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/ 4 September 2006
The banks are entering a new price war, one that is very good news for savers and people who rely on interest to meet their monthly bills. As banks come under pressure to find new sources of cash to fund their lending, so they are increasing their deposit interest rates to attract new clients and grow market share.
Lack of legislative clarity has left the life industry and its clients in limbo and set the industry back by up to a year in terms of issues around retirement annuity (RA) penalties. An Old Mutual client’s complaint to ITInews, an online life industry newsletter, highlighted this issue when she said that Old Mutual was refusing to credit her RA policy in accordance with a ruling by the Pension Funds Adjudicator.
Access to credit has never been easier, with banks falling over themselves to provide credit to customers. But remember, next time you get a call from a bank to tell you about pre-approved credit, be sceptical. It may tell you that you can afford it, but only you know what you can afford to repay.
The typical life-stage-cycle approach to investments is that in your 20s you have a maximum exposure to equities, which reduces over time as you get closer to retirement. By the time you retire at 60, your pension should have no equities and be fully invested in cash and bonds with no risk.
Recently, Standard Bank’s economics division released an update on its residential property gauge. House-price rises slowed from 6,5% in June to 6% in July, the lowest growth rate since December 2002, and the bank believes the slowdown in property price growth is now entrenched.
There is a sentiment among retail investors that socially responsible investing (SRI) is rather like a charity — you don’t get the same returns as a "normal" investment. Performance figures, however, prove that you can have a conscience and make money.
The latest unit trust figures show that tracker or passive funds have outperformed the actively managed funds over the past two years. With so much investment choice out there and concerns over the impact of costs in a low-inflation environment, investors looking for a simple equity investment with low costs could consider an index tracking fund such as the JSE’s Satrix securities.
A retail development bond could be the perfect vehicle to develop South African small and micro-business and low-income housing while, at the same time, providing retail investors with market-related returns. Although socially responsible investing is well understood in South Africa there is an enormous gap in funding available for projects under R3-million.
With share prices of listed property collapsing by 20% on the back of the rate hike in June and fears of future rate hikes, retail investors bailed out of the sector, according to the latest figures from the Association of Collective Investments. For the quarter ending June, investors were net sellers of unit trust real estate funds to the tune of R500-million.
Fica is a four-letter word for anyone who has had financial dealings in the past three years. Consumers have had to provide certified copies of a set of documents for each account with every financial institution, the information required varying between institutions.