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Wealth creation, Income generation and Wealth protection: Accumulation of Wealth

Endowment 

What is an Endowment plan?

Monthly premium

  • Who should invest in Endowment Plans?
  • The Benefits of your Endowment

Single Premium

  • Continuation after your death
  • Who should invest in a single premium Endowment Plan?

Single Premium and Income

  • What are the unique features of a Endowment plan with income?
  • Who should invest in Endowment Plans with Income?

Second hand endowment policy

Smooth Bonus

  • What is the difference between a Market related investment and a Smooth Bonus Investment?
  • Investment Strategy.
  • Smoothing reduces short-term volatility.
  • Who should invest in this portfolio

Guaranteed Endowment plans

Unit trust

  • What is a Unit Trust and how do they work?
  • Why invest in unit trust
    • Spreads risk
    • Easy and accessible
    • You always know how much you own
    • You are protected
    • Flexible investment options
    • Easy access
    • Tax effective
  • How to choose a unit trust.
  • What is your risk?
  • Do you want income or capital growth?

Shares

  • Why invest in shares:
  • Through an Investment Company
  • Exclusive investment opportunities:
    • Access to respected Stockbrokers
    • Active Involvement in your investment:
    • Convenient transfers of proceeds to other investments:
    • Competitive pricing:
    • Transparent and comprehensive reporting:
  • The Investment:
    • Investment Term:
    • Investment Risk:
    • Opportunities to diversify across asset classes:
    • Tax:

Savings and Investments

  • Saving for a dedicated goal
  • Saving for Education
Education
  • Education Expenses
  • Education Planning
  • Risk Management
    • Retrenchment Premium Waiver
    • Disability Premium Waiver
    • Death Premium Waiver
  • Expected annual future cost of education

Pre - Retirement Planning

  • Pre Retirement
Sources to help you plan for Retirement 

Retirement annuities

  • Tax Breaks
  • Waiver of Premiums
    • Retrenchment Premium Waiver
    • Disability Premium Waiver
    • Maternity Leave Premium Holiday
Single Investment

Pension Funds
  • Defined benefit plan
  • Defined contribution plan

Provident Funds

Preservation Funds

  • Long-term, structured investing
  • Pension preservation fund
  • Provident preservation fund
Collective investment Schemes 
  • Linked Retirement Annuity

Endowments

Volatility Protector - Retirement Annuity

Cost of delaying

  • Compounding

What is a LISP

Post - Retirement Planning

  • Post Retirement

Sources of Retirement Income

  • Annuities
  • Investments
    • Guaranteed Endowment Income Plan
    • Term-certain annuity
  • Rentals

Once Retirement Begins

  • Buy a Life Annuity
  • Invest in a Living Annuity

Income during Retirement

  • Life Annuities
    • Compulsory
    • Voluntary
  • Living Annuities
  • Life Annuity or Living Annuity
  • Risks

Product features

  • Single or Joint lives
  • Capital Protector
  • Fixed income
  • Income escalation
  • With-profit life annuity
  • Fixed income escalation option
  • Income decreases on death of first annuitant
  • No decrease on death
  • Capital
  • Annuity income rate protector option
  • A tax efficient investment 
Level of income selected Source:Liberty Life
___________________________________

Investing

Getting the best out of your Investment.

  • Time in the market
  • The sooner you start the better
  • Your investment strategy
    • Investment time horizon
    • Expected return above inflation
    • Expected volatility of annual returns
  • Invest globally to diversify investment risk
  • Don’t chase the best performers
  • Benefit from rand-cost averaging
  • Invest with a financially sound partner

best income protection 

What are the difference between Market related investment and a Smooth Bonus Investment?

With a market-related policy the value of the investment goes up and down in line with the market and policyholders share immediately in the performance of the underlying investment. With a smooth bonus, bonuses are declared regularly, usually once a year. A portion of the bonus is allocated to each policyholder’s investment. However; the intention is that in the long run you would get the same payout from a with-profit policy as a market-related policy, just with fewer ups and downs along the way.

Investment Strategy:

The assets underlying a smooth bonus policy are invested in a mix of listed equities, property, fixed interest investments and cash.

Smoothing reduces short-term volatility.insurance retirement investments

In a period when returns are high, a lower bonus may be declared than the actual return for that period. On the other hand, when returns are low or negative a higher bonus would be declare than the actual return for the period. (A negative bonus is never declared so with-profit policies can never go down in value – this is different to market-related policies which can go up or down in value.)

The bonus rates we declare reflect a smoothing of the actual underlying investment returns over time. This reduces the volatility of returns over the lifetime of the policy. The graph shows the comparison of actual investment returns and bonus declarations over time.

 

insurance retirement investments

Source: Liberty Life

Who should invest in this portfolio

This portfolio is suited to the investor who is conservative and prefers:

  • A smoothed Return.
    • A smoothed equity-linked return is provided by using a dynamic protection strategy.
  • A vesting Bonus.
    • Bonuses are declared monthly, and once added to the investment it vests fully.
  • Certainty.
    • Bonuses declared gives investors certainty about what they will earn in the month to come.
  • Guarantees.
    • The portfolio construction guarantees that monthly bonuses will never be negative. No guarantee charge is levied for the capital protection that the portfolio provides at all times.
Guaranteed Endowment plans

Guaranteed Endowment plans: an overviewinsurance retirement investments

The investor has a choice of two options: (5 year investment plans)

The Guaranteed Endowment Growth Plan

provides the investor with a guaranteed maturity value at the end of the investment period.

The Guaranteed Endowment Income Plan

provides the investor with guaranteed fixed or escalating income during the five-year period as well as a guaranteed maturity value after five years.

Source: Momentum

Satisfied – not yet

Unit trust

For the “man on the street” or for the well-seasoned investor, unit trusts offer a simple, and effective way of saving money - they are also the perfect way to build a balanced and diversified investment portfolio, with exposure to the stock exchange. A team of investment managers is appointed and they make the investment decisions on behalf of the investors. It is not requinsurance retirement investmentsired of investors to be knowledgeable about shares as experienced investment managers invest this pool of money in different assets in financial markets.

What is a Unit Trust and how do they work?

If you do not have the expertise, time or money to invest in the stock market but still want exposure to shares, you should consider putting part of your portfolio into unit trusts. A unit trust is basically a large group of people who all invest -- sometimes small amounts -- in a cash pool that is used to buy specified stocks that otherwise would be too expensive for each individual. Each member of the pool purchases a share in the fund and is allocated units according to the amount they invest and the price at which the units are trading. Because your investments in the fund are spread over a number of different shares, the overall risk involved in trading on the JSE is reduced. Each fund is managed by a fund manager and you may be required to make monthly payments that are used to purchase additional shares. Your units can be traded like other stock market-related instruments and the price is determined by supply and demand. Prices are published live on the Internet or daily in the press. You can sell your units at any time and can realise the cash within a day or two. Do not be in a hurry. Unit Trusts are unlikely to show a profit overnight. Be prepared to invest for three to five years.  Source: Liberty Life 

Why invest in unit trust

Spreads risk

The risk in unit trusts is spread as it invests in a range of underlying assets, ensuring that all eggs are not in one basket. 

Easy and accessible

Unit trusts are a very convenient way of investing in markets which you otherwise would find difficult to access. You can invest in them on a monthly basis [debit order]

You always know how much you owninsurance retirement investments

The NAV prices of units are quoted daily in the national press, and can also be obtained directly from the unit trust company. You can calculate the value of your investment at any time by multiplying the number of units you own by the NAV price of your fund. When you invest in unit trusts, you buy a share of the units of the total fund. The unit price (also known as the net asset value (NAV)) fluctuates daily as it is dependent on the market value of the instruments in which the pool of money is invested.

You are protected

Collective investments such as unit trusts are the most accessible, flexible, protected, regulated and transparent long-term savings vehicles.

Finsurance retirement investmentslexible investment options

You can either invest a lump sum amount so that your entire investment immediately benefits from the growth and income potential of the chosen unit trust. Or you can make a regular monthly investment, an easier way of building up capital. The latter smoothes your investment into the market over time (called rand cost averaging) rather than being affected by a market movement at a particular time. Unit trusts are also transferable and you can invest in somebody else's name.

Easy access

Unit trusts are liquid so you can cash in all or part of your investment at any time and have ready access to your money.

Tax effective

Unit Trusts are tax-efficient, providing tax exemptions on interest income and capital gains tax exemptions.

How to choose a unit trust. 

What is your risk?insurance retirement investments

The type of fund you choose will depend on the amount of risk you are prepared to take. Factors are age, health, income, alternative liquid assets, financial / collective investment portfolio knowledge, and whether or not you have dependants.

  • An investor seeking security and income should select a money market fund, an income fund, an asset allocation fund or a mix thereof.
  •  A more aggressive investor can select a general equity fund or an equity fund that invests in a specific sector of the market such as financial and industrial companies, resources and basic industries or smaller companies.

Note: The risk / return spectrum of fund of funds is dependent on the combination of underlying funds in which the fund is invested and its investment objective. Fund of funds allow investors to benefit from the investment talents of a range of investment managers. 

In theory this should even out the risk involved, depending on the type of funds selected .Is the objective of the fund in line with your aims ?

Do you want income or capital growth?

Both these options require a match with the risk profile of the investor.

insurance retirement investmentsIf you require regular income,

 you would choose an income or money market fund.

If you require both income and capital growth

 you would choose a bond or asset allocation fund.

If you require capital growth,

you would choose a general equity fund, which is considered a medium risk fund with a broad spread of investments. Source: Sanlam

Shares

Direct or through an Investment Company

Why invest in shares:

The stock market provide excellent investment opportunities. Over the long term shares listed on the JSE Limited has generally out performed inflation and after tax returns from the top 40 listed shares have outperformed bonds and cash

Through an Investment Company

  • Exclusive investment opportunities:
    • You have the opportunity to combine a share portfolio with collective investments as the underlying investments in your endowment policy, investment-linked living annuity , retirement annuity or preservation fund.
  • Access to respected Stockbrokers:
    • You have access to a range of respected stockbrokers who will trade on your behalf according to yourinsurance retirement investments mandate. The stockbroker will assist you in compiling a portfolio that meets your needs and risk profile.
  • Active Involvement in your investment:
    • You have the choice of how much involvement to have in your investment.  Even if you have entered into a discretionary mandate with your stockbroker, you can still have a say in which shares should be purchased on your behalf.
  • Convenient transfers of proceeds to other investments:
    • You can transfer the proceeds from the sale of your shares to other underlying investment options within the same product.
  • Competitive pricing:
    • A competitive pricing structure is on offer.
  • Transparent and comprehensive reporting:
    • Up to date reporting will keep you updated with information on the number and value of shares held on a daily basis.  The consolidated reporting makes it easy to manage your investment portfolio.

The Investment:

  • Investment Term:
    • There is no investment term as shares are liquid.  However, individual products, e.g. an endowment policy, may have a specific term.  It is recommended that you invest for at least five years to reduce the effect of short-term market fluctuations.
  • Investment Risk:

Shinsurance retirement investmentsare portfolios are usually not as diversified as collective investment funds, so the short-term price movements – up or down – are greater.  It is therefore important not to lose sight of your long-term goals when making investment decisions.  It is difficult and highly subjective to assess the risk of shares and views may change in response to specific events or revised social or economic forecasts.  Your share portfolio manager will be able to recommend a basket of shares, based on your financial needs and risk profile.

  • Opportunities to diversify across asset classes:
    • To reduce the risk of holding a pure equity (share) portfolio,  you have the opportunity to diversify across asset classes.  For example, bonds can protect your capital or income if held to maturity.  At maturity – or if sold before – you receive a capital sum which can either be reinvested in a similar instrument or transferred to another asset class.  Bonds are available through some of the stockbrokers on the platform.
  • Tax: 
    • If you invest through a Investment Plan or through endowment or sinking fund products, both Capital Gains Tax and income tax will apply. Source: Glacier by Sanlam

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Any product information [legal and / or technical] on this webpage is subject to change from time to time. This webpage is a summary of some financial products / different product features and is not to be construed as advice by Procon Insurance Brokers. Any recommendations made must take into consideration your specific needs and personal circumstances.

Enige produk inligting [wetlik en / of tegnies] op hierdie webblad is van tyd tot tyd aan verandering onderhewig. Hierdie webblad is ’n opsomming van sommige finansiële produkte / verskeie produkte se kenmerke en moet nie as advies deur Procon Versekeringsmakelaars beskou word nie. Enige aanbevelings wat gemaak word, moet jou spesifieke behoeftes en persoonlike omstandighede in ag neem.


Investment

insurance retirement investmentsA well structured investment portfolio plan can have a profound impact on one's quality of life, whether it is to send your children to college, for special events such as marriages, grandchildren, overseas travel, to save enough to truly enjoy retirement, or to provide for your spouse in case something were to happen to you.

 How

Needs Objectives Goals = Implementation of your plan

The goal is where you want to be. The objective is the steps needed for you to get there.

Identify your objectives and goals, quantify the amount needed to achieve it, product suitability, your attitude to risk and then putting funds aside in a disciplined manner. 

What is an investment portfolio?

An investment portfolio is a structured plan to meet your investment needs over a specific period of time during your lifetime or to be implemented after your death. 

These needs relate to:

  • Protection planning which covers loss of income due to protracted illness.insurance retirement investments
  • Estate planning, which includes providing for dependants should you die  "too young".
  • Investment planning - Accumulation of Wealth /  Saving for a special goal.
  • Retirement planning - including provision should you live "too long"

The construction of an investment portfolio involves:

  • Attitude to risk
    • Your risk tolerance levels i.e. how much risk you are willing to assume for a given level of return.
  • Diversification
    • Does the proposed portfolio have an adequate spread of investments?
  • Income 
    • What income ? if any, is required from the portfolio and for what reason -  disability, household, education or retirement.
  • Timing
    • Is there any date earmarked for capital requirements, for example a planned retirement or education? 
  • Tax efficiency
    • In portfolio construction tax can play a part in deciding on an appropriate form of investment for each asset.
  • Regulation 28 compliant
    • It applies to all retirement fund savings, including retirement annuity funds, pension and provident funds and preservation funds. Refer: Regulation 28

The idea behind your structured investment portfolio is to generate income.

This includes:

insurance retirement investmentsDividend income - the profit share paid to shareholders of a company,

Interest income - the interest earned on the money deposited with an      institution,

Rental income- income received in respect of a property that is rented out etc.

Investment return – creation of wealth, income generation and wealth protection or a combination of all three.

Retirement income –  All of the above plus annuities paid monthly.

Steps needed = available resources.

So... where are we now?

Do you know the difference between Annual and Annualised returns ? Annualised figures illustrate the difficulty of recouping big losses.

Do you require a safe, secure and sound investment?

If so, the Endowment Plans offered is the ideal solution for you.

Endowment 

What is an Endowment plan?

A Endowment Plan is a flexible investment product specifically designed to help investors achieve financial goals over a five-year or longer term. Options within the product allow investors to structure their investments to suit their specific needs.Policyholders receive policy benefits from endowment policies- not dividends. Proceeds or policy benefits payable in terms of the policy are not taxable in accordance with SARS practice in the hands of the investor. 

Monthly premium

The option to invest in portfolios that are professionally managed by leading asset managers in accordance with yourinsurance retirement investments individually identified risk profile. Alternatively you can select different portfolios. These include cash, bonds, property, equity and specialist portfolios. This allows you to choose a combination of portfolios that meet your unique individual needs, access to both local and offshore portfolios and allowing the diversification of investment risk across a number of geographical regions. Switching between portfolios is allowed should your investment needs change. Guarantees are available on certain portfolios for the peace-of-mind of a guaranteed return.

Who should invest in Endowment Plans?

  • Any person.
  • Trusts (with non-taxable institutions and natural persons as beneficiaries)
  • Non-taxable institutions

This product has an indefinite investment term. An initial restricted period of five years is however applicable. After the restricted period, an endowment offers unlimited liquidity and tax efficiency.

The Benefits of your Endowment

insurance retirement investmentsOnce your investment is no longer in a restricted period, you can benefit by retaining the endowment structure.

You will be able to access the capital of your investment through withdrawals or interest-free loans. An interest-free loan allows you to repay the money to your investment and retain the benefits of a tax efficient investment shell to allow your investment to continue to grow at favourable tax rates.

Waiver of premium benefit:

A waiver of premium can be selected to ensure that, should you pass away or become disabled, the premiums on your investment  for the remainder of the specified term will be paid by the insurer.

Single Premium

A single premium investment has been designed for investors with an investment time-horizon of at least five years. You caninsurance retirement investments however access the funds during the first five years of the policy by taking an advance (only after the first year) or surrender, subject to legislative limits. After the initial five years the investment provides the flexibility to take advances against the policy and to repay any amounts that have been advanced. No interest is charged on an advance taken.

Continuation after your death

Your investment can be continued if you die during the initial term. You may assure your family and heirs of a guaranteed amount after your death by including your Investment in your estate plan so that it provides your heirs with exactly the same benefits. Alternatively you can appoint a nominee for policy ownership, who will receive the benefits after your death.

Who should invest in a single premium Endowment Plan?

Single Premium and Income

What are the unique features of an Endowment plan with income?

insurance retirement investmentsEndowment Plans are structured investments directed at providing the investor with capital growth, coupled with the option of receiving a fixed or escalating income for a required period of five years. Endowment Plans with Income provide you with a number of features that can be uniquely combined to meet your specific individual needs. 

These include:

  • The option to take an income under the Endowment Plan with Income.
  • The flexibility to pay additional premiums into the investment.
  • A minimum guaranteed death benefit on death of the last surviving life assured.
  • A tax efficient investment - Partially taxable
    • Provided certain requirements are met only the non-capital portion of your monthly or annual income is taxable in your hands. 

Who should invest in Endowment Plans with Income?

  • Any person.insurance retirement investments
  • Trusts (with non-taxable institutions and natural persons as beneficiaries)
  • Non-taxable institutions
  • An investor who cannot afford to subject his/her capital to risk – Guaranteed return or guarantee on certain portfolios.
  • An investor dependent on a fixed income
  • An investor requiring a fixed or escalating income
  • An Endowment Plan offers an ideal solution for a retired person, widow or widower with a lump sum to invest.

If you don’t want to wait five years and would like immediate access to your investment, then an Endowment that has been in force for five years, is for you.

insurance retirement investmentsYou, the investor, take cession of an endowment that has been in force for at least five years. A choice of risk profiled and specialist portfolios are available, so you can tailor the investment to your unique needs. You enjoy immediate unlimited access to your investment, but the money can be left to grow in the portfolios of your choice until needed. Should you make regular withdrawals, the investment value of the policy will reduce with every withdrawal. On death of the last surviving life assured, the investment value of the policy is payable to your nominated beneficiaries. You can also choose to nominate a beneficiary for ownership, so that if you, as the owner of the policy dies, the beneficiary you nominated for ownership becomes the new owner of the policy. This only works however if you have more than one life assured on the policy. Withdrawals made are subject to capital gains tax* in the policyholder’s hands. Source: Liberty Life 

*Capital gains tax

With current capital gains tax legislation allowing an annual exclusion of  R30 000.00 per annum for a natural person, investing ininsurance retirement investments secondhand policies may provide an added tax advantage to an  investment in the investor’s portfolio. The current capital gains tax rate is a maximum of 13.3%* for a natural person, which is significantly lower than income tax rates which range between 18% and 40% depending on the investor’s tax bracket. Hence, an investment in a structured product could provide a more tax efficient solution by potentially making the return subject to capital gain tax rather than income tax.

*There is a 33.3% inclusion rate on capital gains earned above the annual exclusion mentioned above, which at a maximum individual tax rate of tax of 40% would result in a maximum tax charge being levied of 13.3% (33.3% x 40%).

OK, So you want a policy that can never go down in value

Smooth Bonus

Tinsurance retirement investmentshis is a smoothed investment policy where a policyholder’s premiums (less charges) are invested into a fund account and the policy value grows by bonuses added at regular points in time. It works like a bank account with interest being added to it.

It is important for you to understand that the policy does not earn the exact return on the underlying investments as it would with a market-related policy, but rather shares in surplus as a part of a pool where surplus is shared amongst members. This is the essential principle of smoothing.