Just saw the 1Lifedirect TV advert again this evening and it really gets my goat – their advert is so incredibly
misleading. It should come with a huge health warning similar to that on cigarette packets. They were offering a 44 year old male R1million life cover for just under R500 (if i remember correctly) and at the same time boasting about how cutting out the broker would save up to 22%.
While the 2nd part of the claim may be true, what is distressing is that I can buy R1million life cover through an insurance broker for about R190 per month. If I cut out the commission (broker) then that drops to about R144 per month which is less than 1/3 of what they claim to be able to offer without any commission on it.
What an unbelievable bunch of thieves! They are just like any of the other insurance companies in this country and on top of that, their claims to cut out the paper work could provide you with some very nasty surprises come claims stage.
Based on the quotes above, I would opt for the services of a broker every time – even at full commission.
Tags: 1lifedirect, broker, commission, Insurance, Life Insurance, middle man, no commission
I had to make a trip to SARS in Cape Town this am to hand in the 6 paper provisional tax returns that I cant get on efiling – this is despite several email and telephonic requests to SARS to get them on e-filing.
As I arrived there I was greeted by the site in the picture below…
this is a many-hour queue (and it has been like this since November last year according to the SARS lady that helped me). Fortunately, I did not have to stand in line as I just needed to hand in docs and get stamped copies.
The whole exercise has got me thinking about SARS and e-filing and just how much like Alice SARS is…
For those of you who dont remember Alice (it is not a reference to the song) but rather to the little girl with the bump in the middle of her forehead. When she was good she was very good but when she was bad she was horrid!
And so it is with SARS and e-filing – when it is good it is excellent, but when it goes wrong it is awful! It is hard to argue or reason with a computer and even more so with a disinterested clerk at the other side of the call-centre telephone line.
Despite this though, e-filing is on the whole still brilliant – if you are not registered to e-file your annual and provisional tax returns then you are welcome to join the queue. Guess I will see you in August when I make my next trip to SARS to submit the few paper returns that I still cant get on e-filing – but at least I wont be waiting in any queues.
Tags: e-filing, efiling, provisional tax, SARS, Tax
So Eskom’s been granted increases of 24.8%, 25.8% and 25.9% for the next 3 years. Not as big as they wanted but still significant. What does it mean for us as consumers?
There is a beautiful little rule called the “rule of 72″ which states if you want to know how quickly something will double in value/cost you need to divide the number into 72. So based on this, an increase of 25% means that the price of electricity will double just under every 3 years (72/25 = 2.9).
So if you are currently paying R3oo for electricity then this will increase to about R600 in 3 years time (see the tables below for the actual figures). Basically, the cost of electricity will double over the next 3 years and while this may not seem like a lot to you and me right now, the real cost will come through in the related inflationary effects and only time will reveal what that will be.
So as we say in our house when ever you leave a room at night “Eskom thanks you for turning off the lights”.
Tags: electricity, eskom, Inflation, rule of 72
Oh dear…the old adage certainly rings true (yet again). Following on the most recent post about Fundisa, a friend and I were re-doing the maths…seems like I got it totally wrong…apologies for that!
The returns seemed too good to be true – the problem is with my maths and understanding of how the product works…which raises some important issues that need clarifying by ASISA re the product.
I am just making sure of my maths this time and will update the figures as soon as I have them correct.
Bottom line is you wont get nearly close enough to a degree on R200 pm but I still think it is the best product around and still have 1 for each of my kids.
Watch this space for more info as soon as I have checked it (properly).
Gregg
Tags: education, fundisa, saving for education, university fees
PLEASE BE AWARE THAT THE EXPLANATION OF FUNDISA’S RETURNS IS INCORRECT – IT WILL BE CORRECTED IN A LATER POST. Gregg
Currently the cost of a university degree is about R31000-R35
000 per year, so over 3 years that is pretty much R100000. If varsity fees continue to increase at levels above inflation then this will increase to somewhere between R200000 and R300000 per year for my 3 year old son. That’s between R600000 and R900000* for a 3 year degree in 15 years time.
At a return of 5% better than inflation, you would need to save about R1800 per month (escalating with inflation each year) for 15 years to get there. This is on top of your bond, car, medical aid and school fees!
On the face of it, that’s out of reach for just about everyone…unless you make use of the Fundisa education savings offering (see April 2009 post for more on this amazing offering).
The bottom line is that if you use Fundisa at R200 per month, for 15 years and the government continues to pay the 25% annual bonus and you get an average 10% return from the fund, then you will have ±R1.2million in 15 years time. This is more than enough to pay for the average 3 year degree. 
If you start saving into Fundisa when your child is born, then 18 years later, you should have ±R3.4 million in the fund…you could probably pay for a full medical degree for 2 and still have some change! This is because at a return of 35% per annum, the value of your fund should double almost every 2 years. And I doubt if you will ever get a “guaranteed” return of 35% for 18 years in a row anywhere else.
Surprisingly, the uptake of Fundisa has been relatively poor – the cyni
c in me says that this is because there is no commission on the product and so there is no incentive to sell it. Whatever the reason, if you have kids and you hoping to send them to study at a tertiary educational institution one day, and you are not yet taking advantage of this incredible offer then you are very foolish and it is time that you got “fundisa’d”#. It’s a no-brainer!
Notes:
*this assumes escalations of 12 & 15% per annum.
#For those that speak Xhosa – excuse the pun. For those that dont, “fundisa” is a xhosa verb meaning “teach”.
10 months ago I finally changed my bank account…after almost 19 years at Standard Bank, I finally had enough of their fees and their complete lack of interest in me as a client and I moved to Nedbank – for no other reason than that they offered a very attractive fee structure.
For far too long I had been a “prestige” client of Std Bank – which I finally worked out, meant that I had the “privilege” of paying higher fees and little else – a full R185 per month (or R2220 per year) for a current account. I hardly ever went into the bank, hardly every used a cheque, never went into overdraft and most of my banking was via the internet.
The equivalent offering at Nedbank was R65 per month (R780/year).
So with some sense of dread at the thought of notifying everyone and sorting out the debit orders I finally moved. And it was pretty painless…and over the past 10 months I have now saved myself R1200 in bank fees!
Of course bank fees increase every year and the Nedbank fee has now increased to R69 per month (6% increase)…this is completely acceptable (in the current inflation environment, my opinion). At the same time, Standard Bank’s fees have increased to R199/month (7.5%).
Yes, there are a few differences in internet banking that have taken some time to get used to and I still think that Nedbank’s internet offering is the worst in SA but with a saving of R1560 per year, I can put up with that.
So if you are stuck in the fee “headlights” where you know that you really should be making a change but have not yet gotten around to it mostly because of the fear of making the change, just do it! It is not nearly as painful as the banks would have us believe. And if more people voted with their feet, there would be more competition and better pricing. So, in the words of my old bank, I’m “moving forward”!
Tags: bank accounts, bank charges, bank fees
2010, it’s finally here…
In just over 1 months time it is the end of the 2010 tax year and there are 2 important deadlines that go with this. They are:
Retirement annuities:
- RA contributions need to be made before the end of Feb. This year the 28th is on a Sunday so all contributions will have to be done by the close of business on the 26th Feb in order to qualify for the
2010 tax year. But dont leave it to the last minute – get your contribution in way before that – leaving it to the last minute always creates additional and unnecessary stress. - If you are unsure about how much you can contribute, speak to your financial planner and most important of all, make sure you are using a unit trust RA. You can get into many of them at no initial fees and you are also not contractually bound in any way (this means you can make changes to the contributions without ever incurring a penalty).
Provisional tax:
- This needs to be in by the 26th Feb as well…and this year SARS are applying “new” rules with respect to how the tax liabiity is calculated. Previously you could make a payment in Feb and top this up by the end of Sept…this year, however, you need to have paid 90% of your total tax liability by the end of Feb (you can still top up in Sept). Failure to pay 90% will result in heavy penalties…
- If you need to pay provisional tax, make sure it is in on time and even if you have a nil return, make sure that you submit the form as well.
Gregg
2009, what a year! Markets have done what they always do – surprised us in the short term. We have seen the JSE ALSI run from just over 17500 in March to just under 28000 at the end of December. That’s more than 54% up since March when everyone thought we were facing the worst financial crisis since the Great Depression. (And offshore market recoveries have been even more spectacular.)
During this time much has been written about the markets phenomenal gains and whether or not these gains are sustainable and one of the “new” expressions that has emerged has been the term “green shoots”, with particular reference to the “green shoots of growth” that commentators and analysts are starting to see…
I dont understand how this all works and dont understand wher
e all the growth is going to come from if consumers are cash strapped and not spending money…
And I cant help but think that with all this talk of “green shoots” has anyone stopped to think that weeds are green too?
I attended a refresher workshop for CFP® Professionals hosted by the Centre for Financial Planning Law (UOFS) on Friday. This is part of the continuing education that Certified Financial Planners are required to do in order to maintain their CFP® status. 
One of the interesting things from the workshop was to learn that Financial Planning only started as a career in 1969 when 12 people got together to establish the profession in the USA. 4 years later there were 42 graduates through the CFP® programme. SA joined the CFP® board in 1997 when the old Institute of Life and Pensions Advisors (ILPA) were amalgamated into the Financial Planning Institute and the first CFP’s graduated in SA in 1999.
The FPI is the custodian of the CFP® mark in South Africa and there are about 3500 CFP’s in SA (out of more than 100000 financial “advisors”). W
e are also one of 24 member countries of the Financial Planning Standards Board – the international body that oversees and sets financial planning standards. There are also more than 125000 CFP’s worldwide and Financial Planning is currently the 2nd fastest growing profession (although I’m not sure what puts us into 2nd place).
So when you engage with a CFP® remember that you are dealing with someone who is part of a global standards body and that all CFP’s need to have and maintain appropriate levels of skills and ethics.
I recently attended a Financial Services Board workshop on the FAIS Act (Financial Advisory and Intermediary Services). FAIS is big on putting consumer interests first and on making sure that consumers get appropriate advice. Despite the legislation there are still many instances of investors getting bad advice and being ripped off – this is partly due to the way that advisors are remunerated and partly due to the fact that the insurance companies continue to offer inferior and inappropriate products (I am referring specifically to the long-term contractual savings policies that are still offered by insurance companies and more specifically, retirement annuities (RA’s) through life insurance companies). It is my opinion that it is time to explore using FAIS legislation to force the industry to change – yes this is contentious and potentially highly explosive…but here goes anyway.
For me the
issue has to do with insurance companies still contractually binding people to long term contracts in this day and age. W e all know that anyone who enters into any contract is bound by the conditions of that contract and if you alter or break the contract there are penalties. This is the case with contractual insurance products such as life insurance RA’s. This is just the way that it is…However, given that the average person will change jobs many times in a working career (some stats say as many as 6 times) there is no way that any client should or could commit to binding themselves to such a contract – it is doomed to fail.
Consider the following:
Mrs Client starts working for Company A that has no pension fund and she is sold a life RA (not the better unit trust option). A year or 2 later she leaves the company and goes to Company B and they have a pension fund so she is “forced” to stop the RA because she can no longer afford the premium and there is also no longer any tax incentive to continue paying. As a result of this she will incur a penalty of up to 30% on the value of her funds.
Or on a slightly different tack, she has an RA through an insurance company and her employer decides to implement a pension scheme with compulsory membership and again she is forced to stop her RA because she cant afford to contribute to both funds. As a result she will lose up to 30% of the value of her RA. These penalties are as per the Statement of Intent (SOI) that was signed between the Minister of Finance and the Life Insurance Industry some years back.
This is just wrong! And yet insurance companies still insist on selling these products and still insist on penalisin
g clients when they break the contract (I am still trying to get statistics from an insurance company as to how many RA contracts actually make it through the entire term but have not been able to get these yet).
As a result of the penalties that an investor in a life insurance RA is likely to incur, could he/she not make a case for “inappropriate advice” against any advisor who puts him/her into a life RA? Especially when the advisor knows full well that the client is extremely unlikely to be able to stick to the contract for the entire term and as a result will incur penalties of up to 30% each time they need to alter the contract.
If the life insurance RA was the only option then there may be some leniency that could be applied, but there is a perfectly good (if not superior) alternate product in the form of the unit trust RA where there will never ever be any kind of penalty because there is no contractual obligation to continue paying? And more importantly, the fee structure on them is completely different – there is no accounting for future earnings in today’s income statement.
Perhaps the time is coming when the FAIS Ombudsman could well find the following case of “inappropriate advice” on his desk…
“Mr Broker, you put me into a contractual product, knowing full well that I would probably not be able to adhere to the terms of the contract and that at some stage in the future I would have to alter the premium. As a result of that I will incur penalties…and all along you could have put me into a unit trust option where there are never ever any penalties…surely that was inappropriate advice”?
Perhaps the same approach will be used when the National Savings Scheme is finally introduced and many people who have RA’s will be forced to stop these as they will be obliged to contribute to the NSS and will not be able to afford to do both the RA and the NSS. At this point, anyone in an insurance RA will incur penalties of up to 30%. 
My thinking is that either the insurers will be legislatively forced to waive these penalties or else there could well be more than a few cases for “inappropriate advice” on the FAIS Ombudsman’s desk against advisors for putting clients into life RAs when they knew full well that the NSS was coming and that there would be penalties when the contracts were altered, especially when they could have put the client into a non-contractual (unit trust) RA.
How about it? There must be some good legal minds out there? Could a client make a case of inappropriate advice against an advisor for putting them into a life insurance RA where they have incurred penalties when there was a better product with no penalties (albeit with much lower commission) available?
