AF Access Newsletter - Issue 3 2022

Live smart, save hard

notice

Fund updates – hot off the press

Enhancing our lifestage strategy

New income targeting portfolios will replace the current portfolios to better align your investment strategy close to retirement.

It makes sense that your investment strategy before retirement matches the income you are targeting after you retire. For example, the AF Houseview portfolios introduced in June will align with a with-profit guaranteed pension, which should suit most members’ needs. We renamed the portfolios in June 2022:

More changes coming very soon

Protector portfolio

Houseview Income Target portfolio

Passive Protector portfolio

Passive Houseview Income Target portfolio

These changes will result in a reduced total investment cost, which is better for you. They will also encourage you to consider your investment strategy before and after retirement.

We’ll introduce two more income targeting portfolios in September 2022:

• AF Inflation-linked Annuity Target portfolio if you want a guaranteed pension for life that is linked to inflation

• AF Flexible Income Targer portfolio if you want a flexible pension that is linked to the value of your investments and must be managed

We will send you more information closer to the time on these additional portfolios. You will then be able to choose which income targeting portfolio you want to invest in when you are five years from retirement.

To recap …

The enhancements we’ve made to our lifestage strategy are simple: investment types align before and after retirement, and we’ve renamed the portfolios.

In-fund

Financial tips for young adults

As a young adult you are probably experiencing some of the best years of your life. Here are some financial tips to help you build a better tomorrow for your future self:

Tip 1: Learn to live on cash

If you can’t afford it, don’t buy it on account. Paying for something using cash helps you to get a better grasp of the value of the money you are spending. It is easy to just pull out your plastic card until you get your monthly statement. That’s when you see how quickly it adds up.

Tip 2: Be careful of taking the wrong financial advice

Friends and family can give you what they think is good advice, like inviting you to join a pyramid scheme. You may even have a cousin or friend who encourages you to spend money you should be saving.

What is a pyramid scheme?

It’s an illegal investment scam that pays members higher up in the structure with money taken in from newly recruited members.

Tip 3: Never lend money to friends

This is a tough one. Who doesn’t want to help a friend out in a time of need? The problem is that many times your friend won’t be able to pay the money back. It will ruin your friendship. If you are going to lend money, rather see it as a gift. That way, if your friend does pay the loan back, it’s a bonus. If not, you weren’t expecting it back anyway. Don’t lend money if you don’t have it yourself – the last thing you should do is take it from your overdraft.

Tip 4: Commit to saving a small amount every month

Open a 32-day notice account and commit to adding small amounts whenever you can so it can grow for that special something. In this way, you can pay for it in cash instead of using credit.

What is a 32-day notice account?

A 32-day notice account is a savings account that keeps your money safe. You have to give the bank 32 days’ notice before you can withdraw some or all of your money.

Tip 5: Get financially independent as soon as possible

You may still be getting support from mom and dad at this point. While there is nothing wrong with getting money from mom and dad, it is better to work yourself to a point of financial independence. That way, if anything happened to your parents, or they lose their money somehow, you are capable of standing on your own two feet.

Tip 6: Don’t get into debt when you get married

Your wedding day should be magical, but is should not break you financially. Don’t get yourself into debt because of it. Be realistic about the type of wedding you can afford and the unnecessary stress of being in debt will have on your new marriage.

Tip 7: Get into the 50/30/20 way of life

This means that you spend 50% of your income on essentials like housing, food and transport. You’ll use 20% on savings for your future self and spend 30% on wants like social activities and hobbies for the month.

essentials

Tip 8: Track your spending –budget

You are more likely to spend wisely if you are tracking your spending habits. Always know how much you have available and how much you have spent.

savings

Why

to

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Increase your contributions if your employer offers flexible contribution rates.

Ask your HR or payroll department if you can contribute more from time to time. You’ll need to complete the additional voluntary contribution form here or get it from your HR department.

Meet Sophie …

Sophie’s family has a history of living well into their 90s. Though this is great for Sophie, it may also mean that she needs to prepare for a retirement that extends longer than most and will need more savings to cover this extended period. After speaking to a financial adviser Sophie increased her monthly retirement contributions from 15% to 17%. She understands that she will need to track her savings along with her adviser to make sure this adjustment will be sufficient to cover her potential longer life.

Women often have career breaks

In some households mothers may take off a few years of work to look after their young children. The reality is that when they return to work, they often have to pick up where they left off, which sets them back in their career and in their earning potential. They also don’t contribute towards retirement during this time. To prepare for the years lost, you could ask your HR or payroll department if you can contribute more from time to time. You’ll need to complete the additional voluntary contribution form here or get it from you HR department.

Meet Virginia …

Virginia gave birth to a special needs child and decided to stay at home until her daughter was two years old. After those two years, she returned to work. Thankfully her employer provides access to financial advice. Virginia met with an adviser who calculated how much she would need to save to make up for the shortfall in contributions. Her employer’s retirement fund doesn’t have flexible contribution levels, so she couldn’t opt for a higher contribution level, but does have the option of additional voluntary contributions. Virginia signed up to make them and even saved some tax at the same time. Today she is well on her way to reaching her retirement goals.

How do you prepare for those additional years?

Women are heads of households

In South Africa women head around 38% of households. This means women often have to spend all their money on caring for their children, leaving little to save for retirement. To look after your home and still prepare for your future, your best option is to keep your retirement savings invested every time you change employers instead of taking them in cash.

Meet Jenny …

Jenny’s husband died in an accident many years ago, leaving her with two children to take care of by herself. Though Jenny is doing well at work, she is barely making ends meet. Jenny realised that she needs to provide for her future because she has no one else to get support from. She made a promise to herself to keep her retirement savings invested every time she changes employers. Today she has three preservation funds that are growing well. She may not retire in luxury but Jenny will have an income when she is no longer working. She is a keen baker and plans to do some baking in retirement to make some extra money.

Women, in general, earn less than men

On average, women earn 23% to 35% less than men in South Africa. This percentage is quite high compared to the global average pay gap. While the gender pay gap is still so evident, as a woman it is critical to plan your own retirement accordingly.

Meet Miriam …

Miriam is a professional in a male dominated field where women are generally paid less than men for the same work. She decides that she wants a certain level of comfort when she retires. The problem is that her fund salary and her monthly contributions are not enough to reach her retirement dreams. Miriam speaks to a financial adviser and the adviser calculates that if she retires at 68 instead of 63, she will reach her goals. Miriam is happy with this plan because her employer will allow her to retire later.

Financial tip: Educate your children from a young age. Teach them about a budget and to save as much as they can for something they want in future. Tell them how the issues facing women that we have discussed above can make it more difficult to save enough for retirement, so they understand the importance of starting early.

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