Long-Term Gain over Short-Term Pain: Lessons from life and investing
Geo Botha • December 3, 2024
"I'm never doing this again"
This is what I said last Saturday afternoon as we started to climb the last 5 hills in the last 30 of the 200km cycle race called the Double Century.
It was the 3rd time I have said it, in 3 consecutive years
Only to come back and compete again the next year.
Challenging ourselves physically is about a lot more than just pushing to what we think our physical limits are.
It's about creating the discipline to train, the perseverance to push through and silencing those inner voices when you want to quit.
It's also strange how we quickly forget about the pain and suffering and only remember the positive accomplishment and memories.
I’d like to share an article I recently read from Siobhan Simpson, Head of SA Unit Trusts at Ninety one, who shared a similar experience this year.
She went through the exciting yet uncertain phase of giving birth to her daughter and shared the lessons she learned throughout and how we can apply these insights into managing our own investment portfolio.
She also shares some interesting stats on how investing over different time periods can greatly influence the outcome and why it’s never a good idea to wait for the right moments
Enjoy the festive season with your loved ones and stay safe out there.
Geo Botha
Marketing Director
A living annuity is a post-retirement income product available to South Africans who've exited a retirement fund — typically a pension, provident, preservation, or retirement annuity fund. Instead of taking the full benefit as a cash lump sum (subject to the usual tax-free and taxable limits), a retiring member can use some or all of the remaining capital to buy a living annuity from a registered long-term insurer. A traditional life annuity pays a guaranteed income for life in exchange for handing over the capital permanently. A living annuity works differently — more like a structured drawdown account. The contract sits with the insurer, not a fund, so once the policy is in place the member is no longer part of a retirement fund at all; the relationship becomes a contractual one between annuitant and insurer. The underlying investments also belong to the insurer rather than the annuitant, even though the annuitant chooses how the money is invested, usually from a range of unit trusts or similar portfolios on offer. Income is flexible, within limits — annuitants must draw between 2.5% and 17.5% of the remaining capital each year, reviewable annually. That flexibility is useful, but it cuts both ways: there's no pooling of longevity risk the way there is with a life annuity, so drawdowns that are too high, poor investment returns, or simply living longer than expected can deplete the capital. Whatever's left on the annuitant's death goes to the nominated beneficiaries on the policy. It doesn't form part of the deceased estate, and it isn't divided under intestate succession unless no beneficiary was nominated. It's this combination — contractual rather than fund-based, insurer-owned assets, flexible but unguaranteed income — that creates particular complications when a marriage ends in divorce. Living annuities vs "pension interest" It's worth separating a living annuity from "pension interest" as defined in the Pension Funds Act 24 of 1956. Since 1 September 2024, pension interest has meant a member's individual account or minimum individual reserve, calculated under the fund's own rules as at the date of the divorce order — this replaced the older definition that used to sit in the Divorce Act 70 of 1979. Timing is the key issue. Pension interest only exists while someone remains a member of a retirement fund. Once they retire and use the benefit to buy a living annuity, fund membership ends, and what they're left holding is a contractual right to annuity income — not a fund interest. A divorce order simply can't divide or assign a living annuity to a non-member spouse the way it can an active retirement fund benefit. What the Courts Have Said The Supreme Court of Appeal has dealt with this directly, in ST v CT 2018 (5) SA 479 (SCA) and again in Montanari v Montanari [2020] ZASCA 48. Both confirm that a living annuity is fundamentally contractual: the insurer owns the underlying assets, and the annuitant's entitlement is limited to drawing income within the permitted range, with anything left over going to nominated beneficiaries on death. That means a living annuity doesn't form part of the annuitant's estate for accrual purposes the way a share portfolio or property would, and because it isn't pension interest, it can't be divided through a divorce order either. Montanari did add a useful nuance, though: while the capital itself stays out of reach, the right to future annuity income can still count as an asset for accrual purposes. So the annuity can't be split, but its existence — and the income stream it represents — can still shape the overall settlement. That income is also relevant when maintenance is being worked out, which is reason enough to factor it into broader divorce planning. Why Valuation is Tricky The legal principles are reasonably settled at this point, but putting a number on the right to future annuity income is a different problem altogether — the courts haven't prescribed a methodology for it. The value depends on drawdown choices, investment performance, life expectancy, and inflation, none of which are fixed. Different actuaries working off the same annuity can land on meaningfully different figures, which makes negotiations harder and can leave clients with mismatched expectations going into a settlement. Conclusion The annuity itself can't be split or transferred, full stop — this is probably the most common misconception clients arrive with. That doesn't make it irrelevant, though: the right to future income can feed into the accrual calculation and into maintenance discussions. Valuation itself sits outside the scope of financial advice, so where a number is genuinely needed, referral to an independent actuary or other suitably qualified expert must be done. This article is for general informational purposes and does not constitute legal, financial, or actuarial advice. Ruvan J Grobler RFP™ (PGDip Financial Planning)
Die uitdrukking “Twee koppe is beter as een” is welbekend en dui daarop dat samewerking voordelig is. Is daar voordele vir lede van ’n familie wanneer hulle gesamentlik familie-finansiële beplanning doen, asook inkomstevoorsiening deur middel van familiebesighede? Familiebesighede in Suid-Afrika, waar gesamentlike finansiële beplanning plaasvind, is ’n belangrike deel van die ekonomie. Talle Afrikaanssprekendes is afkomstig van die platteland waar hulle in ’n familiebesigheidsomgewing op plase grootgeword het. Weens ’n verskeidenheid van redes verander die landbou-familiebesigheidsomgewing, en sommige van hierdie families verskuif hul familiesakebelange met groot sukses na ander sektore van die ekonomie. Entrepreneursvaardighede word egter benodig om vir jouself ’n inkomste te skep. Bovest is behulpsaam om die nodige entrepreneurskundigheid deur middel van die TV-program “Welvaartskeppers” aan die kykerspubliek bekend te stel. Bykomend hiertoe word finansiële advies aan families gegee om sodoende maksimum finansiële voordeel te verkry. Indien die voordele van familie-finansiële beplanning met dié van persoonlike finansiële beplanning vergelyk word, bestaan die volgende voordele: Laer gesamentlike fooie vir familielede kan beding word; Meer effektiewe belastingskale kan benut word deur beleggingskapitaal tussen gades te verdeel; Die oordrag van welvaart na die volgende geslag kan vergemaklik word deur familietrusts te gebruik; Gedeelde verantwoordelikheid bevorder dissipline om by langtermyn-kapitaalbouplanne te hou; Verskillende lewensiklusse en risiko-aptyte help om die familie se beleggingsportefeulje te balanseer; Die verskille in ouderdom en lewensfases ondersteun die uiteenlopende eiendomsbehoeftes van familielede. Aangesien die finansiële beplanning van families meer kompleks is, benodig dit samewerking tussen die verskillende geslagte om behoeftes en verwagtinge te verwesenlik. Die rol van die Bovest-adviseur in hierdie proses kan nie onderskat word nie.
