I have been a huge fan of Fundisa, having written about it often and having encouraged many of my clients to invest in it…however, after initially being a huge fan of the product, I have done some more work on it and as I see it, the big hurdle that Fundisa has is the underlying fund and its potential returns over a 15 year period…so much so, that I am questioning whether or not I can continue to support it.
Here is my thinking…
Following some basic maths, I calculated that the projected return using Fundisa would look something like this (assuming R200 from me + R50 from govt and a 10% per annum return – this also assumes no escalation on the contribution because the bonus is capped on the first R200).
|
Year |
Fundisa |
| 1 | 3 141 |
| 2 | 6 612 |
| 3 | 10 445 |
| 4 | 14 681 |
| 5 | 19 359 |
| 6 | 24 528 |
| 7 | 30 238 |
| 8 | 36 545 |
| 9 | 43 513 |
| 10 | 51 211 |
| 11 | 59 715 |
| 12 | 69 109 |
| 13 | 79 488 |
| 14 | 90 952 |
| 15 | 103 618 |
| 16 | 117 609 |
| 17 | 133 066 |
| 18 | 150 141 |
| 19 | 169 004 |
| 20 | 189 842 |
So after 10 years there should be ±R51000 in the account and by 15 years, ±R103600…
However, if I use a simple balanced fund and I put away R200pm, no escalation and I can get a return of 14% pa (which is the historical average return for this sector over 10 years) the results look something like this:
| Year | Bal Fund | Fundisa |
| 1 | 2 560 | 3 141 |
| 2 | 5 503 | 6 612 |
| 3 | 8 885 | 10 445 |
| 4 | 12 772 | 14 681 |
| 5 | 17 239 | 19 359 |
| 6 | 22 374 | 24 528 |
| 7 | 28 275 | 30 238 |
| 8 | 35 058 | 36 545 |
| 9 | 42 854 | 43 513 |
| 10 | 51 814 | 51 211 |
| 11 | 62 112 | 59 715 |
| 12 | 73 948 | 69 109 |
| 13 | 87 552 | 79 488 |
| 14 | 103 187 | 90 952 |
| 15 | 121 157 | 103 618 |
| 16 | 141 811 | 117 609 |
| 17 | 165 550 | 133 066 |
| 18 | 192 833 | 150 141 |
| 19 | 224 192 | 169 004 |
| 20 | 260 233 | 189 842 |
So for the first 9 years or so, Fundisa is a better prospect, however after that, it gets left behind. This is without any escalation on the debit order – which you would normally do and also assumes I use a balanced fund not an equity fund which would be totally appropriate over a 15 year period…
So we have a problem…Given that most people will start saving (via Fundisa) when their kids are very young and will therefore be saving for much more than 15 years, Fundisa is not as good as it appears and anyone using it would be worse off over anything more than a 10 year period…
To my mind, Fundisa needs to do the following to make it a really attractive option:
1. Fundisa needs to have an alternate (more aggressive) fund option such as a balanced or equity fund.
2. Fundisa needs to allow for bonuses on an escalation – this could be capped at 10% per annum.
Even if I escalate my contribution on Fundisa without the bonus increasing, I will still be significantly worse off than escalating the contribution on the balanced fund (without any bonus)…
I have written to ASISA re these concerns and will post their reply if we get one…Fundisa is a great concept, but in my opinion, it was not clearly thought through…
For now, I would hold off on new investments into Fundisa.
