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Financial Planning
Sunday, April 1, 2007
Save, don’t squander

The 2007 Budget, in which individuals will again benefit from increased money in their pockets, highlights the necessity for sound financial advice.

“The Budget will assist individuals and businesses to achieve prosperity by rewarding a culture of saving,” says Peter Dempsey, Managing Director of Masthead, a support network for independent brokers.
This is reflected in the R8,4 billion in personal income tax relief for individuals over all income groups. One of the most significant features of the Budget is R3 billion in savings due to the abolition of retirement fund tax. Other savings will come through, inter alia, the increased exemption thresholds for interest income; increased tax-deductible contributions to specific public benefit activities; increased monthly monetary caps for tax-free medical aid contributions; increasing the donations tax free limits to R100 000; increasing the estate duty rebate to R3,5 million and the increased exclusion threshold for capital gains or losses, he says.
“It is of great importance that individuals settle their debts or save, rather than spend the additional money that comes their way and become accustomed to living at a higher level,” says Mr Dempsey. “To get out of debt and to invest additional money to build up substantial personal wealth, it is essential to consult a professional and credible financial planner.”
Financial planners are able to advise their clients on what debt actually costs, and how best to save and set up good financial plans. They are able to advise clients how to invest retirement savings to maximise their benefits on retirement, he says.
Although the budget unveiled plans for social security reform in South Africa, which could see all citizens contribute towards pension funding, he believes this is unlikely to ensure a financially independent retirement.
An example of how important a financial planner is when planning for retirement is demonstrated by the proposed change to new minimums and maximums for draw-downs on Living Annuities, namely a minimum of 2,5% and a maximum of 17,5%. Without proper advice, clients would be hard put to restructure their current retirement investments.
“Masthead’s financial planners are independent brokers who are FAIS licenced,” he notes. “They are committed to the highest ideals of the financial planning profession and maintain rigorous adherence to regulatory requirements.
“With seven top product partners backing Masthead, broker members and clients can select from the wide range of products offered by Metropolitan Life, Old Mutual, Sanlam, Auto & General, Old Mutual Bank, Metropolitan Odyssey and Liberty Life.”

Copyright © Insurance Times and Investments® Vol:20.3 1st April, 2007
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