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LIVE
YOUR BEST
RETIREMENT
Save and grow your money
Learn, explore and grow
Set the pace
Become empowered
CONFERENCE 2015
MEET YOUR PANEL OF EXPERTS
Anthea Towert
Head of scheme consulting,
Health, Alexander Forbes
Benny Masekwameng
Tsogo Sun executive
chef and MasterChef
South Africa judge
Bruce Cameron
Semi-retired founding editor
of Personal Finance
Cathy Yuill
Adult development coach,
Cathy Yuill UnLtd
Gareth Johnson
Head of retail business,
Investment Solutions
Jenny Gordon
Head of retail legal
support, legal services,
Alexander Forbes
John Anderson
Head of research &
product development,
Alexander Forbes
Laura du Preez
Editor of
Personal Finance
Andrew Auld
Financial adviser,
Alexander Forbes
2
Jeff Spiller
Financial adviser,
Alexander Forbes
Ken Russell
Financial adviser,
Alexander Forbes
CONTENTS
WHAT’S INSIDE
6
“Financial advice
must be an ongoing
relationship as you work
on an overall plan for
your financial well-being”
MONEY
5
19
Save and grow
your money
to reach your
retirement goals.
Learn, explore and
grow your potential
to live your best
retirement.
HEALTH
20
“Recognise this
as an opportunity
for potential
change, growth
and new learning”
24
LIFE
LEGAL
23
31
Set the pace to
live your retirement
to the fullest.
Become empowered
to make informed
decisions about your
future.
“Cultivating healthy habits early
on improves the chances of early
treatment that could increase
longevity and improve your quality
of life.”
3
CONFERENCE 2015
Contents
Show me your number:
Measuring your financial
adviser’s performance
Contributors
6
Tax before, during
and after retirement
10
Decisions, decisions
12
What are you
investing for?
14
Managing your
money in retirement
18
What to do with
your 8 hours
20
Staying healthy
after retirement
24
Your medical aid check-up
27
Know your rights
30
The legal side of saving
32
You use this information at your own risk
Alexander Forbes does its best to give you information that is
current, fair and accurate, but we cannot guarantee it. The
Alexander Forbes Group is not responsible for any loss you or
anyone else may suffer if we have made a mistake or left out
important information in this document. Anyone who uses this
information does so at their own risk. The information in this
document belongs to Alexander Forbes. You may not copy,
distribute or modify any part of this document without the express
permission of Alexander Forbes.
Alexander Forbes Financial Planning Consultants is a
licensed financial services provider (FSP 31753).
Written and designed by Alexander Forbes Financial Services
Communications 8956-2015-02. Images: iStock
4
Rogerio Cabanita
Chief Investment Officer of Retail
Alexander Forbes
Rob Rainier
Regional head: Port Elizabeth
Financial Planning Consultants
Alexander Forbes
Michael Kirkpatrick
Retail Best Practice Specialist
Research & Product Development
Alexander Forbes
Youri Dolya
Retail Best Practice Leader
Research & Product Development
Alexander Forbes
Dr Lerato Motshudi
Medical Adviser, Health
Alexander Forbes
MONEY
MONEY
Save and grow your money to
reach your retirement goals.
5
CONFERENCE 2015
SHOW ME
YOUR NUMBER
Measuring your financial
adviser’s performance
by Rogerio Cabanita
Financial advisers are experts in their field and dedicate
their careers to helping others reach their financial
goals. Think about it like this: if you were an accountant,
you wouldn’t try to do your own plumbing, service your
car or prescribe medicine. Then why would you feel
differently about your finances?
6
MONEY
Professional advisers know what information is relevant to
developing a financial roadmap for you and can separate
themselves emotionally from making decisions on the most
appropriate route to take. They also assess your risks and
likelihood of reaching your goals and aspirations.
The value of advice
Research papers released by Morningstar and other
international advisory firms try to quantify the value-add an
adviser brings to your overall financial plan by making more
intelligent financial planning decisions. This concept is
known as gamma, the value of advice. The study estimates
that an adviser can help a retiree add an extra 1.8% to their
annual income.
This number is based on a model and a few reasonable
assumptions. But the question remains, how can you measure
the value-add your adviser gives you? After all, you pay them
an advisory fee.
An ongoing relationship
You can’t base financial advice on a single investment
transaction, but rather on an ongoing relationship as you
work on an overall plan for your financial well-being.
Your financial adviser helps keep you on track with your
financial plan. They are able to assess your situation and then
map out the appropriate route to take.
Here is a table showing the type of advice your plan should include and how you can measure it:
Type of advice
Formulating a precise
budgeting strategy
Quantifiable measure
Difference in what you save and what you spend
Monitoring an investment
Closing the gap between your current situation and
relative to its objectives
meeting your goals after you get advice
Total wealth asset allocation
Dynamic withdrawal strategy
Efficient allocation that takes your risk and objectives
into account
Valuing the residual and extra savings from your
withdrawal strategy
Annuity selection and
Understanding the pension (annuity) selection and the
allocation
reasons for choosing the pension
Effective tax planning
Increased post-tax return and savings after retirement
Reduced estate duty liability, enough liquidity in estate
Estate planning
wind-up and increased efficiency (simplicity) in
estate planning
Reviewing assurance covers
Identifying, lessening and prioritising all insurable risks
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CONFERENCE 2015
Know more
An important role of an adviser is to raise your general financial knowledge to empower
you to make informed financial decisions. These could be decisions on investments,
risk reduction and understanding the choices you have to make. When you’re educated
about financial security you will start saving earlier and avoid unnecessary strain on your
monthly income as you get closer to retirement. You can use this as a measure of advice.
Track your plan
Many people still believe that the role of an adviser is to
recommend the fund with the highest return. This is in fact
only a tiny element of what an adviser should do for you.
We all have goals in life and the best way to reach these
goals is to have a plan in place. You should value your adviser
according to how close you get to your goal. Your adviser is
like a financial fitness coach, keeping you on track to reach
your goals. This is evident from the results of the Value
of Advice Report 2012 published by Standard Life and
Unbiased.co.uk. They found that people who sought advice
had more sophisticated products and protected their families
more with insurance products. These people also tended to
have a higher savings rate and longer savings periods – all
positive behaviour aimed at securing their financial wellbeing. This is already a measure of an adviser’s value-add.
With access to advice you have a greater likelihood of
adopting a long-term investment strategy, creating better
savings behaviour, choosing tax-efficient investments,
protecting yourself against poor financial decisions, sticking
to your financial plan and avoiding harmful emotional
reactions to your investments. The greatest benefit you will
get is the peace of mind that a professional is overseeing
your finances.
8
The value you get from any financial advice is the difference
between the results achieved by the strategy recommended by
the adviser and the choices you would have made had you not
received the advice.
Budgeting basics
One of the most neglected, but important financial
education areas is the basics of budgeting. If you can’t
budget, you will have problems with:
■■ Investing for the future
■■ Excessive debt
■■ Having enough insurance
■■ Restricted medical aid.
Many people’s financial problems are rooted in not having
a budget, because “if you fail to plan, you plan to fail”. A
financial adviser will help you develop a precise budgeting
strategy. The value-add can be measured by what you save
and what you spend.
Professional advice is an important part of your and your
family’s financial plan – and that goes for everybody. Without
a properly considered plan you may find yourself and your
dependants having to adjust your lifestyle considerably.
MONEY
How much of your salary
will you replace when you retire?
THE ALEXANDER FORBES
PENSIONS INDEX TRACKS
4
RETIREMENT
FUND MEMBERS
TO FIND OUT IF THEY ARE ON TRACK TO BE
FINANCIALLY INDEPENDENT WHEN THEY
RETIRE AT AGE 65.
The Alexander Forbes Pensions Index shows
how much of their salaries they will be able to
replace when they retire, and how that number
changes over time, because of factors like:
±
PAST INVESTMENT RETURNS
EXPECTED FUTURE RETURNS
THE COST OF CONVERTING SAVINGS INTO A PENSION
BORN
1952
75%
1962
1972
1982
Each contributes
JUNE
2012
58.4%
47.8%
DEC
2012
52.9%
38.5% 30.4%
JUNE
2013
59.8%
DEC
2013
68.1%
JUNE
2014
67.1%
50.7%
40.7%
38.1%
DEC
2014
66.7%
50.1%
40.3%
37.8%
MOST RETIREMENT FUNDS AIM
TO HELP MEMBERS REPLACE
75% OF THEIR SALARIES.
According to the latest research 75% will not even be enough
for most South African households. As you can see, although
the Alexander Forbes Pensions Index is improving, these
members still aren’t on track to reach that 75%.
41.4%
37.8%
46.1%
51.9%
41.8%
13.3%
of their
pensionable
salary to their
retirement
fund.
ARE YOU
Speak to an accredited financial
adviser for ways to make sure
you’re on track to retire with
financial independence.
9
CONFERENCE 2015
BEFORE, DURING AND
AFTER RETIREMENT
by Jenny Gordon
The government actively encourages
people to save enough for retirement,
through tax incentives for retirement
fund members. Understanding how
the tax system works will help you
make better decisions in retirement.
10
Tax before retirement
Tax planning for retirement means that you should evaluate
existing tax opportunities and assess whether they will
enhance your overall retirement investment strategy. Bear in
mind that tax savings are important but must not override
other important considerations. For example, you should not
invest in an investment which will not keep up with inflation
merely because there are tax breaks attached.
You can save for retirement with pre-tax and post-tax money.
Pre-tax means that you invest with money that has not been
MONEY
taxed yet, such as when your employer contributes to a fund
or when the money has been taxed but the contribution is
deductible and so the tax is refunded. Pre-tax retirement
funding is only available through approved retirement funds,
such as pension, provident and retirement annuity funds.
However, tax concessions on contributions are not unlimited.
In South Africa, there’s a major problem with people
taking their retirement savings in cash when they
change jobs. That’s why in the vast majority of cases,
individuals only get a fraction of the income they
need in retirement. So it becomes necessary to top
up your pre-tax investments. This means that the
investment amount has already been taxed but there
are opportunities to have the return taxed at a lower
rate. For example, the growth on a unit trust is taxed as
a capital gain and only one-third of the gain is taxable.
The withholding tax on dividends is only 15% and
interest potentially qualifies for an annual exemption.
Moving with the changes
Tax is dynamic and changes regularly. In 2016, the tax
deductions that are currently allowed for retirement funds
will change. Currently, the tax deduction on contributions
differs depending on whether the fund is a pension, provident
or retirement annuity fund. This table shows the current tax
treatment of retirement fund contributions. Together with
these amounts, an employer could claim a deduction of up to
20% of their salary and the employee was not taxed on the
contribution. See the table below.
Employee contributions
Tax treatment for employee
Pension fund
Greater of 7.5% of retirement
funding income or R1 750 is tax
deductible
Provident fund
Not tax deductible
Retirement annuity fund
Greater of 15% of non-retirement
funding income or R3 500 less
current deductions to a pension
fund, or R1 750 is tax deductible
The new rules will harmonise the tax deduction so that it is
the same, regardless of the fund type. From 1 March 2016,
there will be one deduction for all funds. Any employer
contribution will be considered a contribution by the member
and the member will be entitled to a deduction of 27.5% of
salary or taxable income. This can be spread across employer
funds and retirement annuity funds. There will also be an
annual deduction cap of R350 000. To the extent that the
member’s contributions exceed the maximum deduction, the
contributions can be carried forward to future years where the
full deduction has not been claimed. Alternatively, this can
increase the tax-free portion of lump sums when you leave a
retirement fund. Or these can be written off against pension
income in retirement.
A valuable tax feature of retirement fund investments is
that there is no tax on investment growth inside the fund.
This means that investment returns are not taxed during the
build-up phase.
What you pay at retirement
On retirement, R500 000 is available in cash as a tax-free
lump sum. Lump sums of up to R1 050 000 are taxed at a
reduced rate, according to the current tax scales. However,
if one has previously withdrawn from a retirement fund and
paid tax on a cash withdrawal after 1 March 2009, this will
reduce the tax-free lump sum and potentially the lower rates
applicable on retirement. All lump sums taken over a lifetime
are aggregated, so early withdrawals will be detrimental to the
tax concessions at retirement.
Tax in retirement
Pensions are fully taxable in retirement. The good news is
that tax rates in retirement for people over age 65 are usually
lower than during their working years because of enhanced
rebates, medical tax credits and lower incomes.
There is also no estate duty payable on retirement funds on
death, regardless of whether the member dies before or
after retirement.
Keep in mind that tax planning for retirement starts long
before retirement. It is a marathon, not a sprint, and needs to
be fine-tuned all the way.
11
CONFERENCE 2015
DECISIONS,
DECISIONS
by Michael Kirkpatrick, Youri Doyla and Rogerio Cabanita
Before you start marking off the days
to your retirement you need to start
thinking about what type of pension
(also known as an annuity) you’ll buy to
give yourself a regular income after you
get your final pay cheque.
Choosing the right type of pension is unique for each person.
Your retirement income needs are different from those of the
person sitting next to you. With this in mind, we give you
some of the important criteria you need to consider together
with your financial adviser to make this decision.
Standard of living
Inflation is the constant increase in prices over time. All of us
have been exposed to the effects of inflation – just think back
to how much things used to cost 5, 10 or 15 years ago and
how much you’re paying for them now.
At the end of 2007 a loaf of white bread cost R5.89. This
same loaf of bread cost R10.50 at the end of September
in 2013. This is an increase of 78% in just under 6 years.
The point here is not that the price increased, it’s that
someone receiving a pension over this time would have had to
buy this loaf of bread. If their income wasn’t increasing at the
same rate, they would find themselves using a larger portion of
their income to buy the loaf of bread.
Your retirement income should counter the effect of inflation
over time.
Make this part of your plan
There are many different types of pensions on the market.
Below we outline the three basic questions you can ask
yourself to help you narrow down your options:
Will the pension sustain my standard of living?
Will my retirement income be stable?
Will I have enough income to last the rest of my life?
12
Stable income
Getting a retirement income that changes every month
will make it difficult for you to budget, and live within that
budget. This becomes especially difficult if you don’t have
an additional income that you can rely on when your pension
doesn’t pay you enough to meet your expenses. As such, the
income from your pension should be reliable and predictable
throughout your retirement.
Income for life
When considering your pension options, make sure you’ll get a
guaranteed income for life before you sign the dotted line.
MONEY
What to consider when you buy your pension
Discuss your options with your accredited financial adviser before you make any decisions.
Inflation-linked
pension
With-profit
pension
Fixed increase
pension
Guaranteed to keep up
with inflation.
Allows you to share (with
the insurance company) in
the investment profits made
on your pension portfolio.
Pension increases are
based on the inflation rate
for the previous year.
Advantages
■■Your pension keeps
up with inflation and
is protected against
increases in the cost
of living.
■■The pension is paid for
as long as you live.
■■You can choose for
your spouse to get your
pension when you
pass away.
Disadvantages
■■The pension is expensive
because increases are
fully linked to inflation.
■■The pension increases
can be low (even 0%) if
the inflation rate is low.
Pension increases are
determined by the
insurance company, based
on how your money in your
investment portfolios grew.
Advantages
■■The starting pension
amount and yearly
increases are guaranteed.
■■Increases can be good if
investment performance
is good.
■■The pension is paid for
as long as you live.
■■You can choose for
your spouse to get
your pension when
you pass away.
Disadvantages
■■The pension may not
keep up with inflation.
■■You could have a 0%
pension increase if
investment returns
are poor.
Level pension
Living annuity
pension
A fixed increase pension
pays you a lower starting
income, but the pension
increases each year at
a fixed percentage that
you choose.
Also known as a standard
pension, this option pays
the same income for the
rest of your life.
A flexible pension that
allows you to draw
between 2.5% and 17.5%
of your money each year.
No yearly increases.
Pension increases are a
fixed percentage each year
that you choose.
Advantages
■■The starting pension is
higher.
■■The pension is paid for
as long as you live.
■■You can choose for
your spouse to get
your pension when
you pass away.
Pension increases depend
on how much of your
money you decide to draw
each year.
Advantages
■■The pension increases
are predictable.
■■The pension is paid for
as long as you live.
■■You can choose for
your spouse to get your
pension when you
pass away.
Disadvantages
■■The increase percentage
you choose is fixed
for life.
■■The pension might not
keep up with inflation.
Disadvantages
■■You can’t adjust your
income level.
■■The pension will not
increase over time
and will not keep up
with inflation.
Advantages
■■The pension is flexible
and you can leave money
to your beneficiaries.
Disadvantages
■■You could run out of
money if you draw too
much too soon. Only
suitable if you have
more than R1 million
to invest.
13
CONFERENCE 2015
WHAT ARE YOU
INVESTING FOR?
by Gareth Johnson
When preparing for retirement, you need to
look closely at your longevity and finances. The
majority of South Africans don’t save enough
for their retirement years. This means a drop in
living standards and relying on family for support
during retirement. This calls for action.
14
MONEY
Thinking about retirement is not
the same as planning. You need to
be invested and the sooner you
start the better.
On the other hand, if you ‘capitulate to reluctance’,
you could sacrifice returns for comfort by investing in
one familiar asset class or one familiar asset manager,
forgoing the investment returns you could earn if you
diversify across different asset and asset managers in
your portfolio (see the example below).
Impact of investing in a diversified portfolio
We are not all investment specialists. We feel uncomfortable
about investing and managing our investments. No matter
your background or upbringing, comfort is one of the biggest
drivers of investment decisions and therefore returns. Let’s
explore this.
The impact of emotional investing
Your need for ‘short-term emotional comfort’ makes you
reluctant to invest and you hold onto your cash. This
comes at a price. The long-term benefit of investing
compared to holding cash can cost you up to 5% in
returns per year. The graph below shows the impact of
keeping cash uninvested.
R6 323.63
R100
January 1987 to January 2015
When you hear your friends boasting about their
investment returns, you fear losing out – also known as
‘loss aversion’ – and you join the so-called ‘herd’ and
invest more actively. This gives you some comfort as
you believe you’ll feel more emotional pain from losing
out on returns than by achieving returns. This can lead
to ‘excessive investing’ – you constantly adjust your
portfolio to take advantage of perceived market trends,
unknowingly increasing or decreasing your risk.
Keeping your money under the mattress
R100
R11.75
What is the cost of emotional comfort in investing?
An estimated 2–3% per year in lost returns. This loss,
referred to as the behavioural gap, stems from your
financial decisions that are optimal in the long term,
but are uncomfortable to live with in the short term.
January 1987 to January 2014
15
CONFERENCE 2015
Challenges on the horizon
Current investment challenges include low investment
returns, market volatility, negative sentiment and the
questionable role of benchmarks.
These challenges call for a new investment approach
in diversified portfolios. An approach that focuses on:
■■ Goal setting rather than beating benchmarks
■■ Reducing the risk shares bring
■■ Providing acceptable risk levels
■■ Moving away from conventional growth and
defensive assets
■■ Employing a more dynamic approach to asset
allocation that counteracts low returns, market
volatility and the reduced correlation between
bonds and shares.
We believe we can improve returns by focusing on achieving
best ‘anxiety-adjusted returns’; in other words, the best
return you can achieve for the level of stress you’re going
to experience during your investment journey. Some of this
stress comes from taking risk, and a great deal arises from
your emotional responses to fluctuations during the journey.
This brings us to goal-based investing. This is different from
conventional approaches where returns are measured against
a benchmark. With goal-based investing, the focus shifts from
achieving the best investment returns to managing personal
financial goals. It helps to prevent rash investment decisions
by providing clear goals, such as retirement planning, and
choosing investment strategies to achieve these.
Goal-based investing attempts to foresee and understand
investors’ future liabilities and protect their portfolios
against such liabilities. With the help of a financial adviser,
it considers investment products and strategies after
understanding what the investor wants and how they can get
there. It’s about focusing on consistently achieving investors’
goals with an appropriate investment strategy.
This does not mean a conventional approach to managing
your diversified portfolio is wrong, or that a high allocation to
shares isn’t appropriate for the long term. In fact, managing
funds to a pre-agreed benchmark makes it easy for you to
know the risk and return you’re likely to encounter. Growth
and defensive assets are still easy to understand and there
is no evidence that shares have lost their long-term ability
to deliver.
Investment Solutions’ approach is not to ignore the human
need for comfort. We understand investors and the challenges
they face to achieve their financial goals, and we offer
practical and individually targeted advice to give comfort and
overcome the behavioural gap.
This means we challenge the conventional idea of looking for
best risk-adjusted returns that are only concerned with longterm financial goals and which ignore human emotions during
the investment journey.
16
However, if you have a
specific need or income
requirement, it’s worth
considering an absolute
goal-based approach.
MONEY
The risks retirees face
Longevity
Consumption
Research shows people are living at least
another 20 years after retirement.
Creating a decent pot of savings and
choosing the right pension can reduce
this risk.
In retirement, you have to ensure that you
don’t run out of savings. The rate at
which you use up your savings should be
carefully reviewed on a regular basis.
Inflation
At the current inflation rate of about 6%
a year, in 12 years’ time R1
will have the buying power of
50 cents. Add on the inflation for medical
cover and you can see why you need to
protect your plan against inflation.
Choice
There are 5 basic types of pensions
you can buy at retirement (see page
13). Understand your needs at retirement
so that you choose a pension that will best
meet your needs.
17
CONFERENCE 2015
MANAGING YOUR
MONEY IN RETIREMENT
by Rob Rainier
Retirement is an opportunity to push
the reset button, and begin the next
chapter in your life. As you plan for
your best retirement, here are some
tips to help you manage your money
for this phase in life.
Your first steps
To make sure you manage the money you have
saved up you should:
■■ Get advice on how best to invest your
hard earned savings from a professionally
accredited adviser who will offer objective
advice and play the role of coach during
your retirement years.
■■ Realise that you’re going to be accountable
to pay yourself each month from the
available money you’ve saved up during your
working life.
■■ Know that retiring into a low inflationary and
low interest rate environment means that
you are going to have to save more to get a
reasonable monthly pension.
18
Tips on how to make sure your savings last.
Tips on how to make sure your
savings last.
Make a budget: Identify what you’re spending now,
and try to forecast if there will be any changes to your
budget once you’re retired. Will your house and car be
paid off? Will you be travelling once a year? Make note
of this in your budget.
Target unnecessary expenses: These are things you
spend money on that you definitely don’t need. It may
be the extra meals at restaurants, or the wardrobe
items you never really wear. Look at your expenses in
detail to identify what you can adjust in your budget.
Target excessive expenses: These are things you
need, but that you could get more cheaply. Have you
shopped for insurance lately? Could your next car be
better at reducing fuel consumption?
Have discipline: Once you have a budget, you need
discipline to make sure you stick to it. Some people
give themselves a weekly allowance in cash, and don’t
spend beyond that. Others take their credit cards out
of their wallets when they have reached their spending
cap for the month.
LIFE
LIFE
Learn, explore and grow your
potential to live your best retirement.
19
CONFERENCE 2015
WHAT TO DO
WITH YOUR
by Cathy Yuill
HOURS
In life we experience many stages.
Stage one is preparation, where we
learn and grow, supported by family.
We then move on to experiment
with places to live, relationships
and careers in stage two. Our next
phase is playing out the choices we
made previously. Then comes stage
four – the phase you are now facing.
A time for integration, where you
have an opportunity to step into the
whispers from the future to become
your dream.
20
LIFE
We would love to fulfil our highest promise of potential in
these years, yet we instinctively know that this involves hard
work and change. It involves letting go of the familiar and
letting come the ‘not yet known’.
This is the stage where we need to develop a compelling
vision of the future; a future that does not assume a
trajectory of decline after sixty, but rather recognise this as an
opportunity for potential change, growth and new learning.
So if you have arrived at the fourth stage of your life, and you
have found yourself with eight or more hours to fill every day,
what do you do with them? Perhaps you need a map and a
guide as you embark on this journey.
Your journey to living your best retirement
While financial security is an important consideration, there is
more to the art of growing older.
We are growing older in a society that does not expect much
from us as an elder. The culture does not challenge us to
grow and become more; rather, the expectation is that we will
fade and become less.
Finding a positive role or a challenging assignment is really
up to us. Society encourages us to step out of main stream
culture and move to a ‘retirement village’, become consumers
in a niche market, relax and have fun and in doing so makes
poor use of the incredible potential and talent that lies in this
community of people over sixty.
Emergence means change and as
human beings we have a unique
way of resisting this change.
Take the time to think about what
you want to do with your time in
retirement to fully live up to your
potential in these years.
How can you remain engaged in the total
flow of life? For each of us, the story will
be different, but here’s a map you could
consider following. Let’s call it the map of
emergence.
Step
Go to the source
This means to go deep inside of yourself,
notice the richness you already hold, and listen
carefully to the whispers from the future. What
are those whispers calling you to do?
Step
Build the courage to act on those voices
Develop a beginner’s mind, take a leap of faith
and be prepared to become ‘the fool’ in the
process as you try new things. Trust in self and
others needs to be high to take this leap – this
needs to replace cynicism and past experience.
Step
Create a new vision
Be quiet and centred, taking advice from the
inner voice. In doing so, you begin to wake up
and grow up.
Step
Bring creativity to what you’re doing
This is an attitude, an inner approach and you
may at times need to become the rebel as you
swim against the tide of public opinion that says
that we are on the decline and offers us few
roles as leaders, workers or mentors.
Step
Integration
Bring together all aspects of your life, of your
mind, body and soul. The conflict and resistance
is inside of you and that is where first resolution
and then integration and maturity takes place.
01
02
03
04
05
21
CONFERENCE 2015
YOUR STORIES
Living your best retirement means something different to
each person. A few retirees share their thoughts:
Yvonne Philips
“Accepting changes in your life and in the world in general will help you live a
happy retirement. Patrick and I spend our time travelling, camping and helping
with community affairs. So far we’ve climbed in the Drakensberg, Pyrenees,
Himalayas, Caucasus, Andes, New Zealand and Kilimanjaro.”
Patrick Dillon
“The secrets to a happy retirement are good friends who enjoy the same pursuits
as you, good financial planning so that you can afford to do what you want
to do and staying good friends with your children. The young crowd will keep
you young.”
Gilbert Goor
“I adjusted my dream to realities. I’ve sailed around the world, seen interesting
things and met interesting people. Retirement must be planned at an early age.
You should have a good idea on what to do with your daily 24 hours of free time.
That way you can focus your energy and financial means towards your goal or
dream without wasting any of it on trivial things.”
John Bishop, semi-retired
“This time has taught me the value of keeping my mind active in retirement. I’ve
also seen the value that retirees and semi-retirees can add to ‘youngsters’ and
newcomers in the workplace.”
22
HEALTH
HEALTH
Set the pace to live your
retirement to the fullest.
23
CONFERENCE 2015
STAYING
HEALTHY
AFTER
RETIREMENT
by Dr Lerato Motshudi
It is important to be financially fit in
retirement, but it’s just as important to
be healthy to enjoy your retirement to
the fullest. These five simple steps are
all you need to improve your health now
and into your retirement.
24
HEALTH
Health bite
According to the World Health Organization the most
common medical conditions in old age are:
■■ Musculoskeletal (arthritis and other joint problems)
■■ Cardiovascular (heart disease, high blood pressure
and stroke)
■■ Mental illness (depression, stress-related disorders)
■■ Cancer
■■ Chronic lifestyle conditions
Cut down on alcohol
Alcohol misuse can lead to
liver disease, heart disease
and several other medical
conditions.
It has also been shown that
people who are forced to stop
working for reasons beyond
their control such as ill-health
have increased their alcohol
consumption in retirement,
leading to a poorer quality of
life compared to those who
retire normally.
Health bite
A study conducted on over
34 000 medical doctors,
published in the British
Medical Journal showed that
quitting smoking at age 40
added 9 years to your life,
if you quit at age 50, you
gained 6 years and at age
60, 3 years.
Stop smoking
Cigarettes contain more than
4 000 toxins, many of which
have been proven to increase the
likelihood of cancer.
Tar in cigarettes lines the airways,
causing lung diseases and
cancers. Nine out of every ten
cases of lung cancer are related
to smoking.
Health bite
Mayo Clinic indicates that red wine contains antioxidants and resveratrol, which are both good for the
heart and for raising good fats (HDL). A glass of red
wine a day with your meal is adequate and healthy.
Exercise
Regular exercise that raises your heart
rate for 30 minutes is beneficial to
your health. A brisk walk, swimming or
aerobic exercise at least three to five
times a week are good habits to cultivate.
These fitness activities also produce
‘happy’ hormones called endorphins
which reduce stress and lift your mood.
It’s also important to allow the body to
rest, so have exercise-free days to allow
the muscles to rest.
Health bite
Take a step outside – being out
in the sun produces vitamin D
and improves the absorption of
calcium. Just remember to put
on sunscreen before you step into
the rays!
25
CONFERENCE 2015
Eat healthy foods
Eating the right food helps to build the immune system,
fight off cancer-causing cells, maximise muscle building
and cut down fat. Eating a healthy balanced diet means
having a variety of greens, carrots, fruit, milk, nuts and other
food groups. Reducing salt and fatty food is also important.
Each of these contain different nutrients and elements such
as vitamins A, C, E, selenium, fibre, iron, magnesium and
calcium which help keep your immunity strong. Calcium and
magnesium are good for keeping bones strong. You can also
take supplements if you don’t eat a fully balanced diet.
Health bite
From age 40, mammograms for females should
be done once a year together with other screening
assessments. From age 50, a colonoscopy may be
recommended for some patients to identify polyps and
other colon cancer risk factors.
Go for your annual medical check-up
There are several ‘silent’ diseases, which if not picked up
through routine check-ups before any symptoms appear will
only be evident when there are severe complications already
and it may be too late to cure or manage them.
Health bite
■■ Don’t skip breakfast.
■■ Eat five small meals a day.
■■ Drink eight glasses of water daily.
■■ Increase fibre and roughage.
■■ Eat supper at least two hours before you go to bed
to allow for proper digestion.
Therefore, visit your family doctor and dentist at least once a
year for a general check-up, which includes checking for:
■■ Hypertension
■■ Diabetes mellitus
■■ High cholesterol
■■ Cancer
Your doctor should test your thyroid function, do a pap smear
for females and a prostate exam for males, check for breast
and skin cancer as well as refer for other investigations
appropriate for your age. Your family doctor will need a detailed
history to recommend the most appropriate assessments to
proactively manage any treatable medical conditions.
Cultivating these healthy habits early on improves the
chances of early discovery of diseases and early treatment
that could increase longevity and improve your quality of life.
26
HEALTH
YOUR
MEDICAL AID
CHECK-UP
By Anthea Towert
Eating an apple a day might keep
the doctor away, but there are some
things you need to know about medical
aids, health insurance, gap cover and
prescribed minimum benefits to keep
your retirement plan financially healthy.
27
CONFERENCE 2015
The need for health insurance
In South Africa’s health sector, there is no regulation which
governs the tariffs charged to patients by health professionals,
so private practitioners can determine their own fees. This
often results in a significant gap, reaching as much as 450%
to 500% between what is charged by a private specialist
doctor and what is reimbursed by medical schemes.
These costs have resulted in strong public support for health
insurance cover, specifically hospital cash plans and gap
cover products.
What is health insurance?
A health insurance policy is a contract sold by an insurance
company. The policy promises to pay for certain stated or
fixed benefits if you are ill or injured. You pay a monthly
premium, which is directly related to your age, health status
and income. Specific types of exclusions may also be built
into a policy, such as a maximum age at entry which excludes
older people for cover, in particular retirees.
The gap cover policy is a specific type of short-term health
insurance designed to protect medical scheme members
from costs not covered by medical scheme benefits. It pays
the difference between the actual fees charged by health
professionals (anaesthetists, surgeons, other specialists, GPs
and so on) and the medical scheme reimbursement tariff, for
medical and surgical procedures done in-hospital only, not
out-of-hospital.
A hospital cash plan, in contrast, targets non-medical
scheme members who want to insure themselves against
using the public sector. The policies are more affordable
compared to medical scheme cover and pay a fixed rate for
each day spent in hospital. The benefit is usually paid only
after day two or three of hospitalisation. Day procedures such
as a burst appendix, which don’t need an overnight stay, may
not be covered.
Understanding your prescribed minimum benefits
Your prescribed minimum benefits (PMBs) are a basket of
care that all medical aid members are entitled to, regardless
of the benefit option you join. This is to make sure that in
28
spite of your state of health or age, you have a safety net –
access to a basic level of healthcare cover.
The basket of care must provide for the diagnosis, treatment
and ongoing care costs for:
■■ A limited set of 270 conditions called the diagnostic
treatment pairs (DTPs)
■■ A list of 27 chronic illness conditions sometimes referred to
as the chronic disease list (CDL)
■■ Any emergency condition
Medical aids must pay PMBs in full without
co-payment, from the risk benefits of the scheme,
and not from your day-to-day benefits.
This means that you may have to use designated service
providers (DSPs) to avoid making a co-payment. These are
healthcare providers chosen by the medical scheme as
preferred or first choice providers. DSPs include hospitals,
pharmacies, doctors and specialists. If you get a service from
a non-DSP involuntarily because of an emergency then the
scheme is obliged to pay for the treatment in full. Medical
schemes can nominate state facilities for the minimum level
of care, but they must make sure that this facility has the
capacity to deliver.
Avoiding co-payments
To avoid a co-payment, members are obliged to follow a
prescribed treatment plan and to use the formulary drugs.
However, if you need more frequent or extra services than
provided for in the protocols or if a drug on the formulary
is ineffective or would cause an adverse reaction, you can
appeal to your medical aid scheme. The scheme’s appeal
process might include a motivation from the treating doctor
that explains the clinical reasons for additional services or
drug substitutions.
HEALTH
What to consider when you choose
your medical aid scheme
Size of the fund
Larger schemes have more stable claims.
A growing scheme shows that the product is reliable.
Age profile of the
medical aid scheme
This will have a direct impact on your claims and
contribution increases.
Operating results
Positive results lead to lower contribution increases.
Solvency
Minimum solvency requirement is 25% – anything
below this could mean higher contributions or benefit
restructuring.
Contribution history
Shows how well a scheme can manage its claims and risks.
29
CONFERENCE 2015
KNOW YOUR RIGHTS
by Anthea Towert
Your medical aid rights and obligations checklist
You have rights and obligations as a medical aid scheme member.
Keep these member rights and obligations in mind to make sure your plan is in check.
You have the right to:
You have the obligation to:
■■ Membership of one medical scheme at a time.
■■ Do your research before choosing a medical scheme to make
sure the scheme is in good financial health and has good
corporate governance in place. An accredited healthcare
broker can assist you.
■■ Continue membership until death. This is known as
guaranteed cover.
■■ Have your medical records kept safe and confidential
(Protection of Personal Information Act).
■■ Receive payment in full and without co-payment for the
prescribed minimum benefits from the risk benefits of the
scheme, and not from day-to-day benefits.
■■ Have claims paid within 30 days of receiving a claim.
■■ Change your benefit option each year on 1 January.
■■ A copy of the registered scheme rules, prescribed minimum
benefits treatment protocol and drug formulary for your
registered chronic illness condition.
■■ Receive written proof of membership and a certificate of
membership when you resign from the scheme.
■■ Lodge a complaint or dispute; first with the scheme directly,
then with the scheme’s dispute committee if you’re not
satisfied with the response and lastly with the Registrar’s
office at the Council for Medical Schemes.
30
■■ Give full medical disclosure on admission to membership.
■■ Choose a benefit option that meets your medical needs
and affordability.
■■ Understand how your benefits work, especially the prescribed
minimum benefits.
■■ Not commit a fraudulent act or claim against the scheme
such as buying sunglasses or other non-medical items or to
loan your membership card to another person.
■■ Pay contributions within three days of the due date.
■■ Submit claims within four months of the date of service
or treatment.
■■ Abide by the rules of the scheme.
■■ Take part in your scheme’s annual general meeting where
members voice opinions, ask questions and present motions.
■■ Nominate new trustees with the right skills set to serve on
the board of trustees.
Become empowered to make
informed decisions about your future.
LEGAL
LEGAL
31
CONFERENCE 2015
THE LEGAL
SIDE OF
SAVING
You’ve decided to take a
step and sign up for a new
financial product such as an
investment.
We interviewed Jenny Gordon, and asked her to
suggest ten tips to bear in mind before you sign
on the dotted line.
32
LEGAL
01
02
03
04
05
Understand the product
One of the most important aspects of financial planning
is to fully understand any product you will be buying,
contributing towards or investing in. Whenever you make a
financial commitment it is important to understand what
your expectations are of the product.
Ask questions, and then ask again
There are no silly questions when it comes to your
financial plan. Your application form and other supporting
documents, such as policy documents and a fund member
booklet, make up the basis of your contract with the
product provider. Make sure you have read the terms. If a
contract refers to a disclaimer or a website or an addendum
in another document, make sure you see this before you
sign the contract or fill in a form. Only sign the document
once all your questions are answered.
06
07
08
Say no to jargon
Don’t sign anything you don’t understand. Ask your
financial adviser to explain any legal or financial terms that
you’re not familiar with. You must understand every aspect
of what you are signing into before you take the
next step. Insist that language and definitions that you
don’t understand are explained so that you can make an
informed decision.
Discuss fees
Find out if there are any fees you will have to pay, such
as advice fees and administration fees. An advice fee is
an agreed fee between you and your adviser. Ask about
the service that you will get in return for that
advice fee.
Make sure you understand the charges at every level
Once you sign up for an investment or financial product
there may be charges at different levels of the agreement,
such as charges to an asset manager, the administrator and
your financial adviser. These fees may have an impact on
your savings, so it is important to understand the applicable
charges and the potential effect on your financial product.
09
10
Always deal with someone you trust
By working together with an accredited financial adviser that
you trust, you will be able to build a relationship that has
your future goals in mind. Use only reputable companies for
investments and make sure that people have the appropriate
qualifications, such as a Certificate in Financial Planning, to
work with you on your financial plan.
Give all necessary details
Make sure you give your adviser sufficient details of your
current financial status, goals, existing products, debts
and other necessary information so that your financial
adviser can give you the correct advice that is suited to your
unique needs. Inadequate or incomplete information could
jeopardise the financial goal you’re working towards.
Record it
Keep all signed copies and records of your investments,
policies and your will filed in a safe place, such as your
Ready Set Retire folder, and let your next of kin know where
they are kept. This is to make sure that if something were
to happen to you, your family will know where to find the
necessary documents at a time when they will need
them most.
Change is good
When a life change happens, such as the birth of a child or
grandchild or you get married or divorced, consider whether
any changes need to be made to your will, beneficiary
nominations or financial plan. Do you have sufficient life,
disability and severe illness cover? Do you have the correct
medical aid plan for your current needs?
Your last word – your will
Don’t let anyone else have your last word. Make sure that
your will is up to date and that all legal documents that
deal with your investments and policies correctly reflect
your current financial status. It is often a good idea to
write a letter or keep an inventory of your financial affairs,
with the name of your financial adviser, together with
your will so that your executor is aware of all your
financial products when winding up your estate.
33
CONFERENCE 2015
Customer satisfaction
If you are dissatisfied with the service you have received from a financial adviser, there are steps you can take. First
you must lodge a formal complaint with the service provider. If you are not satisfied with the way your complaint was
handled, you can speak to the relevant ombudsman or adjudicator.
For complaints about life insurance, contact the Long-term Insurance Ombudsman:
Telephone: 021 657 5000
Fax: 021 674 0951
Email: info@ombud.co.za
Website: www.ombud.co.za
Private Bag X45
Claremont
Cape Town 7735
3rd Floor, Sanclare Building
21 Dreyer Street, Claremont
Cape Town 7700
For complaints about financial services, contact the Financial Services Providers Ombudsman (also known as the FAIS Ombud):
Telephone: 012 470 9080
Fax: 012 348 3447
Email: info@faisombud.co.za
Website: www.faisombud.co.za
PO Box 74571
Lynnwood Ridge
Pretoria 0040
Ground Floor, Baobab House
Eastwood Office Park, Corner of
Lynnwood Road and Jacobson Drive
Pretoria 0081
For complaints about retirement funds, contact the Pension Funds Adjudicator:
Telephone: 012 346 1738
Fax: 086 693 7472
Email: enquiries@pfa.org.za
Website: www.pfa.org.za
34
PO Box 580
Menlyn
Pretoria 0063
4th Floor Block A,
Riverwalk Office Park
41 Matroosberg Road
Ashlea Gardens, Pretoria 0081
COMMUNITY
TAKE YOUR PLAN ONLINE
Visit www.readysetretire.co.za for more interesting articles,
views from our experts and to get more information on the
Ready Set Retire Club events.
35
We create, grow
and protect your
wealth and assets.
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A licensed financial services provider