Newsletter March 2016

Dear clients and associates,                                                                                                                                               

We are thankful 2017 has been very positive so far in comparison with the previous year. In February 2016 South Africa’s economy was still in shock after the “Nenegate” debacle, a shock that put our currency and markets under enormous pressure.

The Rand exchange has since achieved outstanding growth against the major world currencies and the markets is steadily recovering. Many economists have predicted inflation has already started declining and interest rates will be reduced by the end of the year.

            The below table is a comparison of the exchange rate and JSE performance over the last 2 years.

	28 Feb 2016	28 Feb 2017
Rand/Dollar	R16.17	R13.00
Rand/Pond	R22.43	R16.14
JSE ALSI 1 Year performance	-7.34% (27/2/2015 – 26/2/2017)	9.05% (26/2/2016 – 13/1/2017)

Budget 2017  

This year’s budget speech was slightly more optimistic compared to 2016, but a few tax increases were announced which could have a direct impact on the consumer’s disposable income. The Treasury is also determined to continue cutting government spending, thus there is speculation that certain government employees might soon be offered severance packages. If you have been or is aware of anyone else who have been offered a severance package, please contact us urgently for advice, as the wrong decision now can have severe negative tax and other implications in the short and long term.

Please see below a few important increases as announced by Minister Gordhan:

• Individuals earning more than R1.5 million per annum will pay 45% on income tax.
• The general fuel levy will increase by 30c/Liter and 9c/liter for the road accident fund levy. 
• Dividend withholding tax has increased from 15% to 20%.
• Consumers of alcohol and tobacco products can also expect to pay 6%-10% more.

Luckily there is also a few tax benefits that can be utilized to your advantage :

• Properties to the value of R900 000 can be purchased with no transfer duties payable. 
• The limit on tax-free investments have increased from R30 000 to R33 000 per annum. Please feel free to contact us for more information on how you can utilize this benefit to its full potential. 
• Up to 27.5% of all retirement contributions can be claimed back from tax. Taxpayers that fall in the highest tax bracket can claim up to R350 000 back of their retirement contributions from tax. The social grant for pensioners was recently increased to R1600 per month for persons over 60 years and R1620 per month for persons over the age of 70. This amount falls far short in comparison with the real cost of living in South Africa. Thus, retirement planning is not only a smart way for tax relief, but also a necessity.  
• Majority of taxpayers can expect to pay less income tax in the next financial year. 

 Below table shows what taxpayers in certain brackets can expect to pay in the 2017/18 tax year.

Taxable income	2016/17 Rates	2017/18 Rates	Tax adjustment (R)	% adjustment
R150 000	R13 500	R13 365	-135	-1.0%
R300 000	R49 780	R49 348	-432	-0.9%
R500 000	R116 460	R115 824	-636	-0.5%
R750 000	R213 431	R212 490	-941	-0.4%
R1000 000	R315 931	R314 990	-941	-0.3%
R1500 000	R520 931	R519 990	-941	-0.2%
R2000 000	R725 931	R744 990	-941	2.6%

Please remember the tax year commenced on 1 March 2017, so be sure to keep your logbook up to date, save all invoices/receipts and keep record of all medical expenses to ensure that the tax return process is as smooth as possible with the onset of the tax season.

Investments and creation of wealth

2016 was truly a unpredictable year for the markets, but as mentioned before, it seems that things are turning around. Below tables indicate how unpredictable the markets were in 2016. Both tables indicate funds with high equity exposure which performed well over a long period, but completely under performed in 2016.

Top 3 fund positions over 3 year up to Dec 2015	Position in 2016
Nr 1	Nr 102
Nr 2	Nr 92
Nr 3	Nr 98

Top 3 funds in 2016	Position over 3 years up to Dec 2015
Nr 1	Nr 103
Nr 2	Nr 101
Nr 3	Nr 78 (*fund inception was 1 Nov 2013)

Above just again emphasizes that no one can accurately predict market performance. Along with top fund managers, we at TVZ are convinced wealth creation can only be achieved through

•  sufficient diversification,
•  the use of recognized fund manager with outstanding track records over the long term,
• sticking with your investment strategy/plan through the good times as well as times with weaker growth,
• not making emotional decisions.

Risk cover: Life-, Disability- and Severe illness cover

We can not emphasize the importance of risk cover enough: thus we encourage all our clients to consult us about proper death, disability and severe illness cover for you and your loved ones. We recently handled a client’s severe illness claim who was diagnosed with cancer. Luckily the cancer was detected and treated early. The severe illness claim was paid to the client in full without delay. As of 1 April 2017 new regulation will be introduced to limit medical gap cover policies. Thus, besides the emotional impact that severe illness can have on you and your loved ones, it can also have a devastating financial impact without the correct cover. Please feel free to contact us for a comprehensive financial needs analysis.

Short-term insurance

2016 was a great year for our short term division. 90% of all claims was paid out, the claims that were declined were for items that were not insured. We want to remind clients to check that all necessary items are covered. If you are under-insured, the insurance company will not pay out the full amount. We are approached regularly by clients wishing to leave direct insurance companies. One big reason for this is poor service from call centres. Sometimes the premium might be lower than what the larger insurance companies offer, but there are various excesses that are added to the policy that can easily be overlooked. At TVZ you know exactly who you are dealing with and we act as your intermediary, thus you don’t have to speak to a different person every time you make contact.  Also the insurance companies we partner with does not add unnecessary excess fees. It is our duty to ensure our client understands the policy contract in its entirety. Please feel free to contact us if you have any queries regarding short-term insurance.

Conclusion

Let’s aim to save in 2017, think twice before adding unnecessary expenses; work towards reducing debt; save for retirement, unforeseen circumstances, and also our dependents and very important, let’s save water, our most valuable asset.

Please feel free to visit our website, www.tvzfinancialservices.co.za, or Facebook page for information regarding market conditions, news of the insurance industry or to leave a comment. We are well aware that “word of mouth” is still one of the most effective methods of marketing, so you are welcome to refer your friends, family and colleagues for a financial needs analysis, free of charge.

Kind Regards,

From all of us at Toni van Zyl Financial Services