Wealth creation, Income generation and Wealth protection: Accumulation of Wealth
What is an Endowment plan?
Single Premium and Income
Second hand endowment policy
Guaranteed Endowment plans
Volatility Protector - Retirement Annuity
Cost of delaying
What is a LISP
Sources of Retirement Income
Once Retirement Begins
Income during Retirement
Getting the best out of your Investment.
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.
The assets underlying a smooth bonus policy are invested in a mix of listed equities, property, fixed interest investments and cash.
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.
Source: Liberty Life
Who should invest in this portfolio
This portfolio is suited to the investor who is conservative and prefers:
Guaranteed Endowment plans
Guaranteed Endowment plans: an overview
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.
Satisfied – not yet
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 required 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
Easy and accessible
You are protected
How to choose a unit trust.
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.
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.
If you require both income and capital growth
If you require capital growth,
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
Share 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.
And that’s it. Contact us HOW CAN WE BE OF SERVICE
A 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.
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:
The construction of an investment portfolio involves:
The idea behind your structured investment portfolio is to generate income.
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.
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.
The option to invest in portfolios that are professionally managed by leading asset managers in accordance with your 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?
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
A single premium investment has been designed for investors with an investment time-horizon of at least five years. You can 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?
Endowment 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.
Who should invest in Endowment Plans with Income?
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.
You, 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 in 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
This 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.