Private Portfolio – 2011 in retrospect
With this calendar year fast drawing to a close, I shall use this opportunity to reflect on a few issues and events that have confronted us so far.
Hopefully this year will be remembered by the amazing rain season that we experienced. The financial turmoil caused by sovereign debt issues, the many natural disasters that amongst others led to a nuclear fallout, the regime changes in north Africa and other major international events, do not appear to have affected us much so far.
Admittedly investors in the local and South African stock market linked investments may have made little or no profits nor did interest bearing investments offer much excitement.
We have also not seen a second crash as many had predicted. So far we are experiencing a depreciation of our currency against other major currencies. However, even this is seen as a blessing by those that felt our currency was overvalued.
In theory it should make our exports like meat, fish and even tourism more attractive. Investors that got their timing right may also make a buck or two on offshore investments.
So for me most of the negative international events have had a neutral effect on our little society. I rather fear that many of our problems and issues that we need to face are home grown.
Are we possibly experiencing a lull before the storm? For example, in the beginning of the year I did a comparison on some legislative and tax changes that SA introduced to amongst others address the financial problems that retirees are and will be facing.
The local authorities made a number of announcements in August, but nothing much seems to have happened to date. I recall a similar situation a few years back when the issue of taxing interest bearing investments attracted a lot of lobbying so that all went quiet only to be faced with legislation that was passed over the festive season as a surprise present. Are we in for a similar Christmas surprise this year?
Many tax payers recently received two or three years’ income tax assessments all in one go. Tax deductions that were readily entertained in the past have now been queried and disallowed. The existing tax base is being squeezed to no end while little is being said or done to expand the tax base, as SA is desperately trying to achieve.
On the counter side to all of this, I have recently seen retirement preservation fund withdrawals being taxed at rates less than the mandatory 27% being the minimum average tax rate applicable according to the law the way I have it.
When looking at the issue of providing for retirement funding where SA is contemplating amongst others to disallow the cashing in of pension fund benefits before retirement on resignation for example, rumour has it that we will soon see the opposite happening here.
It is rumoured that GIPF being by far the biggest and most lucrative pension fund, is contemplating a rule change that will allow a full cash withdrawal of both employee and employer contributions on resignation.
To date, members are forced to use preservation fund transfers as an intermediate step to lay their hands on the employer contributions. Not only will this move put an end to the lucrative commissions earned on the preservation fund investments made for resigning government employees but will also put paid to any further thoughts on the idea of preventing the cashing in of retirement fund benefits prior to retirement.
It is issues like these that lead me to state that our problems are to a large extent home grown.