Latest news with #MartinHesse
IOL News
10-05-2025
- Business
- IOL News
Words on wealth: your roadmap to financial freedom
Discover practical strategies to break the cycle of debt and regain control of your finances. This guide offers actionable steps to help you manage your debts effectively. Martin Hesse Debt is like deceit: a minor transgression can trigger a series of increasingly darker ones, each to cover up the previous one, until the situation is worse than anything you could have imagined. On the financial front, the scenario might look like this: Transgression #1: You don't pay off the full amount on your credit card because you need to settle an exorbitant dentist's bill that the medical aid wouldn't cover. Transgression #2: You go into overdraft on your bank account because the rising debt on your credit card is causing your monthly repayments to spiral. Transgression #3: You miss a repayment on your car loan because you have maxed out both your credit card and your overdraft. Transgression #4: You take out a personal loan at a prohibitively high interest rate to get your arrears car payments up to date, after some threatening letters from the vehicle finance company. Transgression #5: You approach another bank for a credit card, but owing to your deteriorating credit profile, the bank politely declines your application. Deeper and deeper… How to break the spiral You need to act decisively to break this spiral into misery, and the sooner you do it, the easier it is: swallow your pride, recognise the seriousness of the situation, and take steps to turn things around. Having covered this topic extensively, cobbled with a good dose of common sense, I offer the following get-out-of-debt plan: Admit you are in trouble. If you're single, this is hard enough, but if you are in a relationship or have dependants, you need to bring them with you on your journey. Explain to your loved ones that you are having financial difficulties. Reassure them it'll all turn out all right, as long as everyone gets used to consuming less and trying to live more frugally. Determine the depth of the hole you're in. You need to figure out whether, with a determined effort, you can climb out of the debt hole yourself, or whether you are in so deep that you need professional help. If such a large portion of your income is going towards servicing debt that you don't have enough left over for the basics, such as food and transport, you probably cannot do it alone and will need to see a debt counsellor. Know what's going in and what's going out. Going back over the last six months or so, make a detailed list of your income and expenses for each month, grouping your expenses into debt repayments, essential expenses and non-essential expenses. By the way, DStv is a non-essential: you can go without watching the World Cup in the comfort of your home; you can't go without a roof over your head. That's already R1 000 a month saved. Draw up a frugal-living budget. You cannot be spending more than you are earning, so first, cut back on the non-essentials until expenses equal income. Then you need to cut some more – even a saving of R500 a month will help. Oh, and there's something else to cut, using a sharp pair of scissors: your store cards and credit cards. You're allowed to keep your bank debit card. Stick to your budget, with your family's support. Make positive efforts. Encourage your family with statements such as: 'Look how much we're saving by eating out only once a week!', or 'We pride ourselves on wasting as little as possible and recycling where we can – it's our contribution to the environment.' Now tackle the debt. Put the R500 (or more) you're saving into paying off the smallest debt with a high interest rate. This is likely to be a store account, a credit card account, or a personal loan. It may take several months to pay off the account, which we'll call account A. Once you've finished paying off A, take the whole amount you were paying on A (the regular repayment plus the R500), and add it to your regular repayments on account B, another account with a high interest rate. When B is paid off, you will have an even larger amount to pay off account C: in addition to the regular payment on C, you add the R500 plus what would have been your regular payments on A and B. Get it? On each successive account, the amount you have available will be more than on the previous one. So you're turning the vicious cycle into a virtuous one. Once you're at a debt level you can live with – the remaining debts should be only the long-term, low-interest ones such as vehicle loans and your home loan, and ideally their combined repayments shouldn't be more than a third of your income – you can switch to a 'maintenance diet', by still trying to live frugally while indulging yourself now and then. At this stage, you might even begin something that you never thought possible: investing. * Hesse is the former editor of Personal Finance. PERSONAL FINANCE
IOL News
03-05-2025
- Business
- IOL News
Words on wealth: understanding the challenges of retirement fund benefit disbursement
Explore the challenges surrounding delays in retirement fund benefit disbursement and the recent regulatory changes aimed at streamlining the process. Martin Hesse I believe there should be increased efforts by regulators and the financial services industry to reduce delays by retirement funds and their administrators in disbursing benefits to members or transferring benefits to another fund. The longer a fund sits on money that should be disbursed or transferred, the longer it receives the administration fees on that money. In terms of the Pension Funds Act and the rules of the fund, a retirement fund has to finalise a payout to a member or effect a transfer of benefits 'within a reasonable time' of receiving instruction from the member. If the member has died, the process is more involved, because the fund needs to consider dependants not necessarily named on the beneficiary form when distributing the benefit, which would typically be part retirement savings and part group life insurance payout. In death-benefit cases, the time limit is a year. Individual payouts on resignation are typically done within about three months, but the files of the Pension Funds Adjudicator are full of cases where payouts have taken inordinately longer than that. The introduction of the two-pot system last year and the subsequent deluge of savings-pot withdrawal applications forced many funds to streamline their processes for cash withdrawals. Over time, it will only be savings-pot withdrawals that funds will have to contend with, as withdrawals of vested benefits on resignation will eventually fall away. However, it is when individuals want to voluntarily transfer savings from one fund or one provider to another that unwarranted delays persist, in my view. Transfers are governed by Section 14 of the Pension Funds Act, which requires approval from the Financial Sector Conduct Authority (FSCA), among other things. You would think that transferring savings in a preservation fund or retirement annuity (RA) from one provider to another could be accomplished within a week or two. But no. It can take six months or longer, according to financial advisers I have spoken to. Draft notice So it was with some optimism that I read of the FSCA's recent decision, via a draft notice, to exempt retail RA and preservation fund transfers from the requirements of Section 14(1) of the Act. The notice is open to input from the retirement industry until June 5. The problem with the legislation is that it applies equally to full-scale transfers of the collective assets of one occupational fund to another or the amalgamation of such funds as it does to an individual in a retail RA or preservation fund transferring his or her savings to a similar fund offered by another provider. Section 14(1) ensures that collective transfers or amalgamations are correctly, carried out under the watchful eye of the registrar to ensure that actuarial valuations are correct, the funds are in a sound financial state, and that the rights of all members of the relevant funds regarding their retirement benefits are respected. The FSCA notice states that, pursuant to section 14(9) of the Pension Funds Act (which gives the FSCA the power to exempt a transaction from the provisions of section 14), the FSCA exempts retail fund transactions involving amalgamations or transfers from the requirements of section 14(1) of the Act insofar as the transactions relate to: Transfers between retirement annuity funds; Transfers between preservation funds; or Transfers from a preservation fund to a retirement annuity fund. The notice says the exemption is subject to the following conditions, among others: Retail funds keep proper records of all such transactions; The assets and liabilities are transferred within 180 days of the effective date of transfer; and Any assets transferred must be increased or decreased with the fund return from the effective date until the date of final settlement. Although the notice provides for 180 days for the transfer to be effected, I am hoping that, with fewer hurdles to clear, providers will process transfers more expeditiously. Let's wait and see. Financial advice You are likely to undertake this type of transfer on advice from a financial adviser, in which case it is worthwhile to consider the following points by Momentum in a trustee newsletter: The most important question to ask is: will I be better off in retirement after moving my money? 'The promise of better returns shouldn't be the only consideration – the only thing you should be focusing on is your investment goal and if you're on track to achieve that goal,' Momentum says. You will not be taxed on the transfer, although there could be costs, and in some instances, penalties or cancellation fees, involved. All costs must be disclosed to you by the adviser. No initial financial adviser fee is allowed to be charged on transfer. However, the adviser may charge an ongoing annual advice fee on the investment, depending on your fee agreement. You can turn to the Pension Funds Adjudicator if your retirement fund is taking an unreasonably long time to transfer or pay out your savings. Go to * Hesse is the former editor of Personal Finance. PERSONAL FINANCE
