Personal Finance - 25 April 2015
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P E R S O N A L F I N A N C E 2 SATURDAY STAR April 25 2015 PSG Wealth Financial Planning (Pty) Ltd is an authorised fnancial services provider. FSP 728 For more information, call 0800 551 552, email [email protected] or visit psg.co.za PUBLICISMACHINE 7793/E We keep our advisers independent, so they’ll only do what is best for you, not us. We believe that you should receive tailor-made advice to suit your needs. That’s why, by making our advisers independent, you’ll benefit from solid, unbiased advice that will yield the best results. YOUR QUESTIONS ANSWERED I went to Canada in 2001 and planned to stay for about six months. Almost 15 years later, I am still in Canada. I did not emigrate, and I hold dual citizenship. My retirement annuity (RA) will mature in a few months. Since I have been in Canada, I have contributed about R2 million to the RA. I did not submit tax returns to the South African Revenue Service (SARS) and did not claim any tax deductions. The RA was started 10 years before I left for Canada, and I claimed those contributions against tax. Can I use the contributions that I did not claim since 2001 as part of my tax-free lump sum (R500 000) and invest the difference in a living annuity? What is the tax scale if I decide to take everything to Canada? Name withheld on request Marius Cornelissen, a financial adviser at PSG Wealth in Menlyn, Pretoria, responds: Your situation is complicated because you are a non-resident and did not claim the tax deductions from SARS. An option is to emigrate formally, in which case you will have to obtain approval from the South African Reserve Bank to access the funds in the RA. This will be regarded as a withdrawal, which will be taxed according to the retirement lump sum withdrawal table. The first R25 000 will not be taxed, if you did not receive any previous benefits in the form a lump sum. Any amount between R25 001 and R660 000 will be taxed at 18 percent; any amount between R660 001 and R990 000 will be taxed at 27 percent; and any amount from R990 001 or more will be taxed at 36 percent. If you decide to buy a living annuity, you can take up to one-third of the benefit in cash, while the balance will be invested in the living annuity, or you can use the entire amount to purchase a living annuity. If you decide to take one-third as a cash lump sum, it will be taxed according to the retirement lump sum table. The first R500 000 will not be taxed, if you have not taken lump sums previously. Unfortunately, in your case, you cannot use a portion of the contributions that you did not claim from SARS as part of your tax-free lump sum. SARS allows taxpayers to deduct from the lump sum the contributions that SARS did not previously allow as a deduction. This has the effect of reducing the actual lump sum that is taxable, because any contributions that were not allowed as a deduction are deducted from the lump sum before it is taxed. However, you did not claim these contributions as a tax deduction, as opposed to SARS not allowing the contributions to be deducted against tax. Therefore, SARS may disallow you from deducting the contributions you did not claim from the lump sum. I would advise you to consult a South African-based auditor, tax consultant or financial adviser for advice on the best way to proceed. I have a retirement annuity (RA) that will mature in 2022. Its current value is R781 416. I contribute R4 268 a month. The annual premium escalation is 15 percent. The illustrated maturity values are R1 737 132 at growth of four percent and R2 492 870 at growth of 10 percent. Can I rely on these targets for financial planning purposes? Should the growth not be in line with market conditions – about 12 percent? Kevin Martin Pierre Puren, a financial adviser at PSG Wealth in Jeffreys Bay, responds: The product provider uses the illustrated maturity values merely as a guideline to indicate the future value of your investment if you pay the contracted premium and certain growth rates prevail. The actual return will not depend on the provider’s illustrations or assumptions, but will depend on the performance of the underlying fund, or funds, you chose. Your financial adviser can help you to calculate the future value. If you adhere to the contracted contributions to maturity, the following can be used as a guideline with your requested growth rate of 12 percent a year: ◆ Growth of underlying fund less costs: 12 percent a year compounded monthly ◆ Premiums compounded monthly with annual growth of 15 percent ◆ Term to maturity: Seven years (or 84 months) ◆ Future value of premiums paid therefore amount to R968 749.61 ◆ Plus growth in current capital of R1 802 510.06 ◆ Total illustrative value at maturity: R2 771 259.67 You should be cautious of assuming that past performance is an indication of future returns. Most financial products have ongoing costs – management fees, administration fees or adviser fees. The growth rate that is assumed must therefore be net of these fees when projections are made. Ensure you are familiar with the relevant costs associated with your RA and that your underlying investment is allocated to funds that suit your appetite for risk. Who can I contact to establish whether my employer has the right unilaterally to convert my pension fund from a defined-benefit (DB) fund to a defined-contribution (DC) fund? Name withheld Anton Prinsloo, a financial adviser at PSG Wealth in Silver Lakes, Pretoria, responds: Legislation does allow an employer unilaterally to change from a DB to a DC fund, as long as the employer has received prior approval from the Financial Services Board (FSB). Legislation does, however, protect members against unfair and unlawful acts by employers. If you have any concerns in this regard, you can contact the FSB to ensure that approval was granted. In Personal Finance on February 28, 2015, it was stated that, for over-65s, credits for medical scheme contributions must be taken into account when Pay-As-You-Earn tax is deducted. When I queried this with the administrator of my pension, I was advised that it is still awaiting an official instruction to implement the change. When will the enabling legislation be passed? Peter North Franz Tomasek, the group executive for legislative research and development at the South African Revenue Service, responds: The change will be included in the legislative proposals to be introduced in Parliament later this year. It is likely that the final legislation will be promulgated late this year or early next year. My debt counsellor issued me with a clearance certificate in December 2014. But I have subsequently been refused credit, apparently because my credit report states that I am still in debt review. How can that be, and where can I go for help? Name withheld Angelique Ardé, Personal Finance’s reporter who writes about debt, responds: You have the right to lodge a dispute with a credit bureau that is carrying inaccurate information about you. Credit bureaus are merely the hosts of information received from various sources; they are not responsible for listing the information. The information about you is listed by your creditors and other data sources, such as debt counsellors and debt collectors. The data supplier is ultimately responsible for listing accurate information. When a dispute is lodged with a credit bureau, the bureau must investigate and report back to you within 20 business days. If the information is found to be incorrect, the bureau must remove it. When you are in debt counselling, this is noted on your profile, and you will be refused credit until you have been issued with a clearance certificate. Personal Finance asked the National Credit Regulator (NCR) and the Credit Bureau Association (CBA) who is responsible for reporting to the credit bureaus when a consumer has “graduated” from debt counselling. According to Lesiba Mashapa, the company secretary at the NCR, when a debt counsellor issues a clearance certificate to a consumer, the debt counsellor must notify the NCR and all the credit bureaus. The regulator must be notified online, on the NCR’s Debt Help System (DHS), which is a portal for debt counsellors to share information with the regulator about consumers in debt review. The credit bureaus must be notified via email and be sent the consumer’s clearance certificate. These actions should be done at the same time. Jeannine Naudé Viljoen, the executive manager of the CBA, says the bureau removes the debt review flag from the consumer’s profile on receipt of the clearance code from the NCR (via the DHS portal). Once the bureau has received the clearance certificate from the debt counsellor, all relevant negative information is removed from the consumer’s profile. In this case, once the consumer has lodged a dispute with the bureau concerned, the bureau will check the DHS for a clearance code from the NCR. If one has been issued, the flag will be removed. We ask experts to answer your financial queries. Email queries to [email protected] or fax to 021 488 4119. Feature sponsored by PSG Wealth RSA RETAIL BONDS: APRIL 2015 FIXED-RATE BOND* Two years . . . . . . . . . . . 7.25% Three years . . . . . . . . . . 7.75% Five years . . . . . . . . . . . 8.00% * Rates are set every month. INFLATION-LINKED BOND* Three years . . . . . . . . . .1.25% Five years . . . . . . . . . . .1.75% Ten years . . . . . . . . . . . .2.00% * Rates are in addition to capital adjusted for CPI twice a year. Source: National Treasury.Website: www.rsaretailbonds.gov.za Telephone: 012 315 5888. Email: [email protected] INTEREST RATES TO 24/4/2015 MONTHS 1* 3 6 9 12 24 Absa Bank 4.74 4.76 5.75 5.25 6.10 6.25 African Bank – 6.07 6.50 – 7.34 8.12 Bidvest Bank 6.13 6.24 6.84 7.00 7.25 – Capitec Bank – – 6.00 – 6.45 7.20 F N B – 5.10 5.90 – 6.30 6.50 GBS Mutual Bank – – 5.40 5.61 7.23 7.50 Grindrod Bank 5.80 5.95 6.55 6.85 7.10 – Mercantile Bank 5.80 5.90 6.35 6.50 6.60 – Nedbank 5.10 5.30 5.95 5.95 6.75 7.25 Sasfin 5.10 5.30 5.85 – 6.75 7.00 Standard Bank 5.00 5.10 6.03 – 6.10 6.35 *One-month rate applies to fixed deposits only and not to notice deposits. Senior citizens may qualify for an extra 0.5 percent on some 12-month investments. All the rates quoted are for interest paid monthly, apply to investments from R50 000 to R100 000 and are correct at the time of going to press. Source: Personal Trust (independent agents for deposit-taking institutions). Telephone 021 689 8975 EXCHANGE RATES TO 24/4/2015 These rates are subject to market fluctuations and are applicable for amounts up to R160 000. These rates are for indication purposes only, and neither Nedbank nor Personal Finance accepts any responsibility for any decisions based thereon. Source: Nedbank. Quoted at 7.20am USA 11.9700 11.9497 11.9411 12.3200 UK 17.9658 17.9305 17.9188 18.5724 Euro 12.8773 12.8495 12.8379 13.3512 Australia 9.1743 9.1241 9.0580 9.7371 Canada 9.7466 9.7087 9.6899 10.2354 China 1.9019 – – 2.0222 Denmark 1.7138 – 1.7088 1.8008 Hong Kong 1.5270 – 1.5225 1.6103 India 0.1865 – – 0.1968 Israel 3.0048 – – 3.1898 Malawi 0.0265 – – 0.0287 Mauritius 0.3270 – 0.3236 0.3537 New Zealand 8.8731 8.8339 8.7951 9.5329 Norway 1.4988 – 1.4941 1.5967 Seychelles – – – 0.9667 Singapore 8.7413 8.7108 8.6957 9.3721 Sweden 1.3697 – 1.3657 1.4374 Switzerland 12.3001 12.2699 12.2399 13.0719 Thailand 0.3451 0.3431 0.3413 0.4068 COUNTRY BUYING RATES SELLING Telegraphic Traveller’s Bank transfer cheques notes ANNUITY RATES TO 24/4/2015 These rates for a level annuity are based on a compulsory purchase price of R100 000 for people born on 01/01/1954 payable monthly in arrears, guaranteed for 10 years. These rates for a level annuity are based on a voluntary purchase price of R100 000 for people born on 01/01/1955 payable monthly in arrears, guaranteed for 10 years. These rates are valid on a daily basis. E&OE Source: Computerised Pension Bureau. Telephone 011 482 3625 Male Discovery . . . . . . . R691.43 Liberty Life . . . . . . R743.70 Metropolitan . . . . . R781.70 Momentum . . . . . . R759.31 Old Mutual . . . . . . . R761.13 Sanlam . . . . . . . . . R770.44 Female Discovery . . . . . . . R660.56 Liberty Life . . . . . . R692.55 Metropolitan . . . . . R717.12 Momentum . . . . . . R716.74 Old Mutual . . . . . . . R708.48 Sanlam . . . . . . . . . R723.31 Male Discovery . . . . . . . R691.43 Liberty Life . . . . . . R743.70 Metropolitan . . . . . R735.55 Momentum . . . . . . R749.20 Old Mutual . . . . . . . R761.13 Sanlam . . . . . . . . . R770.44 Female Discovery . . . . . . . R660.56 Liberty Life . . . . . . R692.55 Metropolitan . . . . . R681.16 Momentum . . . . . . R708.50 Old Mutual . . . . . . . R708.48 Sanlam . . . . . . . . . R723.31 Note: Letter writers will be sent the unabridged response that Personal Finance obtains on their behalf. However, published letters and responses will be edited for length and clarity. RA tax options if one lives abroad Can I rely on illustrated values? Incorrectly listed in debt review Medical tax credits and PAYE Conversion from DB to DC fund The best defence against the threat of rising interest rates in the United States and locally is to invest in qual- ity companies – and the demand for these companies’ shares has never been higher, asset managers say. Rising interest rates in the US could result in the sale of foreign investment holdings in South African equities, listed property and bonds, which is likely to result in prices in these sectors falling. William Fraser, a director at Foord Asset Management, says that when valuations are high, as they are in the local share market, you should be in quality companies with strong balance sheets that can with- stand a change in the liquidity in the market and can produce goods and/or services at low cost. If the factors that are buoying the market unwind when the US Federal Reserve starts to increase interest rates, these companies will continue to make a profit, and they may take market share from com- panies that produce at higher cost. Foord continues to focus on future company earnings when analysing investment opportunities. Fraser says if the share price of a company that has strong and con- sistent earnings falls because of external factors, such as a change in investor sentiment, the price will eventually correct to follow the com- pany’s earnings. Clyde Rossouw, the multi-asset portfolio manager at Investec Asset Management (IAM), says Investec also prefers high-quality businesses that have strong cash flows and trade at reasonable price-to-earn- ings (PE) multiples. These busi- nesses are relatively defensive (they can maintain profitability despite tough economic conditions), and IAM believes they will protect investors if there is a correction in equity markets, he says. Paul Bosman, a multi-asset fund manager at PSG, says PSG likes quality companies that are mis- priced (the share is priced below the intrinsic value of the company), because it gives the manager a mar- gin of safety when it invests. PSG bought shares in Steinhoff (which makes, sources and sells fur- niture and household goods in Europe, Africa and Australasia) when it was undervalued. It also held AVI (owner of a number of food and beverage brands), which regu- larly pays out almost 100 percent of its earnings and still grows its earn- ings at 20 percent a year. However, opportunities are more limited than they were in the past, because many industrial shares are expensive, as evidenced by the FTSE/JSE Industrial Index, which is very expensive relative to its expected future earnings (it is trad- ing on a very high PE ratio), and the companies in the index have been reporting high profits. There is a risk that these companies’ profits and share prices could come down, he says. In the absence of sufficient opportunities in the market, PSG will hold high cash reserves and wait for a market correction to deliver shares that are mispriced. Bosman says PSG has started to buy “unloved” resource and con- struction shares, but only those that it believes will be able to make a profit even if the global demand for resources stays low and weak eco- nomic growth depresses the demand for construction. If you buy the right companies, with diverse business activities and good management, you can do well, but PSG will not have a blanket buy on construction and resource shares, because not all of them are good quality, Bosman says. He says that, in the fixed-interest sector, PSG’s multi-asset funds bought Capitec bonds when these were sold down as a result of nega- tive sentiment during the demise of African Bank. PSG has also invested in cash instruments, such as NCDs with longer durations, because these are offering real (after-inflation) yields of two to three percent a year. Bosman says, as typically hap- pens when prices in a sector are ris- ing steadily, there have been a num- ber of new listings in the listed property sector. However, the shares in the FTSE/JSE SA Listed Pro- perty Index are now, on average, trading at a premium of about 40 percent to their net asset value. Like PSG, Foord has trimmed its exposure to local equities and is also stashing cash to buy quality com- panies when share markets fall dur- ing periods of volatility. Fraser says Foord started to invest in local bonds last year, when yields were higher, but when the oil price resulted in lower inflation expectations, bond yields fell too far, and real return expectations became unattractive. Fraser says Foord is patient and will gradually increase the alloca- tion to bonds. He believes a combi- nation of higher interest rates on US Treasuries (government bonds) and higher domestic short-term interest rates will result in higher yields on local longer-dated bonds. Fraser says that when you con- sider the out-performance of listed property relative to other asset classes, it is clear that asset man- agers made the wrong calls on this sector over the past year. However, the fall in listed prop- erty yields does not reflect the future outlook for growth in distributions; instead, it is driven by very low global interest rates. The sector has also benefited from foreign inflows, and prices are not realistic. Listed property shares may con- tinue to do well as long as offshore money is looking for higher yields, but there is a huge risk in investing in this sector now, because share prices are out of kilter with the com- panies’ net asset values. Offshore equities have done well, because company earnings have reflected the improvement in eco- nomic conditions, Fraser says. The end of the upward economic cycle is not close and there is room for more economic expansion, because no central banks have started to raise interest rates, he says. The improvement in economic conditions in the US and a sharply weaker euro have resulted in exporters in Europe showing signif- icantly better earnings. What may change the outlook for equity markets is a prolonged rise in global interest rates. Although the upward cycle may continue, there will be much greater volatility in equity markets, Fraser says. He says Foord is not overly con- cerned by the slowdown in the growth rates of emerging market economies; instead, it will focus on long-term themes in sectors that will grow at a faster pace than over- all economic activity. For example, Foord will seek companies that will benefit from ageing populations in both emerging markets and devel- oped markets. Interest rate jitters spark flight to quality Efficient companies with robust balance sheets will keep growing their profits when a rise in interest rates sees investor sentiment turn against equities. L a u r a d u P r e e z reports
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Transcript of Personal Finance - 25 April 2015
PERSONALFINANCE2 SATURDAY STAR April 25 2015
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For more information, call 0800 551 552, email [email protected] or visit psg.co.za
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We keep our advisers independent, so they’ll only do what is best for you, not us.We believe that you should receive tailor-made advice to suit your needs. That’s why, by making our advisers independent, you’ll benefit from solid, unbiased advice that will yield the best results.
YOUR QUESTIONS ANSWERED
I went to Canada in 2001 and planned tostay for about six months. Almost 15 yearslater, I am still in Canada. I did not emigrate,and I hold dual citizenship.
My retirement annuity (RA) will mature ina few months. Since I have been in Canada,I have contributed about R2 million to theRA. I did not submit tax returns to the SouthAfrican Revenue Service (SARS) and did notclaim any tax deductions. The RA wasstarted 10 years before I left for Canada, andI claimed those contributions against tax.
Can I use the contributions that I did notclaim since 2001 as part of my tax-free lumpsum (R500 000) and invest the difference ina living annuity? What is the tax scale if Idecide to take everything to Canada?
Name withheld on request
Marius Cornelissen, a financial adviser atPSG Wealth in Menlyn, Pretoria, responds:Your situation is complicated because youare a non-resident and did not claim thetax deductions from SARS.
An option is to emigrate formally, inwhich case you will have to obtainapproval from the South African ReserveBank to access the funds in the RA. Thiswill be regarded as a withdrawal, which willbe taxed according to the retirement lumpsum withdrawal table. The first R25 000will not be taxed, if you did not receive anyprevious benefits in the form a lump sum.Any amount between R25 001 andR660 000 will be taxed at 18 percent; anyamount between R660 001 and R990 000will be taxed at 27 percent; and anyamount from R990 001 or more will betaxed at 36 percent.
If you decide to buy a living annuity, youcan take up to one-third of the benefit incash, while the balance will be invested inthe living annuity, or you can use the entireamount to purchase a living annuity.
If you decide to take one-third as acash lump sum, it will be taxed accordingto the retirement lump sum table. The firstR500 000 will not be taxed, if you have not
taken lump sums previously.Unfortunately, in your case, you cannot
use a portion of the contributions that youdid not claim from SARS as part of yourtax-free lump sum.
SARS allows taxpayers to deduct fromthe lump sum the contributions that SARSdid not previously allow as a deduction.This has the effect of reducing the actuallump sum that is taxable, because anycontributions that were not allowed as adeduction are deducted from the lumpsum before it is taxed.
However, you did not claim thesecontributions as a tax deduction, asopposed to SARS not allowing thecontributions to be deducted against tax.Therefore, SARS may disallow you fromdeducting the contributions you did notclaim from the lump sum.
I would advise you to consult a SouthAfrican-based auditor, tax consultant orfinancial adviser for advice on the bestway to proceed.
I have a retirement annuity (RA) that willmature in 2022. Its current value isR781 416. I contribute R4 268 a month. Theannual premium escalation is 15 percent.The illustrated maturity values areR1 737 132 at growth of four percent andR2 492 870 at growth of 10 percent. Can Irely on these targets for financial planningpurposes? Should the growth not be in linewith market conditions – about 12 percent?
Kevin Martin
Pierre Puren, a financial adviser at PSGWealth in Jeffreys Bay, responds: Theproduct provider uses the illustratedmaturity values merely as a guideline toindicate the future value of yourinvestment if you pay the contractedpremium and certain growth rates prevail.The actual return will not depend on theprovider’s illustrations or assumptions, butwill depend on the performance of the
underlying fund, or funds, you chose.Your financial adviser can help you to
calculate the future value. If you adhere to the contracted
contributions to maturity, the following canbe used as a guideline with your requestedgrowth rate of 12 percent a year:
◆Growth of underlying fund less costs:12 percent a year compounded monthly
◆Premiums compounded monthlywith annual growth of 15 percent
◆ Term to maturity: Seven years (or84 months)
◆ Future value of premiums paidtherefore amount to R968 749.61
◆Plus growth in current capital ofR1 802 510.06
◆ Total illustrative value at maturity:R2 771 259.67
You should be cautious of assumingthat past performance is an indication offuture returns. Most financial productshave ongoing costs – management fees,administration fees or adviser fees. Thegrowth rate that is assumed musttherefore be net of these fees whenprojections are made.
Ensure you are familiar with the relevantcosts associated with your RA and thatyour underlying investment is allocated tofunds that suit your appetite for risk.
Who can I contact to establish whether myemployer has the right unilaterally to convertmy pension fund from a defined-benefit (DB)fund to a defined-contribution (DC) fund?
Name withheld
Anton Prinsloo, a financial adviser at PSGWealth in Silver Lakes, Pretoria, responds:Legislation does allow an employerunilaterally to change from a DB to a DCfund, as long as the employer has receivedprior approval from the Financial ServicesBoard (FSB). Legislation does, however,protect members against unfair andunlawful acts by employers. If you have
any concerns in this regard, you cancontact the FSB to ensure that approvalwas granted.
In Personal Finance on February 28, 2015, itwas stated that, for over-65s, credits formedical scheme contributions must betaken into account when Pay-As-You-Earntax is deducted. When I queried this with theadministrator of my pension, I was advisedthat it is still awaiting an official instruction toimplement the change. When will theenabling legislation be passed?
Peter North
Franz Tomasek, the group executive forlegislative research and development atthe South African Revenue Service,responds: The change will be included inthe legislative proposals to be introducedin Parliament later this year. It is likely thatthe final legislation will be promulgated latethis year or early next year.
My debt counsellor issued me with aclearance certificate in December 2014. ButI have subsequently been refused credit,apparently because my credit report statesthat I am still in debt review. How can thatbe, and where can I go for help?
Name withheld
Angelique Ardé, Personal Finance’sreporter who writes about debt, responds:You have the right to lodge a dispute with acredit bureau that is carrying inaccurateinformation about you. Credit bureaus aremerely the hosts of information receivedfrom various sources; they are notresponsible for listing the information. Theinformation about you is listed by your
creditors and other data sources, such asdebt counsellors and debt collectors. Thedata supplier is ultimately responsible forlisting accurate information.
When a dispute is lodged with a creditbureau, the bureau must investigate andreport back to you within 20 businessdays. If the information is found to beincorrect, the bureau must remove it.When you are in debt counselling, this isnoted on your profile, and you will berefused credit until you have been issuedwith a clearance certificate.
Personal Finance asked the NationalCredit Regulator (NCR) and the CreditBureau Association (CBA) who isresponsible for reporting to the creditbureaus when a consumer has“graduated” from debt counselling.
According to Lesiba Mashapa, thecompany secretary at the NCR, when adebt counsellor issues a clearancecertificate to a consumer, the debtcounsellor must notify the NCR and all thecredit bureaus. The regulator must benotified online, on the NCR’s Debt HelpSystem (DHS), which is a portal for debtcounsellors to share information with theregulator about consumers in debt review.The credit bureaus must be notified viaemail and be sent the consumer’sclearance certificate. These actions shouldbe done at the same time.
Jeannine Naudé Viljoen, the executivemanager of the CBA, says the bureauremoves the debt review flag from theconsumer’s profile on receipt of theclearance code from the NCR (via the DHSportal). Once the bureau has received theclearance certificate from the debtcounsellor, all relevant negativeinformation is removed from theconsumer’s profile.
In this case, once the consumer haslodged a dispute with the bureauconcerned, the bureau will check the DHSfor a clearance code from the NCR. If onehas been issued, the flag will be removed.
We ask experts to answer your financial queries. Email queries to [email protected] or fax to 021 488 4119. Feature sponsored by PSG Wealth
RSA RETAIL BONDS: APRIL 2015FIXED-RATE BOND*Two years . . . . . . . . . . . 7.25%Three years . . . . . . . . . . 7.75%Five years . . . . . . . . . . . 8.00%* Rates are set every month.
INFLATION-LINKED BOND*Three years . . . . . . . . . .1.25%Five years . . . . . . . . . . .1.75%Ten years . . . . . . . . . . . .2.00%* Rates are in addition to capitaladjusted for CPI twice a year.
Source: National Treasury.Website: www.rsaretailbonds.gov.zaTelephone: 012 315 5888. Email: [email protected]
INTEREST RATES TO 24/4/2015MONTHS
1* 3 6 9 12 24 Absa Bank 4.74 4.76 5.75 5.25 6.10 6.25African Bank – 6.07 6.50 – 7.34 8.12Bidvest Bank 6.13 6.24 6.84 7.00 7.25 –Capitec Bank – – 6.00 – 6.45 7.20F N B – 5.10 5.90 – 6.30 6.50GBS Mutual Bank – – 5.40 5.61 7.23 7.50Grindrod Bank 5.80 5.95 6.55 6.85 7.10 –Mercantile Bank 5.80 5.90 6.35 6.50 6.60 –Nedbank 5.10 5.30 5.95 5.95 6.75 7.25Sasfin 5.10 5.30 5.85 – 6.75 7.00Standard Bank 5.00 5.10 6.03 – 6.10 6.35
*One-month rate applies to fixed deposits only and not to noticedeposits. Senior citizens may qualify for an extra 0.5 percent onsome 12-month investments. All the rates quoted are for interestpaid monthly, apply to investments from R50 000 to R100 000and are correct at the time of going to press.
Source: Personal Trust (independent agents fordeposit-taking institutions). Telephone 021 689 8975
EXCHANGE RATES TO 24/4/2015
These rates are subject to market fluctuations and are applicable foramounts up to R160 000.These rates are for indication purposes only, andneither Nedbank nor Personal Finance accepts any responsibility for anydecisions based thereon. Source: Nedbank. Quoted at 7.20am
USA 11.9700 11.9497 11.9411 12.3200UK 17.9658 17.9305 17.9188 18.5724Euro 12.8773 12.8495 12.8379 13.3512Australia 9.1743 9.1241 9.0580 9.7371Canada 9.7466 9.7087 9.6899 10.2354China 1.9019 – – 2.0222Denmark 1.7138 – 1.7088 1.8008Hong Kong 1.5270 – 1.5225 1.6103India 0.1865 – – 0.1968Israel 3.0048 – – 3.1898Malawi 0.0265 – – 0.0287Mauritius 0.3270 – 0.3236 0.3537New Zealand 8.8731 8.8339 8.7951 9.5329Norway 1.4988 – 1.4941 1.5967Seychelles – – – 0.9667Singapore 8.7413 8.7108 8.6957 9.3721Sweden 1.3697 – 1.3657 1.4374Switzerland 12.3001 12.2699 12.2399 13.0719Thailand 0.3451 0.3431 0.3413 0.4068
COUNTRY BUYING RATES SELLINGTelegraphic Traveller’s Bank
transfer cheques notes
ANNUITY RATES TO 24/4/2015These rates for a level annuity are based on a compulsorypurchase price of R100 000 for people born on 01/01/1954payable monthly in arrears, guaranteed for 10 years.
These rates for a level annuity are based on a voluntarypurchase price of R100 000 for people born on 01/01/1955payable monthly in arrears, guaranteed for 10 years.
These rates are valid on a daily basis. E&OESource: Computerised Pension Bureau. Telephone 011 482 3625
MaleDiscovery . . . . . . . R691.43Liberty Life . . . . . . R743.70Metropolitan . . . . . R781.70Momentum . . . . . . R759.31Old Mutual. . . . . . . R761.13Sanlam . . . . . . . . . R770.44
FemaleDiscovery . . . . . . . R660.56Liberty Life . . . . . . R692.55Metropolitan . . . . . R717.12Momentum . . . . . . R716.74Old Mutual. . . . . . . R708.48Sanlam . . . . . . . . . R723.31
MaleDiscovery . . . . . . . R691.43Liberty Life . . . . . . R743.70Metropolitan . . . . . R735.55Momentum . . . . . . R749.20Old Mutual. . . . . . . R761.13Sanlam . . . . . . . . . R770.44
FemaleDiscovery . . . . . . . R660.56Liberty Life . . . . . . R692.55Metropolitan . . . . . R681.16Momentum . . . . . . R708.50Old Mutual. . . . . . . R708.48Sanlam . . . . . . . . . R723.31
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RA tax options ifone lives abroad
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Conversion fromDB to DC fund
The best defence against the threatof rising interest rates in the UnitedStates and locally is to invest in qual-ity companies – and the demand forthese companies’ shares has neverbeen higher, asset managers say.
Rising interest rates in the UScould result in the sale of foreigninvestment holdings in SouthAfrican equities, listed property andbonds, which is likely to result inprices in these sectors falling.
William Fraser, a director atFoord Asset Management, says thatwhen valuations are high, as theyare in the local share market, youshould be in quality companies withstrong balance sheets that can with-stand a change in the liquidity in themarket and can produce goodsand/or services at low cost.
If the factors that are buoyingthe market unwind when the USFederal Reserve starts to increaseinterest rates, these companies willcontinue to make a profit, and theymay take market share from com-panies that produce at higher cost.
Foord continues to focus onfuture company earnings whenanalysing investment opportunities.
Fraser says if the share price ofa company that has strong and con-sistent earnings falls because ofexternal factors, such as a change ininvestor sentiment, the price will
eventually correct to follow the com-pany’s earnings.
Clyde Rossouw, the multi-assetportfolio manager at Investec AssetManagement (IAM), says Investecalso prefers high-quality businessesthat have strong cash flows andtrade at reasonable price-to-earn-ings (PE) multiples. These busi-nesses are relatively defensive (theycan maintain profitability despitetough economic conditions), andIAM believes they will protectinvestors if there is a correction inequity markets, he says.
Paul Bosman, a multi-asset fundmanager at PSG, says PSG likesquality companies that are mis-priced (the share is priced below theintrinsic value of the company),because it gives the manager a mar-gin of safety when it invests.
PSG bought shares in Steinhoff(which makes, sources and sells fur-niture and household goods inEurope, Africa and Australasia)when it was undervalued. It alsoheld AVI (owner of a number of foodand beverage brands), which regu-larly pays out almost 100 percent ofits earnings and still grows its earn-ings at 20 percent a year.
However, opportunities are morelimited than they were in the past,because many industrial shares areexpensive, as evidenced by the
FTSE/JSE Industrial Index, whichis very expensive relative to itsexpected future earnings (it is trad-ing on a very high PE ratio), and thecompanies in the index have beenreporting high profits. There is arisk that these companies’ profitsand share prices could come down,he says.
In the absence of sufficientopportunities in the market, PSGwill hold high cash reserves andwait for a market correction todeliver shares that are mispriced.
Bosman says PSG has started tobuy “unloved” resource and con-struction shares, but only those thatit believes will be able to make aprofit even if the global demand forresources stays low and weak eco-nomic growth depresses the demandfor construction.
If you buy the right companies,with diverse business activities and
good management, you can do well,but PSG will not have a blanket buyon construction and resourceshares, because not all of them aregood quality, Bosman says.
He says that, in the fixed-interestsector, PSG’s multi-asset fundsbought Capitec bonds when thesewere sold down as a result of nega-tive sentiment during the demise ofAfrican Bank.
PSG has also invested in cashinstruments, such as NCDs withlonger durations, because these areoffering real (after-inflation) yieldsof two to three percent a year.
Bosman says, as typically hap-pens when prices in a sector are ris-ing steadily, there have been a num-ber of new listings in the listedproperty sector. However, the sharesin the FTSE/JSE SA Listed Pro-perty Index are now, on average,trading at a premium of about
40 percent to their net asset value.Like PSG, Foord has trimmed its
exposure to local equities and is alsostashing cash to buy quality com-panies when share markets fall dur-ing periods of volatility.
Fraser says Foord started toinvest in local bonds last year, whenyields were higher, but when the oilprice resulted in lower inflationexpectations, bond yields fell toofar, and real return expectationsbecame unattractive.
Fraser says Foord is patient andwill gradually increase the alloca-tion to bonds. He believes a combi-nation of higher interest rates onUS Treasuries (government bonds)and higher domestic short-terminterest rates will result in higheryields on local longer-dated bonds.
Fraser says that when you con-sider the out-performance of listedproperty relative to other asset
classes, it is clear that asset man-agers made the wrong calls on thissector over the past year.
However, the fall in listed prop-erty yields does not reflect the futureoutlook for growth in distributions;instead, it is driven by very lowglobal interest rates. The sector hasalso benefited from foreign inflows,and prices are not realistic.
Listed property shares may con-tinue to do well as long as offshoremoney is looking for higher yields,but there is a huge risk in investingin this sector now, because shareprices are out of kilter with the com-panies’ net asset values.
Offshore equities have done well,because company earnings havereflected the improvement in eco-nomic conditions, Fraser says. Theend of the upward economic cycle isnot close and there is room for moreeconomic expansion, because no
central banks have started to raiseinterest rates, he says.
The improvement in economicconditions in the US and a sharplyweaker euro have resulted inexporters in Europe showing signif-icantly better earnings.
What may change the outlook forequity markets is a prolonged rise inglobal interest rates. Although theupward cycle may continue, therewill be much greater volatility inequity markets, Fraser says.
He says Foord is not overly con-cerned by the slowdown in thegrowth rates of emerging marketeconomies; instead, it will focus onlong-term themes in sectors thatwill grow at a faster pace than over-all economic activity. For example,Foord will seek companies that willbenefit from ageing populations inboth emerging markets and devel-oped markets.
Interest ratejitters sparkflight to qualityEfficient companies with robust balance sheets will keepgrowing their profits when a rise in interest rates sees investorsentiment turn against equities. Laura du Preez reports
