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Investors adopt a long-term strategy that maximises both onshore and offshore opportunities

May 09, 2017

Anaemic economic growth and a high unemployment rate have raised the stakes for South Africans to save more and reduce debt.

According to Greg Barclay, Head of International Personal Banking from Standard Bank it is never too late to start saving, but every person’s individual goals and appetite for risk need to be considered, in order to arrive at the optimal savings solution. It is equally important to ensure that not all of a portfolio’s eggs are in one basket, or just one country.

“It is hard to generalise about the ideal investment mix and strategy as each individuals’ goals and appetite is so different. However, there are a number of new and exciting ways to maximise the outcomes from a savings perspective, including tax free savings accounts and an array of offshore diversification opportunities,” says Mr. Barclay.

South Africa’s unemployment rate has soared to 27.1% - a 13 year high – while the economy is predicted to struggle to eke out even 1% growth in the year ahead. Inflation, meanwhile, is beginning to rear its head and add more pressure on the pockets of consumers. The appetite for taking risks has waned, but this should not prevent a balanced inter-generational approach to preserving and growing wealth.

“It is not all doom and gloom if investors adopt a long-term goals-based approach that aligns to future objectives and outcomes. This strategy needs to be carefully crafted by a financial planner after taking into account all the risks, rewards and the expectations of the investor,” he says.

The key is to ensure a long-term, disciplined savings strategy is adhered to so that wealth can not only be protected, but gets given the ability to grow.
“Many South Africans are struggling to retire with enough money to maintain their lifestyles – never mind leaving legacies for future generations. However, it is never too late to start with a plan that is ideally suited to your circumstances and future wealth goals,” says Mr. Barclay.

Tax free savings accounts, for example, were introduced in SA in 2015 in order to assist in improving savings levels, and as of last Budget, have a R33 000 annual allowance, but many people are still unaware of the benefits a tax free investment can deliver.

In contrast, the majority of employed people in SA already have retirement funds through their companies. The majority of these funds will have up to 30% invested in offshore assets in line with the regulations for pension funds investing in offshore assets. However, the decision to take a portion of an investment portfolio offshore will depend on an individual’s goals and appetite for risk.

“As exchange controls have been relaxed and access to offshore banking and investments becomes more accessible, we will see the number of people diversifying wealth offshore grow,” says Mr. Barclay.
“Simply trying to get away from the rand should never be a reason to invest offshore, but diversifying investments is certainly one of the factors – among many - that should be taken into account when structuring an offshore plan. Offshore investing spans traditional savings and fixed deposits, to capital protected structured products, to offshore unit trusts, discretionary/non-discretionary portfolios to property,” concludes Mr. Barclay.

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