on knowl­edge. Too many peo­ple sim­ply do not know what they have saved or what they need for re­tire­ment. They of­ten in­cor­rectly as­sume that be­cause they be­long to an oc­cu­pa­tional re­tire­ment fund they will have suf­fi­cient sav­ings to re­tire on.

Many of the prob­lems could be solved if more re­tire­ment fund mem­bers un­der­stood what they have to take into ac­count and what they should and should not do.


The pri­mary aim of Per­sonal Fi­nance over the years has been to ed­u­cate you, our read­ers, about all as­pects of fi­nan­cial plan­ning, par­tic­u­larly re­tire­ment plan­ning be­cause of the large sums of money in­volved.

As part of this cam­paign, Per­sonal Fi­nance will join forces next year with the coun­try’s big­gest re­tire­ment fund ad­min­is­tra­tor, Alexan­der Forbes, to help you to plan prop­erly for re­tire­ment on a com­pre­hen­sive on­go­ing ba­sis.

First up, in March, will be an all-day event, the Ready Set Re­tire con­fer­ence, on the most im­por­tant things you need to know about re­tire­ment plan­ning. This will be fol­lowed by the cre­ation of a re­tire­ment plan­ning club, which will meet eight times dur­ing the year and will be stitched to­gether through an re­tire­ment com­mu­nity web­site, which will bring club mem­bers up-to-date in­for­ma­tion and re­search as well as al­low for the ex­change of ideas.

The con­fer­ence will be held in Gaut­eng, the Cape Town area, Dur­ban and Port El­iz­a­beth.

Ed­ward Kieswet­ter, chief ex­ec­u­tive of Alexan­der Forbes, says: “The point of the Ready Set Re­tire re­tire­ment plan­ning en­vi­ron­ment we are cre­at­ing is to en­sure that peo­ple en­hance their chances of a fi­nan­cially se­cure re­tire­ment. Alexan­der Forbes wants to en­able and ac­ti­vate peo­ple to take the pos­i­tive steps in self- ed­u­ca­tion and per­sonal plan­ning that will as­sist in se­cur­ing their long- term fi­nan­cial well­be­ing in re­tire­ment.

“Too of­ten, peo­ple with the best in­ten­tions do not achieve their fi­nan­cial tar­gets. Of­ten, the rea­son is be­cause they do not have the nec­es­sary in­for­ma­tion and tools avail­able.”

By sign­ing up for the Ready Set Re­tire con­fer­ence you will have ac­cess to ex­perts in the field of re­tire­ment plan­ning in South Africa. Sub­jects will in­clude: ◆ The chang­ing re­tire­ment-plan­ning land­scape. This pre­sen­ta­tion will take ac­count of the many fac­tors that are im­pact­ing on re­tire­ment, from longevity, the cost of med­i­cal care, and gov­ern­ment re­tire­ment re­form through to how much cap­i­tal you are likely to need.

◆ Ex­plain­ing eco­nom­ics and why it is im­por­tant to you.

◆ The im­por­tance of un­der­stand­ing in­vest­ing and the im­por­tance of as­set classes in pro­vid­ing you with the op­ti­mum risk-ad­justed re­turns both be­fore and in re­tire­ment.

◆ The chang­ing face of tax in re­tire­ment plan­ning and the im­pact this can have on you. ◆ The risks you face in re­tire­ment. ◆ Your prod­uct choices be­fore and af­ter re­tire­ment.

◆ The psy­chol­ogy of re­tire­ment – adapt­ing to a dif­fer­ent life­style.

The fi­nal pro­gramme, speak­ers and book­ing de­tails will be pub­lished in Per­sonal Fi­nance in the new year.

To con­clude, my best wishes to all our read­ers for the fes­tive sea­son and 2014.

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