Guiding consumers since 2009

Saving for retirement should remain top priority

By Staff Writer

Professionals, such as doctors, engineers, accountants and lawyers, as well as other higher earning white collar workers need to continue to provide for their own retirement savings needs, but should closely monitor the proposed retirement industry reforms, outlined by the Minister of Finance in the 2011 Budget Speech.

That is the view of Gerhard Joubert, Head of Group Marketing at PPS, who says that it is clear from the Minister’s speech thatreforms will be implemented on a gradual basis. Joubert says, however, that as these reforms unfold, it is crucial for professionals to stay abreast of the changes, as these could have serious financial ramifications for them.

For example, the introduction of the R200 000 cap from next year on the amount deductible from tax for retirement savings will negatively affect retirement fund members who earn more than R888,888 per annum.

According to Nick Battersby, CEO of PPS Investments, over that level, the individual is effectively driven away from the products governed by the Pension Funds Act towards other discretionary products, which are often unregulated. “South African consumers already have inadequate replacement ratios at retirement and this disincentive will likely exacerbate this.”

He adds that for most employees, life and disability cover is offered though group cover in employee schemes, which in turn is linked to contribution rates. These contribution rates will be lowered under this new principle.

“We have always encouraged members to start saving sooner and benefit from longer period of capital growth. It has always been difficult to catch up later in your career because contribution rates need to become much higher to make up for years of lost contributions and growth from a young age. This change will make it even more difficult to catch up, if not impossible. Older senior employees (presumably the high earners) will be forced to prolong their careers which will limit opportunities for the younger generations, which in turn is no supportive of an employment-friendly strategy.”

Saving for retirement is crucial and speaking to a retirement consultant is the best place to get started.

Recent Articles

Featured New homeowner? Be aware of these extra expenses

You’ve overcome all the hurdles of buying a home. You’ve managed to pay your deposit and your closing payments, and now you’re a proud title deed holder. However, there are other expenses waiting around the corner. Are you prepared?

Your biggest credit conundrums – answered

Understanding your credit health is one of the most important factors in managing your finances. This is because it gives you insight into your debt, your borrowing ability, and your financial history. While many understand this, there are still many questions on how to do just that.

Avoid debt collectors, choose debt counselling

There are two things you can do when you are struggling to pay your debt. You can either let your creditors hand your debt over to debt collectors – or you can let debt counsellors help you deal with your debt.

Retail notes: easy investment option for new investors

Being a newbie in the world of investing can be challenging because you don’t know where and how to invest. With so many investment options, you could easily be befuddled. Justmoney looks at how retail notes can help you cut your teeth in the world of investing.   

Deals

Spur's South African Combo Special

Price: R80
When: Mondays
Where: Nationwide

De'Vara Beauty Spa Monday Madness Special

Price: From R580
When: Mondays
Where: Cape Town

Pepperclub Hotel Summer Sale

Price: R1,701
When: From 23-27 October 2019
Where: Cape Town