Hi

Hopefully you are indoors and keeping yourself warm whilst reading our latest newsletter! I thought it would be of interest to you to understand further the compilation of a Model Portfolio and how it “works”.You may have noticed that you are invested in the Jurgens Secure/Moderate/ Balanced or Boutique portfolio. In my described example, I will refer to the Balanced portfolio.The Balanced Portfolio is made up of four unit trust funds. These funds all subscribe to guidelines required at this level of risk. These unit trust funds cannot exceed 75% equity exposure and a maximum of 25% offshore exposure. (These funds are commonly used in retirement annuities, Asset Preservation Funds and Living Annuities).

Approximately 130 Funds available in this risk category, we at Jurgens Finance strive to be invested in the top quartile funds (ie: the top 25% of 130 funds which would equate to the top 33 funds).Various portfolio managers have different views, resulting in some funds being more cautiously positioned than others, thus making their fund occasionally fall into the second quartile category.Our constant communication with portfolio managers allows us to monitor the fund performance and decide whether to remain invested in their particular fund should it move into the second quartile.There are a variety of aspects to consider when selecting a fund manager:

• • The holding investment company’s reputation;
  • Current positioning of the fund and the past track record of the fund;
  • Manager’s remuneration structure and whether he has his own cash invested in the fund;
  • Fee structure of the fund.

Our investment committee meets regularly to discuss market conditions, company asset manager views, tracking of our selected unit trust funds and potential risks.

A client recently asked me why the Jurgens Balanced Portfolio had remained invested in the same four unit trust funds for over a year. The answer was that all four funds had performed consistently well in their risk category and that switching had not been necessary. Should they continue performing in the top quartile for a further 12 months we would, once again, not switch funds. Changing the “make up” of the Balanced Portfolio would only be initiated should one of the funds under perform. One would, in most cases, prefer to be invested in a new fund for at least twelve to eighteen months.

Model Portfolios

Some advisory businesses charge an increased fee for being invested in their selected unit trust portfolio funds. Jurgens Finance does not follow this trend. By way of an ongoing and researched process, our experienced, qualified panel ensures the correct funds are selected based on your risk profile. This essential regular monitoring of unit trust funds ensures continued competitive returns with costs being reduced wherever possible.

Regards,
Mark

Employee Benefits from Estelle Susanna

Further to our In Touch article regarding the introduction of new retirement contribution maximums with effect from 1 March 2015 to 27.5%, some contributors may have been wondering how they would benefit by contributing above the R350,000 per annum limit.

Contributions in excess of the annual limits may be rolled over to future years where the amounts will again be deductible together with contributions made in that year, but subject to the limits applicable to that year.

At retirement, if any excess contributions have not been allowed as a tax deduction, these contributions will accrue to the tax free portion. The value will be available to be offset against any lump sum income prior to the tax calculation, or, will be available at assessment to reduce the tax payable in respect of compulsory annuities compulsory annuity income.

Also to come into effect from 1 March 2015, Income from Income Disability products will be paid to the claimant tax free. This will apply to existing claimants as well as new claimants.

 

Short Term News from Greg Brits

In this article we would like to deal with maintenance of your home and resultant damage, optional extras on vehicles and underinsurance.

These issues often cause confusion when claiming and we feel it best to address certain situations not covered by insurance policies which you may be unaware of.

Home maintenance: The principle of insurance is to be covered for sudden and unforeseen events. Events that occur due to deterioration over time, are not covered. For example, where damp proofing has not been maintained or rising damp occurs, this will not be covered by the policy. Please keep in mind that if the condition of a house is not maintained, that the resultant damage claim could be rejected i.e. the loss could have been foreseen. More and more, many bank insurance policies are being rejected for maintenance related claims. Please ensure that homes are well maintained, roofs and general areas requiring damp or waterproofing, are regularly attended to.

Unfortunately, pipes in walls that gradually deteriorate e.g. due to rust, are not covered but should they cause resultant damage, this will be covered. Breaking the wall to get to the pipe is not covered. Please check your policy for exclusions that may apply.

Extras on vehicles: Please note that extras on vehicles for example, tow bars, bull bars, canopies are not covered unless they have been mentioned under the specific motor section. Only items that are fitted by the motor manufacturer will be insured. Many clients assume that items that are fitted to LDV or SUV vehicles like tow bars are standard when in fact they are an aftermarket accessory. Please check your policy to ensure that these items have been listed. If you are unsure whether they are factory fitted items, please call the manufacturer and give them your VIN number to obtain this.

Being underinsured: In our previous article we dealt extensively with the insurance on buildings and house contents. Please ensure that these are adequately insured. Building values should be based on R13 500 per square meter of the primary residence to allow for all the extras like pools, boundary walls, gates, demolition costs and professional fees. Please note that this is just a guideline and that a professional valuation should be done to get the accurate value. Should you be under insured, the insurer is entitled to impose averages on your claim which may leave you out of pocket. In simple terms, if you insure for half the replacement value, the insurer will pay half your claim.

Should you wish to discuss any of the above please do not hesitate to contact us and we will gladly assist.

POST NOTE: Cell Numbers that now appear on your phones when you receive a call from Jurgens Group land-line, no longer display “unknown”. The following four cell numbers appear if you wish to save them as Jurgens Group: 082 906 0342, 082 906 0339, 082 906 0338, 082 906 0337.

Investment news from Mark Jurgens

Can you believe that we are almost at the end of the first quarter of 2014?
As you are aware, 2013 was a great year for investors, particularly investors with exposure to offshore equities.  The JSE also performed well with the All-share Index having shown growth of 20.59% for the calendar year.

The Mining and Resources sector performed poorly, with global demand decreasing and labour unrest causing instability. As we face these and other economic problems, we question whether the returns in our market are justified.

We also saw significant Rand/Dollar depreciation, perhaps more than expected. Most analysts suggest that the Rand will recover to around R10.40/USD in the short term.

Although positive for many, the 2014 Budget did not deliver any serious changes.  From a financial planning point of view, the first R500 000 from retirement annuities or pension funds is will now be paid out tax-free. As from 1 March 2015, there will be fairly significant changes to all retirement products.

The focus is on trying to ensure employees do not cash in the proceeds from their pension or provident funds when leaving their employer. We will be discussing these changes with clients as and when we see you as certain changes have not yet been legislated.

The amount that you save and invest while you’re working will determine your income and quality of life when you retire. Don’t forget the benefits of investing monthly into a retirement annuity (RA). If you are self-employed, it is extremely important to invest at least 15% of your gross income per month (as you are probably not a member of a pension fund).

Growth in an RA is totally free of tax, i.e. no Capital Gains Tax is paid on profits.

Contributions are also tax deductible.

Although saving for retirement may not be the most exciting prospect now, it is imperative to do so should you wish to retire with dignity.

Employee Benefits from Estelle Susanna

The Taxation Laws Amendment Act, 2013 was signed into law on 12 December 2013.
The main aspects of the Act that will impact on the employee benefits industry are the following:

• From March 2015 income disability insurance (PHI) premiums will no longer be tax deductible, but benefit payments will be tax-free;
• From March 2015 employer contributions to retirement funds will be taxed as fringe benefits in the hands of employees – for tax purposes these employer contributions will be deemed to have been made by the employees. Employees may deduct up to 27,5% of remuneration or taxable income in respect of contributions (employer/employee) to pension, provident and retirement annuity funds, subject to an annual cap of R350 000.
• From March 2015 not more than one-third of the retirement benefit from a provident fund may be taken as a lump sum. However, this restriction does not apply to the balance in the fund as at 1 March 2015 (and growth thereon) and therefore funds will have to keep separate member accounts for pre-March 2015 contributions (and growth) and post-March 2015 contributions (and growth). Provident fund members who are 55 years or older on 1 March 2015 will however, be able to commute the full retirement benefit, including contributions made after 1 March 2015 (and growth thereon) to the provident fund of which he/she was a member on 1 March 2015.
• From March 2015 the commutation threshold upon retirement will be increased from R75 000 to R150 000 for all retirement funds.

Short Term News from Greg Brits

As our first article of the year, I’d like to reiterate a few points that continue to be a challenge when dealing with claims and the replacement value of goods and services.

Replacement items are often imported and the weakness of the Rand, together with other factors such as inflation, have a negative impact on clients’ policies and effectively creates the obstacle of being under-insured.

Here are some ways to prevent this:

When initially writing a policy with new clients and again at renewal time, we highlight the policy terms and conditions and endeavour to make clients aware that it is ultimately their responsibility to bear in mind that the valuations of their possessions should be realistic and current, and to keep their insurer informed of  new acquisitions.  This is very important in order to ensure adequate cover is in place at all times.

We have the services of professional valuators available to clients, however this is usually not taken up due to an additional cost being involved.  Clients in general are usually of the opinion that they have enough cover.

A quick calculation to see if a building is adequately insured is to take the basic square meterage of the building and multiply it by R13 000. For example, a house of 300 square meters should be insured for R3 900 000. This value would include the cost to build and also includes all additional extras like swimming pools, boundary walls, driveways and the like.  It also includes professional fees and demolition costs. This is an assumed cost and as mentioned earlier,  a professional valuator should be used to get an accurate value.

This is an example to help understand how the insurers establish the sum insured.  Other factors to be taken into account are things such as whether your home is built on a steep incline or you have expensive fixtures and fittings, the value per square meter would obviously need to be increased.

The contents of a basic three bedroomed home occupied by a family of four members, should be insured for a minimum of R600 000 as a guideline.  A larger home with expensive artwork, sound systems and designer furniture should be insured for a whole lot more.

With regard to your short term insurance policy, please remember that we try and offer our clients the best value for money and not the cheapest product on the market. It is our opinion that the cheaper products do not live up to our or our client’s expectations. Unfortunately, it is often the case that with the cheaper premium products, problems arise at claim stage.

Cheap products give cheap cover.

Should you wish to discuss any of the above please do not hesitate to contact us and we will gladly assist.

Trivia Naked Numbers: 

• 450 Cups of coffee were bought by journalists on the first day of the Pistorius trial.
• -3.1%  Vehicle sales growth contracted year on year.
• R3bn – R4bn  To be invested in the Victoria & Alfred Waterfront in Cape Town over the next three to four years, much of it in residential  apartments.
• 4000 More passengers use the Gautrain daily since e-tolls were introduced.
• R300m Fine paid by bread producers for price fixing.