2017 Quarter 4 Newsletter

designbythink 2017, Quarter 4 Newsletter 2017

Quarter 4 – 2017

Dear Members

We are constantly measuring our wealth and our health. The number of steps we take per day, our average heart rate per exercise session, our Smart Shopper points, W Rewards, eBucks, share portfolios … You name it, we’re measuring.

But how often do we check whether we’re on track for one of the most important events of our lives – retirement?

Read this newsletter to find out if you are on track for retirement, and how to wisely invest your money and save more.

Are You Saving Enough for Retirement?

designbythink 2017, Quarter 4 Newsletter 2017

Are you saving enough
for retirement?

We are constantly measuring our wealth and our health.
The number of steps we take per day, our average heart rate per exercise session, our Smart Shopper points, W Rewards, eBucks, share portfolios …
You name it, we’re measuring.

But how often do we check whether we’re on track for one of the most important events of our lives – retirement?

You recently received your annual Benefit Statement and on page 3 of the Benefit Statement you will find excellent indicators of how prepared you are for retirement.


A member earns R9 063 per month and saves 15.77% per month (her own 7.5% and the WW 8.27%).
These are her projected retirement figures:

This table tells you what percentage of your final salary you can expect to receive as a pension – if you continue to save the same amount that you are currently saving until retirement at age 63.

PLEASE NOTE: This is shown in today’s money terms, in other words if you were retiring today, this is what you could expect.

The S&P downgrade to Junk Status means that South Africa is in a low-growth investment environment and getting double-digit returns will be next to impossible. It is a safer bet to look at the LOW GROWTH figures above (and on your own statement) to determine your need to save more.

In the above example, the member will receive a pension nearly R4000 less than what she currently earns. This means her standard of living will drop by 44%. She will have to adjust to living on far less each month.

OR she could immediately START SAVING more every month.

How Much to Save

designbythink 2017, Quarter 4 Newsletter 2017

How Much must you Save?

How much must you save every month or year if you want to
retire comfortably?

One number that is easy to understand is to express your retirement savings as a multiple of your current salary at different points in your working life.

The multiple of your salary that you should have saved is based on the following assumptions:

  • You retire at age 63;
  • You save 15% of your annual salary (including your annual bonus/13th cheque) each year;
  • Your investment earns a return of 10% a year (not possible now and for a while due to Junk Status);
  • Your salary increases by 6% a year;
  • If you are married, both you and your spouse contribute towards retirement savings.


Shari’ah Portfolio

The trustees have been monitoring the returns of our Oasis Shari’ah portfolio on the LifeStage Choice option.

After due consideration, the trustees have moved the portfolio to the Investment Solutions Multi-Manager Shari’ah fund in the hopes that we are able to obtain better returns on your investment.

We will keep you updated.

Based on these assumptions and that you should have saved 15 times your final salary by the time you retire, TABLE 1 sets out some goalposts on your road to retirement.

Currently, for each R1 million that a 65-year-old member has saved;

  • a man will receive a monthly pension of about R6 000,
  • while a woman (because she is expected to live longer) will receive about R5 400, both growing with inflation every year.

So, if you want to invest in an inflation-linked annuity at the age of 65, you will need to have saved 15 times your final salary by 63 to buy an annuity that will replace your salary.

TABLE 2 sets out the percentage of your salary that you should save if you start saving at different stages of your life.

As the table shows, if you haven’t started saving at age 25, saving 15% of your salary will not enable you to achieve a multiple of 15 times your final salary at retirement.

Late starters have to save much more every month.

PLEASE NOTE: Cashing in your retirement savings each time you change employment means you have to save more each month to catch up.
Where are you positioned on the above table?

Long-term Investments

designbythink 2017, Quarter 4 Newsletter 2017

Long-term Investments

‘Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.’

– Paul Samuelson

Paul Samuelson was a Nobel Prize winner and Professor of Economics at Harvard University. Paul makes the critical point that investing is about the return you achieve over the long term; what happens in the short term is often just a distraction and ‘noise’.

The chart below shows the returns of the major market indices for periods of up to seven years to 30 June 2017. It demonstrates the difference between short-term noise and long-term returns.

As soon as you focus on the 7-year periods, the returns from all the asset classes, and in particular local and global equities and property, are much better.

Inevitably there will be times when even long-term returns are poor. Such events are difficult to predict accurately, but the Board of the Fund has appointed investment managers who focus on preserving your money over the long term.

Some impatient investors are tempted by excitement to time the market.
That means they sell equities when they think the market will fall, with the hope of buying them back later at a much lower price. However, research shows that it is very difficult to consistently and accurately predict the future course of investment markets.
For this reason it is generally better to:

  • maintain a long-term investment horizon
  • hold a well-diversified portfolio
  • ignore the noise and excitement that the market routinely provides.


The dangers of trying to time the market are demonstrated in the table on the left. The table shows the annualised performance of the main asset classes in the USA for the 20-year period 1996 to 2015, compared to the estimated return earned by the average US unit trust investor.

Remarkably, the average investor did worse than every asset class shown and even earned less than inflation.

The reasons for this very poor outcome will include manager under-performance compared to market indices after deducting fees. However, a significant component is due to human behaviour, whether it be in the form of a naïve belief in their ability to time the market, or simply fear and greed.

how have your investments performed?

The Fund has invested your money in a mix of asset classes (e.g. local and global equities, bonds) and the risk profile depends on how close you are to retirement.

The chart below shows the performance of the three portfolios that make up the ‘Life Stage Model’ compared to inflation for periods to 30 September 2017.

Over periods of five years and longer the portfolio returns are well above inflation, especially for the Growth Portfolio where most of the members’ money is invested.

How to Save More

designbythink 2017, Quarter 4 Newsletter 2017

How to Save More

Your retirement savings MUST be tax efficient. There are a number of options to consider:

In the Fund:

1 R150 (or more) Additional Voluntary Contribution (AVC). The form is available here.
2 Additional contributions via the Modelling Tool.


1 A Retirement Annuity (RA) from an insurance company – the contributions you make are tax efficient.
2 Open a tax-free savings account.
3 Invest in retail government bonds.
4 Invest in an ordinary unit trust fund.
5 Owning a second (or more) property for rental.

This combination will give you more flexibility in terms of investment choice and the ability to access your investment.

The bottom line: You have to sacrifice income today in order to save and have a comfortable future. Think about this a little differently – you work now to save for when you are old and need to pay yourself an income. When you have retired, you pay yourself with the money you have saved. So your retirement is entirely in your hands.

2017 Quarter 3 Newsletter

designbythink 2017, Quarter 3 Newsletter 2017

Quarter 3 – 2017

Dear Members

Saving or spending impacts on your retirement and the quality of your life when you stop working. If you change jobs, you have the choice of preserving or cashing in your retirement savings. Unfortunately, members are often unaware of the disastrous consequences of cashing in their pension savings for short-term gains such as paying off debt.

Read this newsletter to learn more about your options when you retire, and why you should never cash in your retirement savings.

Never Cash in your Pension Savings

designbythink 2017, Quarter 3 Newsletter 2017

Never Cash in your Pension Savings

Saving or spending impacts ON your retirement and the quality of your life when you stop working.

When you resign you can either:

  • PRESERVE your retirement savings, OR
  • CASH IN your retirement savings.

The graph below shows the impact of cashing out your retirement savings and indicates the increased percentage of your salary you should save each time to make up for the loss of your retirement savings.

Unfortunately 93% of people resigning from Woolies cash in their pension, and only a tiny percentage use this to settle their bond. The majority needs the money to get out of serious debt.

July was Savings Month and this is another nudge for you to start taking control of your money so that you do not end up with a lower standard of living when you stop working and retire.

If you change jobs, you have the choice of preserving or cashing in your retirement savings. Unfortunately, members are often unaware of the disastrous consequences of cashing in their pension savings for short-term gains such as paying off debt.

You currently contribute 7.5% of your monthly salary towards your retirement savings. This money is invested for you and over the long term it will grow into a significant amount. Woolworths contributes 8.23% each month (for TCOE members this is paid from your total salary).

If you cash in your pension, in the future you will need to save more every month to make up for the savings you have lost.

CONCLUSION: It is always better to preserve your retirement savings. Never cash in your retirement savings.

12 Habits for Good Financial Health

designbythink 2017, Quarter 3 Newsletter 2017

12 habits for good financial health


July was Savings Month, and this is the ideal motivation to start saving. The decision to save and actually doing it are often very different. So just how do you go about saving?

Basically it’s all about developing new financial habits, such as drawing up monthly budgets, putting money away and delaying gratification.

Here are 12 financial habits you can start developing


Invest in your future

  • Make a start when you begin your first job, even if it’s saving only R100 a month.
  • Explore retirement annuities and pension funds and find the one that offers you the best returns.

Remember, the younger you are when you start saving, the more you will have when you retire. Let compound interest work for you!


Draw up a budget

Go to the wgrf.co.za website and download the ‘Create a Monthly Budget’ brochure.

A budget is the only effective way to take control of your money and your spending.
When done correctly, a budget is one of the most empowering tools to achieve financial health.


Use the envelope system

This simple system helps you keep track of how much money you have for spending. Once you have paid all your bills, put aside separate amounts from your budget each payday.

As an example:

  • an envelope for fuel/transport
  • an envelope for groceries
  • an envelope for entertainment.

Put the money in different envelopes and use only those envelopes for those expenses.

1  The first advantage is that you won’t overspend.

2  The second advantage is that you will have to rework your budget if you regularly run out of money.


Pay your bills immediately

The easiest way to do this is to set up debit orders. Most online banking sites also offer you the facility to arrange for regular payments to certain accounts, which makes paying your bills that much simpler.



Control impulse spending

The “see it, want it, buy it” attitude could easily be the single biggest problem for most people. Impulse spending, such as spending on fast food because you don’t feel like cooking, online purchases you “just couldn’t resist” or “sale” items you probably won’t ever need, are sure-fire budget breakers.

Rather set aside some money for impulse buying in your budget, use it thoughtfully and when it is finished, resist the urge to take money from somewhere else. If you can’t afford something this month, rather buy it when you can afford it – by which time you will probably find you don’t actually need it!


Educate yourself on financial matters

This doesn’t mean you need to know exactly what’s going on at the stock exchange, but you should know which financial indicators affect you, such as

  • the oil price
  • the repo rate
  • the CPIX (Consumer Price Index).

Keeping an eye on these can help to ease their effect on your wallet. For example, if you notice an increase in the price of oil, then petrol will be increasing and you can see where you can save to offset the extra cost.

South Africa is in a recession – so it is important to be clever with your finances.


Evaluate your expenses

Financially successful people know what they spend their money on, from the snack bought on the run to the brand new flat-screen TV. This knowledge helps them to live well within their means.

To start living within your means, keep a diary of all your expenses, big and small. At the end of the month, mark all your expenses as either essential or non-essential, and then cut out the non-essential ones. Keep a similar diary the next month, and watch how your financial standing changes.

Go to the wgrf.co.za website and download the ‘Keep a Spending Diary’ brochure.


Grow your net worth

Net worth is defined as “what is owned minus what is owed”. It is important that you grow your net worth through a combination of:

  • reducing your debt
  • increasing your savings
  • steadily increasing your income.


Eliminate and avoid debt

If you are in debt, put a strategy in place to get out of debt:

1  List your debts in order from smallest to largest.

2  Focus on the debt at the top first.

3  Pay off as much as you can towards it, even if it’s just R100 a month extra.

4  Once your first debt is paid off, take the total amount you were paying and add it to the payment of your next debt.

This will help you decrease the interest on the debt and allow you to pay it off much quicker.


Automate your savings process

Make sure you pay yourself every month. Make it the first payment that comes off your account by setting up a debit order facility.

It is imperative that you also have an emergency fund that can deal with anything from admission to hospital to paying an excess on your insurance. Don’t even think about it; just make sure it happens, each and every payday.



Keep your family secure

  • If you have a spouse or dependants, make sure that your life insurance will be sufficient to take care of their needs when you are no longer there.
  • Draft a will and ask someone you trust to be the executor.
  • Last but not least, take out car and home insurance that offers you the best value for money.

Remember to compare premiums versus excess, and research the benefits.



Go on A consumption diet

If you cannot meet all your financial obligations timeously, such as paying all your accounts and credit cards every month, then you need to put yourself on a consumption diet and get yourself back into financial health and wellness.

The consumption diet plan is simple and is the only effective way to manage your financial wellness.

When buying something new, ask yourself:

  • Do I need it?
  • Do I want it?
  • What difference will it make in my life?
  • Will I still need or want it in a month’s time?

For Example:

If you gave up your daily cappuccino, you could easily save R90 000 over the next
10 years (and that is without even adding the interest).

The extra R25 a day doesn’t seem so bad, but when you add it up, you realise that it is not money well spent.

Rather make it a treat, not an everyday occurrence.