My partner and I are looking to invest together. Can we both contribute to the same retirement account? Do you offer products specifically designed for couples who want to save for their retirement together? Magdeleen Cornelissen, Wealth adviser at PSG Wealth, Menlyn
There are many investment products available to individual investors that can be utilised as retirement savings mechanisms, of which the retirement annuity is one of the most popular options. Other options include a voluntary investment, an endowment and a tax-free investment vehicle.
Unfortunately, a retirement annuity cannot be taken out in the name of multiple investors, as annuities are generally structured as contracts between an individual investor and the product provider. The same rule applies to the other products mentioned, as they typically cater for single investors.
However, there are a few alternative options that you and your partner can consider on your road to financial wellness.
Although most of the local investment products must be purchased in the name of a single investor, many of the product providers do allow for third parties to contribute to an investment. This would allow both partners to contribute to the same investment product and participate in their mutual wealth creation process.
It is, however, important to consider that the person in whose name the investment is made, is generally responsible for the tax implications of such an investment. In the case of a retirement annuity, the investor may benefit from the tax deductibility of the contribution, but if a voluntary investment is used, there might be tax consequences on the growth of the investment to be considered. Honest discussions about your willingness to share the proceeds regardless of the outcome of your relationship will be beneficial to both partners.
Certain offshore investments do allow for joint ownership, but I would strongly recommend that you seek the assistance of a financial adviser when setting up such an investment.
Banks also offer joint bank accounts. This will allow you and your partner to pool your savings into a single bank account, which could serve as a building block in your mutual holistic financial plan.
I’m a 45-year-old single father of two, and I want to ensure a secure future for my children in case anything happens to me. What steps should I take to get my estate in order? Should I focus on a will or a trust, and what is the difference between the two? Shreekanth Sing, Wealth Adviser at PSG Wealth, Northcliff, Johannesburg
The first step to take is to get your will in place. A will is a legal document that states your wishes as to how your assets should be distributed, which person should manage the winding up of your estate (the executor) and, in your case, if your children are minors, who will take care of your children after your death (who their legal guardians will be).
Discussing this with your financial planner can also help you minimise estate duty and other taxes, as well as executor’s fees. In addition, your will is a living document and can be changed as your circumstances change.
On the other hand, a trust is a legal arrangement whereby your property (which can consist of fixed or movable property and investments, for example) is transferred to a trust. A trustee is a person or company responsible for managing property and other assets placed in a trust for the benefit of someone else (the beneficiary/ies).
There are two types of trusts, namely inter vivos trusts and testamentary trusts. The inter vivos trust is created between living persons, whereas the testamentary trust is derived from the valid will of a deceased person.
In South Africa, if you do not establish a trust (for example, a testamentary trust, which is created in your will and established at your death) to receive your proceeds from your estate, the cash assets you bequeath to minorss will be held by the Guardian’s Fund managed by the Master of the High Court.
You can nominate trustees, who will be responsible for managing the affairs of the trust and ensuring that the funds are used to provide for your children’s upkeep and well-being. You can also specify the children’s age at which the trust may be dissolved and the funds held in the trust may be paid out to them.
Considering the challenges experienced by the Master’s office, it is advisable to avoid a scenario where your children’s inheritance is managed by the Guardian’s Fund.
In conjunction with ensuring that your will is in place and deciding on a suitable trust structure, you will also need to ensure that your children are provided for financially. This can be done by taking out life cover, which can provide capital at your death to cover any costs but, most importantly, to ensure you leave a legacy for your children. This will also ensure that the guardians are not placed under any financial strain personally, as the proceeds from the life cover can be paid out directly to your trust.
There is a lot to consider and working with a certified financial planning professional can help you navigate this and ensure peace of mind.
As a first-time investor, what are the key investment strategies or tips I should know? Alexi Coutsoudis, Wealth Adviser at PSG Wealth, Umhlanga Ridge
Warren Buffett, one of the greatest investors of all time, once said, “To invest successfully over a lifetime does not require a stratospheric IQ. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework.”
A sound intellectual framework: It is important to pay attention to things within your control.
Savings rate: Make sure you prioritise saving and investing by paying yourself first. As a rule of thumb, you should save at least 10% of your income towards a long-term or retirement goal. Additionally, having the equivalent of 3-6 months of your expenses in an emergency fund can help you avoid drawing on long-term capital prematurely in case of an emergency.
Asset allocation/risk: Allocating the right amount to growth assets like shares and property is key to meaningfully outperforming inflation over the long term. Diversification – investing in a mix of asset classes – is also important to align with your investment goals. When you are starting out, it may be easier to use a multi-asset fund aligned to your risk profile to achieve this outcome.
Keep emotions from corroding your framework: A common misconception is that only the wealthy or those with large portfolios need professional financial advice. First-time investors or younger clients benefit just as much from having a professional financial adviser to provide guidance and craft an investment strategy. More importantly, an adviser plays a vital role in helping to manage your emotions and ensuring that you don’t make decisions out of fear or greed. It is advisable to look for an adviser who is a CFP® professional and provides holistic financial planning advice, not someone simply trying to sell you a product to earn commission.
How can employee benefits be tailored to meet the diverse needs of a multi-generational workforce, and what considerations should be taken into account to ensure equity and inclusivity in benefit offerings? Nerine Brink, Employee Benefits Adviser at R21 Employee Benefits, Irene
Different age groups have varied needs and expectations, necessitating a thoughtful approach to designing employee benefits:
Baby Boomers (1946-1964) prioritise retirement planning and healthcare benefits. They value comprehensive health insurance, wellness programmes and post-retirement security.
Typically, Generation X (1965-1980) balance their careers and family responsibilities, childcare support, and robust retirement savings plans.
Millennials (1981-1996) often focus on career advancement and personal growth; they value career development programmes and mental health support.
Generation Z (1997-2012) who are entering the workforce are tech-savvy; they prioritise benefits that offer professional growth opportunities and digital tools for collaboration, and they value diversity and inclusion.
Employers should consider the following:
Conduct a workforce analysis and regular surveys: This helps in understanding employee needs and preferences, and ensures that benefits are relevant and valued by all employees.
Promote inclusivity and flexibility: Ensure that all benefit programmes are inclusive by investigating the possibility of allowing access to benefits for fixed-term employees by discussing the options with your insurer. Benefits flexibility allows employees to choose the benefits that best suit their circumstances.
Education and communication: Regularly educate employees, in simple language, on their benefits, ensuring that all employees understand their options and can make informed decisions. Service providers have several online and self-help channels allowing members easy access to their individual benefits.
Support mental health: Prioritise mental health benefits through employee assistance programmes, which provide access to counselling services and promote a culture of openness around mental health issues.
By considering the unique needs of each generation and implementing inclusive policies, employers can create a benefits package that supports the well-being and satisfaction of all employees, fostering a more engaged and productive workforce.
I currently have a wood-burning fireplace, but I am considering switching to a gas fireplace instead. What should I consider for my insurance cover? Karen Rimmer, Head: Distribution at PSG Insure
Installing a gas fireplace is a good option but be cautious on how it is installed and how you store spare gas tanks.
The Occupation Health and Safety Act 85 of 1993 requires gas installations to be accompanied by a certificate of conformity verifying that the fireplace is safety compliant and leak-free. If you can’t produce a certificate of conformity following a fire damage claim, it could result in the claim being repudiated.
The Act sets out strict rules detailing how gas tanks need to be stored. Gas bottles must be installed at least 1 metre sideways from a door or window or at least 2 metres from a drain or air vent, and no less than 1 metre from your property’s boundary wall. Using a qualified installer from the outset will make sure these compliance boxes are ticked.
However, if you choose to keep your current fireplace, adhering to fire safety practices is essential, which includes cleaning your fireplace to keep it free of flammable debris and ash, and maintaining your chimney. Over time, depending on the kind of fuel used, substances like soot, ash and tar can accumulate in chimneys and lead to blockages. The build-up of these blockages can stop hazardous by-products and chemicals from flowing through and out of the chimney effectively.
This is a serious fire risk, and harmful gases like carbon monoxide can damage your health, so chimneys should be checked and cleaned regularly.
You should disclose any upgrades to a trusted insurance adviser who can help you understand the terms and conditions of your insurance policy, preparing you to meet all the requirements in the event of a claim.
PERSONAL FINANCE