R Ramnarain - Liberty Life

12/05/2017

Don’t panic – keep calm and stay invested
Events that have occurred in government recently have sent shivers down the spine of many South Africans.
President Jacob Zuma’s decision to reshuffle his Cabinet has been met with major disappointment from opposition parties and senior members inside the ANC. Our local currency has been affected and the South African economy was officially downgraded to junk status by two ratings agencies.
But what does that mean for us, the citizens of the country?
Firstly, you could decide to join the calls of protestors nationwide. Or you could sign one of the many petitions making rounds on social media. However, no matter what action you decide to take, bear in mind that you need to remain focused on achieving your financial goals, growing and protecting your wealth.
At Liberty, we believe the most important thing you should do right now is remain calm. Yes, your investments are facing political and economic challenges, but now isn’t the time to make sudden changes to them.
It will take some time for the financial markets to feel the full impact of the political changes. This means that any hasty investment decisions now – without a clear understanding of what’s to come – could increase the risks to your investment portfolio.
Yes, we must prepare for uncertainty, but we also need to make careful, strategic and well-planned moves to weather the impending storm. It’s important to remain calm and stay invested.
Liberty is confident that our innovative investment product range is well prepared for unexpected political events. If you’ve worked closely with your financial adviser to set specific financial goals and are following an investment strategy, consult him or her before you make any key changes to your plans.
If you don’t have a financial adviser and need to ensure that your investments are sound, then call one today. Together, you can develop the most appropriate financial plan designed to cater for your personal financial situation, while still considering the current political and economic environment.

10/05/2017

Your parents are at risk of making bad financial decisions

Geraldine Macpherson is a Legal Marketing Specialist. She offers insights into how current SA law protects ageing parents and gives advice on measures to have in place
The reality for those of us over the age of 40 is that our parents are ageing. One of the biggest risks for the elderly is bad financial decision-making. These are often a result of falling for scams, or being in a situation where they’re mentally incapacitated and unable to make decisions.
Your parents may want to give you general power of attorney to deal with their affairs. This provides you with the right to transact on their behalf when they’re not physically present, but what many people don’t realise is that as soon as the person granting the power of attorney lacks mental capacity, then the power of attorney they signed becomes null and void, and continuing to act on it amounts to fraud.
So, while a power of attorney gives you the right to stand in a queue and sign the documents when your parent is too physically frail to do so, once he or she has dementia or Alzheimer’s disease, that power of attorney is no longer valid and may not be used.
Don’t allow power of attorney to be abused
Time and again we see abuse of powers of attorney by children manipulating their parents to benefit themselves, often at the expense of siblings, and at times even blatantly stealing from their parents. It must be accepted that those who lack mental capacity are extremely vulnerable and thus strict measures are in place to protect them.
In countries like the UK, there’s the concept of an “enduring power of attorney”, which continues to be valid if the grantor becomes mentally incapacitated, but this must be granted prior to the mental incapacity occuring. Unfortunately, this concept isn’t applicable to South African law, as it could solve many practical problems, at a small cost.
If your parent’s no longer mentally capable of making decisions, there are two options, one of which is applying to the High Court to have him or her placed under curatorship. This is a complex and costly process, requiring compelling medical evidence, as well as the services of not only an attorney, but also an advocate, as it’s a High Court matter. This could cost tens of thousands of rands in legal fees.

The other option is to apply for an Administration Order in terms of section 60 of the Mental Health Act. This would be the cheaper route, but the administrator’s powers are more limited than the curator’s and it’s necessary to report to the Master on an ongoing basis.

A possible solution is to ensure that assets are held in trust, prior to your parents needing such intervention. The trustees would then be able to make financial decisions (without the need of a court order) for the benefit of your parents. The challenge is that you don’t know if this will even be necessary and the costs may be prohibitive. In a situation where all the siblings are emigrating and only the parent is being left behind, it may be worth seriously considering this option and obtaining legal advice on it.
Five important considerations when taking care of your parents

Unfortunately, taking care of your parents’ finances is a very challenging issue in South Africa due to the deficiency in our law, but there are some basic structures you need to ensure are in place:
Your parents must have a valid will. If one parent has already passed away and the couple had a joint will, make sure the surviving parent has entered a new will as it may be difficult to trace the original one at the Master’s office.
Speak to your parents about a life file which contains a list of all investments, bank accounts, insurance policies, doctor’s details, list of chronic medication, medical details, etc. This file will be important in the event of ill-health (especially if hospitalisation is required) and death.
Make sure that your parents are being serviced by a credible financial planner and, where possible, that at least one of the adult children is involved in all the financial decisions taken and that the siblings are kept in the loop. The balance of power between siblings is incredibly important – you don’t want any of them to feel you’re manipulating your parents to serve your own ends.
Encourage your parents to use Internet banking so that you can easily assist them in paying and managing accounts and can, to a large extent, automate the administrative side of their lives, which can become stressful in later years.
Ensure you educate them about the importance of keeping passwords safe and remind them regularly of the scams that are out there.

05/05/2017

17 million reasons a day: Why you need to revisit your insurance cover:

Last year Liberty paid out R4,3 billion in valid claims, which amounts to R17 million every working day. Henk Meintjes, Head of Risk Product Development at Liberty, explains.
While we are proud that over the last 60 years we have continued to meet our promise to our customers, the 13% increase in claim payments compared to 2015 reveals concerning trends in health and lifestyle risks.
Our claim statistics show that cancer and cardiovascular conditions continue to be the main driver of claims. Cancer was the number one cause for claims for people under the age of 65, with breast cancer the most common type of cancer for women and prostate cancer for men. Colon and re**al cancer were the second most prevalent types among both men and women with skin cancer accounting for nearly 7% of cancer claims from men and nearly 5% of cancer claims from women. Given the increasing rate of cancer claims, it is important to take care of one’s body and to identify any serious illnesses as early as possible.
The economy is also taking its toll on our bodies with an increase in stress-related claims, such as su***de and cardiac and cardiovascular diseases and disorders. Last year’s drought would have put even more stress on farming communities. In the Northern Cape, for example, we saw that the majority of su***des were farmers over the age of 55. Hopefully with the breaking of the drought, we will see fewer of these types of claims.
The tougher economic conditions also led to a higher number of invalid claims. During challenging economic times people tend to put through more invalid claims for conditions they are not covered for in the hope that they will receive some form of payment. An example could be a non-cancerous tumor or a disability/impairment, which is not permanent or hasn’t been continuous for the full waiting period.
We also saw an increase in non-disclosure where the applicants did not disclose all the relevant information, possibly in the hope of a lower premium. However, non-disclosure or under disclosure could delay the underwriting process or the claim process (when access to the claim payment could be vital). Should the information not provided at underwriting stage have been material to the cover applied for, the terms on which the cover was provided may be altered, or the cover may be cancelled resulting in no claim payment. Full upfront disclosure is the only way to ensure you receive the cover you are paying for. Please refer to the summary of your disclosures included in your policy document if you have any doubts.
What risks do you face?
Young achievers: cancer, cars and the economy
As the economy continues to falter, young achievers remain at risk of retrenchment with 12% of their claims a result of retrenchment. Motor vehicle accidents were responsible for 10% of claims (higher for young men at 12% compared to 8% for young women) and, concerningly, 74% of these were for Life Cover. Cancer once again remains the highest cause for claims at 15,2%, although this is predominately for Lifestyle Protection rather than death claims.
Young parents and established providers: cancer, hearts and blood pressure
Young parents and established providers shared similar claims experience suggesting that cancer, heart problems and blood pressure remain significant threats for working households. A quarter of all claims were cancer-related for both young parents and established providers, followed by cardiovascular which was more prevalent among the older established providers. Strokes or central nervous system disorders contributed just over 9% of claims for both these groups. We have seen this trend of increasing cancer and heart-related illnesses since we started reporting on our claim statistics in 2006. This is due to a number of reasons, such as lifestyle choices, diets, a lack of physical activity and improvements in diagnostic tests and tools.
Empty nesters: heart, cancer and lungs
Together, cardiovascular and cancer accounted for nearly half of the claims paid to individuals over the age of 55. As expected for empty Nesters, who are generally older, respiratory diseases and disorders were the third largest claim responsible for 7,31% of paid claims.

31/10/2016

03/10/2016

Five ways to trick yourself into saving

Want to save, but don’t have the discipline? Here are some painless savings tips to help you save for a rainy day without feeling like you’re depriving yourself today.

While it may feel like a big task to find extra money in your current budget that could be put towards your savings, there are smart ways to save without noticing.

If you find it hard to save, blame human psychology. Behavioural scientists have found that we feel loss far more greatly than gain, which is why asking us to cut-back on our lifestyle makes us very unhappy. We feel the sacrifice immediately, but only reap the benefits in the future.

Bank your change

Remember the piggy bank from your childhood? You’d be surprised how fast those coins add up. Every day, empty your wallet of any coins and put these into a jar. If you do this all year, by December you’ll have a little bit of extra money to spend over the festive season or on holiday.

Set up a debit order
You can set up a debit order into an investment for as little R300 per month. Make sure it goes off the day after payday so you don’t spend it. Considering how often you swipe your card for purchases you can’t even remember – do you really think you’ll miss R300 that much?

Commit your future salary

When you set up the debit order, include a 10% annual escalation. Your savings will increase each year without you having to do anything at all.

When you receive your annual bonus, ask your employer to contribute 27,5% to the company retirement fund tax-free. That way, the bonus is paid out after you’ve put money aside so it won’t feel like much of a sacrifice. At your next annual salary increase, ask HR or your adviser to increase the percentage of your salary that you pay towards a retirement fund. You’ll still increase your take-home pay, but a portion of your increase will go towards boosting your retirement savings.

Downsize your coffee

Remember the days when you went to buy a coffee and it only came in single-sized cup? These days, most coffee shops offer a choice of small, medium or large. This is really aimed at getting us to spend more, as people are more likely to purchase a medium-sized cup. The small cup is usually 250ml, which is the same amount we used to be happy with, so rather go for the smallest version of your daily coffee purchase and save anywhere from R3 to R5 – those rands add up over time.

Work those loyalty rewards

Most banks and major retailers offer reward programmes to loyal, regular customers. Keep those rewards, especially those that convert to cash or vouchers, to supplement your festive season spend.

20/09/2016

What you need to know five years before retirement

The best retirement is one that’s well-planned in advance. Liberty’s Wealth Adviser Carlo Gil offers tips on things to consider five years before retirement.

The word “retirement” is often thought of as something we only need to be worried about later on in life, but the years fly by so quickly that, for many people, it may come as a shock when you realise you’re only five years away from retirement.

A successful retirement plan is developed on the basis of extensive budgeting and balancing of assets and expenditures, and you need to start planning the details of your retirement at least five years before retirement. A Financial Adviser may be key to help you put financial goals in place in order to meet your retirement requirements.

Here are a few pointers to help guide you in your pursuit of financial freedom during your retirement:

•Calculate your expected living expenses: Outlining a budget allows you to identify and align monthly expenditure with your current income. This is the starting point for forecasting how much income you need in retirement. A budget will also separate necessary living expenses from luxury spending. When we assist our clients with budgeting, we also take inflation into account, helping us to determine the cost of living at retirement.

•Build in medical costs: Retirement is not cheap – it’s been said that we incur over 80% of medical expenses in a lifetime after retirement, so adequate medical scheme cover is essential. If you’re not already on a fully comprehensive scheme, you need to factor this cost into your retirement expenses.

•Settle your debts: Ideally, we want to enter retirement free of debt. You will need your retirement income to cover your living expenses, not interest.

•Boost retirement savings: With recent legislation changes, you can now invest up to 27,5% of your income and enjoy a tax benefit in doing so. Most people find that they have under-saved for retirement, so this provides the opportunity to boost your retirement funding. Use any salary increases in the last five years to boost your retirement fund, rather than your lifestyle.

•Re-assess your risk cover: Risk cover is intended to protect you by covering any income gaps to pay for any outstanding debts and provide for your family should you no longer be able to. By retirement, ideally you’ve built up sufficient capital to provide an income, so this portion of risk cover is less important and is only needed for estate planning reasons, such as settling taxes and paying for funeral expenses. However, you should increase your critical illness cover as the likelihood of becoming seriously ill increases substantially as we age.

•Understand your investment options: When you formally retire, the financial vehicle used at this point will typically be in the form of annuities. Annuities refer to investments that provide a monthly, semi-annual, or annual income. Your decision about whether to purchase a guaranteed annuity income or invest in a living annuity with an underlying investment portfolio will determine how to manage your current retirement funds. Do you need to start moving to more cash-like investments over the next five years or do you stay invested in equities?

Upon retirement, you’ll be able to take a portion of your retirement funds tax-free. You need to decide how to invest this. This can be used to generate additional income, tax-free, if allocated in the correct form of investment.

01/09/2016

2015 Claims stats

20 Apr 2016


​Liberty pays out over R3.5-billion in valid claims



Johannesburg - 13 April 2016: Liberty, the largest writer of new risk business since 2002, and the first insurer to publish its Claim statistics in 2006, has paid out R3.57 billion in valid claims for the 2015 financial year – delivering on its promise and commitment to protect its customers and their families against life's uncertainties.



Cancer remains the largest cause for claims with a total of 24.9%, followed by cardiac and cardiovascular conditions at 22.1% of all claims, according to Liberty's Director for Risk Product Innovation, Nicholas van der Nest. "This result is consistent with prior years where cancer also recorded the largest number of claims," says van der Nest.



However, there has been a shift in the types of cover linked to cancer, says Liberty's Chief Medical Officer, Dr Philippa Peil.



"With medical advancements such as better screening programmes and more awareness around health and lifestyle, cancers are being diagnosed earlier and at younger ages. The split between cancer payments under critical illness and deaths due to cancer are therefore shifting, with more and more customers qualifying for critical illness payments and surviving longer after diagnosis," Dr Peil says.



Top claims and types of cover



The vast majority of all Liberty payments, R2.48 billion or 57% of the total claims paid, were for death claims. At least R678 million was paid in respect of critical illness, which provides payment to help customers make the lifestyle adjustments required following diagnosis. A total of R407 million was paid for income protection, including both lump sum and monthly income claims.



"The split of claims paid by benefit type is influenced by the types of benefit that our customers bought. A new inclusion in this year's report is therefore a breakdown of last year's sales, which also provides insight to potential customers who are weighing up their insurance needs."



Segmentation of claims



The report on the claim statistics is by segment groups rather than product type or age – which was the case in previous years. Liberty segmented its customers into young achievers, young parents, established providers and empty nesters.



"Although the top five claims causes are responsible for 64.9% of all claims paid, the more interesting findings are in respect of what our segments have claimed for," says van der Nest.



Young achievers claimed mainly for income protection benefits, with retrenchments being the main cause of claim.



Retrenchment claims accounted for 15.9%, cancer 12.3% and motor vehicle accidents (the main cause of claim for young men) 11.9% of total claims for the segment.



Cancer was the main cause for claim for all other segments at 22.5% (young parents), 26.9% (established providers) and 25.6% (for empty nesters) of claims respectively. Female breast cancer and male prostate cancer drove these results to a differing extent for each of the segments.



Similarly, cardiovascular causes were the second most common cause for claims in all three segments at 14.5% (young parents), 21.1% (established providers) and 25.3% (empty nesters) of paid claims respectively. Cardiovascular causes were also responsible for the majority of claims paid in respect of men last year.



Strokes or central nervous system disorders also contributed significantly to total claims paid and were responsible for 8% of young parents claims paid and 8.7% of established providers claims paid. As expected for empty nesters, who are generally somewhat older, respiratory diseases and disorders were responsible for 7.9% of paid claims.



Keeping the promise



"We have made a commitment to our policyholders to pay 100% of all valid claims. We believe that by making our claim statistics public, we are showcasing our commitment to live up to that promise," says van der Nest.

16/08/2016

Why you should stay invested

As long as your investment portfolio is aligned to your personal risk profile, there is no need to panic.

If there is any lesson to be learnt from the Brexit debacle it is that you can never predict the future – even if you are the Prime Minister of England. That is why investing is about the long-term and not short-term market fluctuations, based often on irrational decisions.

You cannot predict market movements over the next six months, but you can have a reasonable level of certainty about the long-term prospects of the companies you are invested in. People are not going to start making less cell-phone calls just because Britain leaves the EU, so the impact on Vodafone’s profits will be negligible even if its share price gets caught up in the Brexit noise.

If the risk profile of your investment is still aligned to your long-term risk profile and is well diversified, be careful of any knee jerk reactions and avoid making panicked, hasty decisions that go against your overall investment strategy. This is especially true of your retirement funds which, thanks to Regulation 28, should well diversified and which by their very nature have a much longer investment term.

Once all the noise and chaos is out of the system, good quality companies with good profits will see their share prices recover. The reality is that while UK growth is likely to be affected, the ramifications of Brexit will be far less than the current market volatility suggests.

In fact, a weak market offers opportunities to investors to buy into good quality assets being sold by panicky investors. For individuals investing in UK shares, it is worth remembering that most of the revenue earned by these London listed companies are actually from outside the UK, often in emerging markets and a weaker sterling boosts their reported profits. UK exporters will also benefit from a weaker sterling.

From a local perspective, although Brexit volatility fed into our markets, we have seen a strong resurgence in foreign buying of our equity market with foreigners buying R60bn worth of equities in June.

Firstly, money has been flowing back into emerging markets. The MSCI Emerging Markets Index in dollars is trading now at the same level as nine years ago which a number of value-based investors find attractive.

Secondly there has been a good recovery, from extremely low levels, in many commodity prices and this is boosting emerging markets with the JSE Mining Index up 57% in dollar terms for the first six months of the year.

What to do when markets crash
•If you understand your investment objectives and are comfortable that your investment portfolio reflects those objectives just sit tight.
•If you are feeling anxious and worried about the impact on your retirement nest egg, meet with your financial adviser and ensure that your investment strategy is in line with your risk tolerance, keeping in mind that this should include the risk you need to take in order to achieve reasonable growth. A crash is not, however, the time to start selling out of equities.
•If you have some cash to invest, look for the pockets of opportunity that have been opened – especially if you want to increase your offshore exposure.

13/08/2016

Do you have A Will? I offer FREE drafting of Wills & Estate Planning to all Existing & New Liberty Life clients.

10/08/2016

Demystifying the Jargon

Do you ever wonder what “purchasing power parity” or “loading a policy” means? Here are 18 investment words worth knowing.

Financial terms can be confusing especially when it comes to reporting on economics or market returns. Just as confusing is the language used by insurance and retirement polices, yet understanding the difference between a beneficiary and a dependant can have a significant implication on a death benefit claim for example.

Here are some of the more common financial terms you will come across:

Policies

Beneficiary: A person (or trust) who will receive proceeds from a policy or investment if you die.

Dependant: A person who relies on another, especially a family member, for financial support. In some cases a dependant can have a claim on a policy or retirement fund even if they are not a beneficiary.

Invalidate: To make a contract, agreement, document etc., invalid, e.g. failure to follow the instructions correctly could invalidate the guarantee.

Loading: An extra amount you may need to pay for insurance in addition to a premium. For example you have heart disease but want life insurance. The Insurance company will assess you to be a high risk, and charge you a high premium made up of the basic rate plus a loading.

Underwrite: To guarantee against financial risk by assuming that risk, as financial institutions do when they offer (underwrite) an insurance policy, or when they buy a new securities issue from the issuer for re-sale to the public.

Premium: The amount you pay, monthly or annually, for an insurance policy.

Quote: An estimation of the cost you will pay for a policy, and/or the value of that policy in future years.

Investing

The market: This usually refers to the stock market, a place where shares of companies are bought and sold.

Return on equity (ROE): A measure of how well a company uses shareholders’ funds to generate a profit. This is expressed as a percentage of net profit to net assets.

Dividend yield: Annual return from holding a stock, determined by dividing the company’s total dividends of the year by the current share price.

Rand cost averaging: A system of accumulating shares or investment fund units by investing a fixed amount of money at set intervals. This means the investor buys more shares/units when the price is low, an fewer when the prices is high. The theory is that this is less costly than a system that involves buying a fixed number of shares/units at set intervals.

Nest egg: An amount of money that you save to use later, especially for your retirement.

Umbrella fund: A fund that is made up of a number of different investments. EXAMPLE: The introduction of the national pension scheme will lead to a shake-up in the private pension fund industry, in which 80% of the funds have fewer than 100 members. It is likely such small funds will merge to form umbrella funds that cover multiple employers before the national scheme is implemented.

Economy and markets

Retail therapy: When people go shopping in order to feel better, rather than because they really need to buy things.

Purchasing power parity (PPP): Method of currency valuation based on the premise that two identical goods in different countries should eventually cost the same. This is illustrated by the Big Mac index which takes a Big Mac hamburger and compares its prices in different countries in order to establish the relative value of their currencies.

Flight to quality: When investors move their funds to more secure/less risky assets during a particularly volatile period in the markets or because of political or economic instability.

Buyer‘s market: A market that favours buyers because supply is plentiful relative to demand and therefore prices are relatively low. The opposite of a seller’s market.

Soft landing: When an economy that has recorded a period of very rapid growth slows down gradually without experiencing the negative effects of a more abrupt reversal.

Some words: Source, The Penguin Dictionary of Financial Terms

09/08/2016

Why critical illness cover is not the same as medical cover

One of the major misconceptions is that critical illness cover is a replacement for medical aid cover, yet there are key differences between the two and a misunderstanding of the role of critical illness cover could lead to a gap in your financial protection against unexpected health events.

By Nicholas van der Nest: Divisional Director for Risk Product Innovation

It’s important to speak to your financial adviser to ensure that you understand exactly the cover you have in place and what it will pay for.

Medical aid cover pays for medical expenses incurred on an individual basis. Critical illness cover pays for the cost of lifestyle adjustments following the diagnosis of a critical illness. A holistic financial plan includes both of these products.

For example, in the case of stage 0 breast cancer a medical scheme would cover the costs of tests used to diagnose the cancer and treatment required, which can be very expensive. This can be in full or based on a benefit scale.

A critical illness product, however, will not pay out for this diagnosis as the impact on the customer’s lifestyle and the amount of money required to make lifestyle adjustments is very limited.

If, however, the policy holder was diagnosed with stage 1 cancer and had the top-up option to their Living Lifestyle benefit, then the critical illness cover would pay out in full.

How the funds are allocated is up to the policyholder and her needs, but it could be used for reconstructive surgery and other lifestyle changes, for instance in the case of a mother, a caregiver could be hired to look after the children.

Critical illness cover is also the most likely policy to be misunderstood because of the significant number of conditions covered by it. Many people are also not familiar with medical terminology used to describe an illness or details of diagnostic procedures and tests used for assessing the severity of a condition.

If you have existing cover or wish to take out critical illness cover, it is important to discuss the product details with your adviser so that you are able to maximise your benefit.

Questions to ask your adviser:
What conditions are covered?
What severity of illness does it cover?
How soon after diagnosis will I be paid