PSG answers your investment, financial, and retirement questions. File photo.
I moved overseas to London for work last year and now have a higher salary when converted into Rands. I plan to return to South Africa within 5 years, and I'd like to begin investing locally while my income is elevated. Apart from the Retirement Annuity (RA) and Tax-Free Savings Account (TFSA) that I already have, what other investment options should I consider? Jonathan Fisher, Wealth Manager, PSG Wealth Sandton Grayston.
You can either invest in discretionary investments or a local endowment where the underlying investments are wrapped in a tax efficient structure with a life company. With either option you can invest in collective investment schemes (CIS), a direct share portfolio, or exchange traded funds (ETF’s), or a mix of all of these.
The choice between the discretionary investment and the endowment will depend on certain factors, like the requirement for short term liquidity, and your individual tax rate. Should your liquidity requirement not be an issue for five years and your individual tax rate is above 30%, then the endowment route would be the preferred investment vehicle to house your underlying investments.
Some benefits of an endowment vs a discretionary investment include lower tax rates on CGT (12% vs 18%) and income tax (30% vs 45%), assuming you are on the highest income tax bracket of 45%. You also do not have to concern yourself with annual tax reporting in an endowment as the underlying taxes are paid directly to SARS on your behalf by the life company as part of the 5-fund approach. The investment in the endowment is also protected against creditors under certain circumstances, whereas a discretionary investment in your own name is not.
Lastly you need to decide on what would be the best underlying investments. Share portfolio, CIS or ETF’s. This will depend on your specific needs and goals as well as your ultimate risk profile. An individual share portfolio is considered higher risk given the generally narrow focus (usually comprising up to 20 counters), whereas CIS’s funds and ETF’s are much broader, hence lower risk. I’m guessing that you might start with a lump sum after which you make monthly contributions – therefore the CIS route would probably be the best option.
Bear in mind there are so many CIS’s – whichever is chosen must align with your needs and goals and fit with your risk profile.
I'm moving in with my long-term partner, and we've kept our finances separate until now. Since we’ll be sharing expenses, how can we manage our individual debts, such as credit cards and bank loans, without it affecting our shared expenses - specifically at the start of this journey? Jacqui Kruger, Wealth Manager, Silver Lakes Wealth Management and Stockbroking.
Moving in together is an exciting milestone and managing finances effectively from the start will help prevent potential conflicts. Since you and your partner have kept your finances separate until now, a structured approach to shared expenses and individual debt management is essential.
First, maintain open and honest communication about your financial situations, including outstanding debts, repayment plans and spending habits. This transparency will help you both set realistic expectations and avoid surprises. To prevent individual debts from interfering with shared expenses, consider keeping personal accounts for debt repayment while opening a joint account for shared costs like rent, utilities and groceries. You can each contribute to this account based on a fair method — whether it’s a 50/50 split or proportional to your income.
Budgeting together is also key. Create a shared budget that accounts for joint expenses while ensuring each partner still has the means to manage their personal financial obligations. If one of you has significantly higher debt, it’s important that this responsibility remains separate, so it doesn’t place an unfair burden on the other. Additionally, setting clear financial boundaries will help. Avoid co-signing loans or taking on your partner’s debt unless you are both comfortable with that level of financial entanglement.
If either of you struggle with debt repayment, consider seeking financial advice to create a structured plan. As your financial situation evolves, regularly review your approach to shared expenses and individual debts. This will ensure that your arrangement remains fair, sustainable and stress-free. The key is balance — maintaining financial independence while building a secure future together.
As a 55-year-old facing financial challenges, how can the two-pot retirement system help me access my pension fund? Kim Wheeler, Wealth Manager, PSG Wealth Northcliff.
The Two Pot System came into effect in South Africa in September 2024 to give people access to some of the money held in their retirement instruments, without having to resign from their jobs. In a tough economy, it is seen as something like the ‘pot of gold at the end of a rainbow’.
Essentially, it means that your retirement funds are held in two ‘pots’. Two thirds are allocated to your retirement pot, and one third to your savings pot. You can withdraw money once a year, with a minimum withdrawal of R2 000 from the savings pot. Your savings pot was initially funded by 10% of the value of your retirement benefits as they existed on 31 August 2024, up to a maximum of R30 000, and then funded monthly from your contributions. So be aware that there is likely a limited amount of money available.
Important to remember is that these funds should not be used for lifestyle or luxury purposes, but for emergencies – hence, you are taxed at your marginal rate on any withdrawals. SARS has collected between R11 billion and R12 billion in taxes as a result of withdrawals since the new system has taken effect.
As a 55-year-old, emergency funds are an essential part of financial planning; you should ideally not have to use a Two Pot withdrawal as a lifeline. Your financial adviser can help you with a financial plan to ensure you don’t have to dip into your retirement savings, as accessing these funds also withdraws money and security from your golden years.
What are the best financial products to ensure my child’s education and overall financial well-being are secure for when they grow up? I’m looking to set them up with the best possible financial foundation. Marzèl Swart, Wealth adviser, PSG Wealth Pretoria East.
One of the greatest gifts you can give your child is a strong financial foundation. Whether it's ensuring they receive quality education or setting them up for financial success in adulthood, the right financial decisions today can make all the difference tomorrow.
While the rising cost of education and financial security may seem overwhelming, starting early allows you to harness the power of compound interest. As the famous quote by Albert Einstein goes: "Compound interest is the eighth wonder of the world. He who understands it, earns it... he who doesn’t, pays it."
There are several financial products available to help you achieve these goals. Given the increasing cost of education, starting with an education savings plan as early as possible is essential. A Voluntary Investment Plan (VIP) is an excellent option to help you reach your education savings goals. It offers flexibility in contributions and withdrawals while providing access to a range of investment options.
Beyond education, ensuring your child’s financial independence in adulthood is just as important. A Tax-Free Savings Account (TFSA) allows investment returns to grow completely free of income tax and capital gains tax upon withdrawal. Contributions are limited to R36 000 per tax year and R500 000 over a lifetime, making it a valuable long-term savings tool. Any contributions in excess of these limits will be taxed at 40%.
Both a VIP and TFSA give you access to unit trust funds, allowing for diversification across asset classes to manage market risks. Consulting a wealth adviser can help you determine the right asset allocation based on your child’s specific financial goals and needs.
However, financial security isn’t just about leaving money behind, it’s about teaching your child how to manage it. Involve them in small financial decisions early on and encourage good money habits to ensure they grow into financially responsible adults.
I am looking to start my own business soon, which I am really excited about! However, I often hear about the various risks that small business owners face, and I want to ensure that my business and I are covered from an insurance perspective. Please could you provide me with some of the most important points I need to consider? Karen Rimmer, Head: Distribution at PSG Insure.
That’s great to hear! Entrepreneurs are a crucial part of our economy, but as you say - being a small business owner in South Africa does indeed come with many risks. From an insurance standpoint, below are a few key points to consider when starting up your business:
1. Cover for your premises
When it comes to your physical location, securing adequate insurance for your business premises is essential. Commercial property insurance typically covers risks such as fire, theft, and natural disasters. For businesses renting premises, ensure you read through and fully understand your lease agreement. It’s also important to understand that your landlord is responsible for insuring the physical structure of the property, and you are responsible for insuring its contents.
2. Consider internal risks
Businesses rely on people, and protecting your workforce and reputation is just as important as protecting physical assets. Depending on the nature of your operations, you may need:
3. Prepare for the unexpected
Business interruptions can impede operations and lead to significant financial losses. Business interruption insurance helps cover lost income and higher operating expenses during interrupted trade. In addition to business interruption cover, many businesses will also have high-value assets such as machinery, and it’s vital to ensure these items have sufficient insurance so that you can recover quickly in the face of theft or damage.
If you’d like to learn more, reach out to one of our qualified advisers, who will be more than happy to assist you!
PERSONAL FINANCE