When Pen­sion Plan­ning, Think Global

Premier Magazine (South AFrica) - - Contents - Text: Gavin Smith, Head of Africa at de­vere Acuma Im­age © istockphoto.com

Plan­ning for your golden years to en­sure you have enough money to en­joy a qual­ity life­style is one of the most im­por­tant fi­nan­cial ac­tiv­i­ties you can do for your­self.

When it comes to in­vest­ing money for your fu­ture re­tired self, many in­vestors want­ing to mit­i­gate do­mes­tic risks are en­cour­aged to think about their pen­sion plan­ning on a global scale.

In South Africa, like the rest of the world, shifts in the eco­nomic and po­lit­i­cal realms af­fect in­di­vid­ual fi­nan­cial se­cu­rity. Di­ver­si­fy­ing one’s wealth port­fo­lio helps to off­set po­lit­i­cal and eco­nomic head­winds. Fi­nan­cial down­turns, re­stric­tions on cap­i­tal flows, over­reg­u­la­tion, pop­ulist eco­nomic re­forms, and new tax laws all af­fect in­vestor con­fi­dence and per­sonal wealth.

Lax on cor­rup­tion, the Zuma regime over­saw the mis­man­age­ment of fi­nances at State-owned en­ti­ties, which have be­come a bur­den on the fis­cus. Their re­liance on gov­ern­ment bailouts con­tinue to pose a ma­jor risk to the econ­omy.

In the months since Cyril Ramaphosa took of­fice, the boards of prob­lem­atic paras­tatals have been over­hauled to strengthen gov­er­nance and fi­nan­cial con­trols.

How­ever, even in times of op­ti­mism, smart in­vestors should re­mem­ber that pol­i­tics is a fickle do­main. High-net-worth in­di­vid­u­als must be cir­cum­spect when mak­ing in­vest­ment de­ci­sions based on po­lit­i­cal sen­ti­ment.

For­ward-think­ing South Africans con­sider in­ter­na­tional pen­sion plan­ning as part of their di­ver­si­fi­ca­tion strat­egy as it typ­i­cally al­lows in­vestors to re­tire at a time and in a man­ner that suits them.

In my ex­pe­ri­ence, high net-worth in­di­vid­u­als pri­ori­tise a “Plan B” or peace of mind over and above a mind-set of purely seek­ing cap­i­tal growth. They deem it im­por­tant to be able to choose when they want to re­tire, with a level of in­come that pre­serves their stan­dard of liv­ing, wher­ever they are.

In­ter­na­tional pen­sions al­low an in­di­vid­ual to save in for­eign cur­rency, re­ceive an al­ter­na­tive in­come stream as they move through re­tire­ment, and ben­e­fit from the favourable tax treat­ment of pen­sions by many gov­ern­ments glob­ally.

High-net-worth in­di­vid­u­als are fac­ing pos­si­ble new threats from a tax per­spec­tive. Although the Davis Tax Com­mit­tee (DTC) found that the in­tro­duc­tion of a “wealth tax” was not fea­si­ble in the short-term, the com­mit­tee pro­posed that all per­sonal in­come tax­pay­ers above the fil­ing thresh­old be re­quired to sub­mit a state­ment of all as­sets and li­a­bil­i­ties from 2020 on­wards.

Cryp­tocur­ren­cies are also on the radar of tax col­lec­tors. The South African Rev­enue Ser­vice re­gards cryp­tocur­ren­cies as in­tan­gi­ble as­sets, so tax­pay­ers are ex­pected to de­clare gains or losses.

With con­stant changes to the po­lit­i­cal, eco­nomic, and reg­u­la­tory land­scapes, it is essen­tial that in­vestors are equipped with the right fi­nan­cial plan­ning tools to nav­i­gate any changes in the mar­ket and pre­serve their wealth.

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