2019 Quarter 2 Newsletter

designbythink 2019, Quarter 2 Newsletter 2019

Quarter 2 – 2019

Dear Members

Your retirement is important, and this newsletter will give you some useful tips on planning for your future. Formulating a plan is essential, and it is not as difficult as you think. All you need to do is sit down and follow a simple step-by-step process that, in the long run, will look after the financial future of both you and your family. Here we also outline some retirement rescue remedies such as eliminating debt, minimising expenses and drawing up a budget. See how easy it is, all in this newsletter.

Plan For Your Future

designbythink 2019, Quarter 2 Newsletter 2019

Plan For Your Future

Your retirement is important. This newsletter outlines some financial rescue remedies and helps you formulate a financial plan.

Planning is a detailed map for accomplishing a defined purpose. Without a map, how will you know where you’re going?

All too often retirement is seen as a long way off and not necessarily something we give much thought to. We are too busy living to even plan for the future.

Some of us may be making additional savings and others hope that our pensions will be enough.

Unless you have actually sat down and thought about what you will do when you retire, where you will live and whether you will have enough money, you have not yet planned. Not many people have a plan, and without a plan, you have nothing.

Of a hundred 50-year-olds now, when they are age 63:
38 will be forced to continue working
36 will be dependent on the government
17 will need family support
5 will be financially independent
4 will be comfortably well-off

Only 9 have PLANNED for their retirement.

The big question – will you have saved enough?

Most people do not save for their retirement for the full 43 years for a number of reasons:
  • They cannot find a job.
  • They skip from job to job and have long gaps between various jobs.
  • They leave work to have a baby or babies.
  • They take time off to travel.
  • They withdraw their pension savings to pay for debts, holidays, or to live on while looking for another job.

We can come up with a multitude of reasons for not saving for the full 43 years, but the main reason is CHOICE. We make choices and have to live by the consequences of those choices.

From the age of 20 you have the potential of working for 43 years until age 63. If you stay in employment and contribute to a pension fund for the 43 years, you will not need to read this newsletter!


Assuming you retire after 43 years, the Fund tries to ensure that your pension is 70% of your final salary:
  • Final salary R10 000 per month
  • First pension R7 000 per month

To earn a pension equal to your final salary at retirement, you will need to invest in a pension fund for 43 years without a break. You need to save 15 times your final annual salary for this retirement plan to work. Then you can expect your pension and your final salary to be about the same.

Being financially independent does not happen on its own – you have to make it happen. It is an active process and requires hard work, sacrifices and, most of all, knowing where you’re going.

Eliminate Debt

designbythink 2019, Quarter 2 Newsletter 2019

Retirement Rescue Remedy Rule #1

Eliminate debt – the best thing you can do for your retirement

The life you live today is due to the choices you made yesterday. It therefore stands to reason that your quality of life in the future depends on the choices that you make today.

Because of poor choices, most people are not living the life they desire, particularly when it comes to their personal finance. They say that they don’t have the opportunity to become financially independent. But this is not really true. Recent statistics show that the average South African saves 0.1% of their income and spends a whopping 65% of their income on servicing debt.
South Africans are funding their lifestyles with debt – which is a poor choice.

Compound interest working against you

To understand the true cost of debt, you have to understand the concept of compound interest. Compound interest is the interest being added to the interest on your debt.

The longer you take to pay off debt, the more interest you pay. The interest you pay on your debt is much higher than the interest you earn on any investments or savings.

So it makes sense that, to prepare for your retirement, it is important to get out of debt as soon as possible and start saving. You must be debt-free by the time you retire.

Rapid Debt reduction

There are a number of ways to reduce debt:

1. Increase your cash flow

To increase your cash flow, you need to begin by taking stock of where your money is going. Jot down all your expenses, from your bond to the magazines you buy, the cups of coffee you bought and your debit orders. Once this is done, decide where you can cut your costs. Record every rand you spend in a month, so you can see just where your money is going.

2. Inject cash

Take stock of all your possessions. If you can do without something, sell it and inject the money into your rapid debt reduction plan. Use your bonus to settle your debts.

3. One giant account

Draw up a list of your debts, from the smallest to the largest – from the overdue clothing account to the car loan and the bond. Now add them all up and look at the total as one giant account, and not as individual accounts.

4. One giant installment

Add up all your monthly installments of each and every one of your debts. See this grand total of all your installments as one giant installment that you need to make every month on one giant account.

Now here’s the magic…

1 Using the money you have saved by cutting back on expenses, pay off the smallest debt first. Easy!
2 Now use this money towards your installments on your next smallest debt.
3 As one debt is paid off, you need to use the extra money towards paying off the next, and the next, and the next until you have no further debt.

During this process you must pay your other monthly accounts on time or you will have to pay interest.

It goes without saying, that while doing this, you may not acquire new debt!

Your house mortgage –
the biggest debt, the biggest saving

Interest on your home loan is calculated daily on your balance, so extra money parked in your mortgage account saves you paying interest.

The best way to save on your mortgage is to put every spare rand into your mortgage account. To do this you need to cut your daily expenses and put the spare money into your mortgage. You can also use your bonus or any extra money that comes your way.

Reduce all your other debt, avoid using credit cards, retail accounts and loans, and so on. Try to stay debt free.

Minimise Expenses and Create a Budget

designbythink 2019, Quarter 2 Newsletter 2019

Retirement Rescue Remedy Rule # 2

Minimise expenses, budget and assess your future need

Answer the following questions:
  • Where does your monthly income go?
  • What are your bank/credit card charges?
  • On average, how much do you withdraw from the ATM in a week?
  • What do you spend the money on?
  • Do you know what your partner spends on average?
  • What does it cost to manage your home monthly?


There are few people who will slip seamlessly from working into retirement with no ill effect on their standard of living. For most of us there is a good chance that when we retire, our income will be reduced by at least 50%.

For this reason, it is a valuable exercise to try to reduce your current expenditure by 50%. That’s a huge reduction, and you probably won’t make it! It is important to consider cutting back now rather than having the shock at retirement.

Draw up a Budget

Budgeting is usually a chore that we avoid. But the time has come to draw up a budget, which will help you spend more carefully and eliminate your debt. Your aim is to SAVE, SAVE, SAVE.

It is important to know where you are going financially. It helps you to keep track of money coming in and money going out.

Budgeting also has other benefits:
  • It puts you in charge of your finances.
  • It encourages you to keep proper financial records.
  • It will help you to save money and reduce debt.

Once you have drawn up a budget, pay the essentials first. Bond repayments, accounts, loans, school fees, rent, car repayments and food are the essentials. These are often neglected because uncontrolled spending on credit has swallowed up your salary.

If you are spending so much on paying off clothing and appliance accounts that you cannot afford essentials and have to resort to going into debt to buy food, you are in serious trouble. If you do not control this you will sink deeper and deeper into debt each passing month.

Your aim is to have no debts by the time you retire:
  • List all your debts.
  • Decide on a time-frame for paying off your debts.
  • Draw up the plan and review it every month.

Luxuries today are robbing you of your retirement. You need to make sacrifices today for your financial security – saving and sacrifice go hand-in-hand.

Money that you pay in interest on your accounts is money you could be using to save for your retirement.

If you seriously make the effort to clear all debt by the time you retire, start reducing monthly expenditure a little each month and draw up a monthly budget (and stick to it), you will have made huge strides in securing your comfort and financial well-being in retirement.

Assess your FUTURE needs

If you haven’t got a plan, how will you know where you’re going? You build a house with a plan, you go on a trip with a plan, you make a dress with a plan – why not have a plan to ensure you retire comfortably?

  • Manage your debt.
  • Minimise expenditure now.
  • Budget.
  • Start planning for the day you retire:

    Where will you live?

    How can you supplement your pension?

    If you plan to live in a retirement village – have you put your name down on a waiting list?

    Do your appliances need replacing?

    Does your house need maintenance?

    Is your car in good shape – do you need a newer, cheaper one?

    What will get you out of bed every day?

Working after retirement – your next career

Very few of us will be in a position to actually stop working at age 63. Also, for most of us the reality of living on a much reduced income will be difficult. Age 63 is still very young, considering we have another 30 years to live!

  • How will you fill those 30 years?
  • How will you supplement your income?
  • What could you do to make more money in retirement?
  • Do you need to acquire those skills now?
  • Do you need to buy some equipment now?

While you are earning a salary now, why not use it to prepare for your next career?

2019 Quarter 1 Newsletter

designbythink 2019, Quarter 1 Newsletter 2019

Quarter 1 – 2019

Dear Members

Preserving your retirement savings has now become easier. Trustee Lefu Mabula explains what options you have when investing your retirement savings and why it is a good idea to leave your money in the Fund when you move employers, resign or retire. Our Willis Towers Watson investment report gives you feedback on the Fund’s investment performance during 2018 and shares why it is important to take a long-term approach to your retirement investments.

Preserving Your Retirement Savings Is Now Easier

designbythink 2019, Quarter 1 Newsletter 2019

Preserving Your Retirement Savings Is Now Easier



The National Treasury has issued regulations which become law in March 2019 and require all retirement funds to implement the following:

  1. Default investment portfolio(s)
  2. A default preservation option
  3. An annuity strategy for retiring members

The intention is to:

  • bring down costs in the retirement funds industry
  • make it easier for members to protect and preserve their benefits
  • assist members in making the right choices.

1. Default investment portfolios

The Woolworths Group Retirement Fund has a default investment strategy in place and the trustees of the Fund are satisfied that this strategy remains appropriate.

2. A Default preservation Option

Default preservation means that when you leave your employer due to resignation, retrenchment or dismissal, you have the option to leave your money in the Fund. This option has been available since June 2018.

When you leave your employer, these are the options available to you:

  • Leave your money in the Fund (use the Fund as a preservation fund).
  • Take all your cash.
  • Move your money to a preservation fund.
  • Move your money to a retirement annuity.
  • Move your money to your new employer’s fund.

So, why is it a good idea to leave your money in the Fund?

  • Preserving your money is in your best interest and will improve your retirement benefit.
  • It is easy and convenient.
  • There are lower costs to you as the fees are at institutional rates and significantly cheaper than retail rates with other preservation options.
  • You remain in the same investment strategy with which you are already familiar instead of having to understand a new, complicated strategy.
  • Getting financial advice is not compulsory.
  • No minimum amounts are required.

What if you have a housing loan?

If you have a housing loan that is secured by your benefit in the Fund, then please note that when you leave your employer, the housing loan will have to be settled, regardless of which of the options you choose.

This means that even if you choose to leave your money in the Fund, the home loan will have to be settled and the balance will be preserved in the Fund for you. Please also note that the home loan settlement will be subject to tax.

3. An annuity strategy

When you retire, you will either require an income immediately or you will not.

IF YOU REQUIRE an income immediately

You would need to purchase a pension, which could either be:

  • a life annuity (guaranteed pension), or
  • a living annuity.

A life annuity protects you and your spouse for life. It operates like an insurance policy. The increases are determined by the type of annuity you buy. This decision will depend on your requirements and the amount of capital you have.

A living annuity is a flexible pension that allows you to draw a pension between 2.5 and 17.5% each year. It operates like a unit trust and does not have any insurance or guarantees. You will need to manage your living expenses to ensure that you have enough money until you and your spouse pass away.

Your trustees have chosen an out-of-fund default living annuity, namely the Alexander Forbes Retirement Income Solutions (AFRIS) Living Annuity. This solution combines the benefits of a living annuity and a life annuity by:

  • allowing you the flexibility of pension income
  • leaving a legacy for your loved ones
  • providing you with a guaranteed income.

The major advantage of this option is the reduced cost at which it is priced. This is because it is priced for ‘institutional’ investors (such as large retirement funds) and not for retail (individual) investors.

PLEASE NOTE: Even though AFRIS is the Fund’s default annuity strategy, you are not obliged to select this option and may select any annuity of your choice following consultation with your financial adviser.

IF YOU DO not require an income immediately

But want your money to stay invested, you can defer taking your retirement benefit and leave your money invested in the Fund.

  • You will continue earning investment returns on your money in the Fund.
  • You will no longer contribute to the Fund.
  • You will not qualify for any of the insured benefits such as death, disability and funeral benefits.
  • You will still pay investment fees and costs, but they will be lower than if you were to invest the money yourself outside of the Fund.

REMEMBER: Always consult your financial adviser before making any important financial decisions.

Portfolio Performance

designbythink 2019, Quarter 1 Newsletter 2019


Woolworths Group Retirement Fund

Portfolio performance

2018 was a TOUGH year for investment markets across the world. A number of the potential hazards that faced THE markets HAVE NOW come to pass.

This resulted in negative investment returns in many regions, especially in the USA and South Africa. This has affected retirement funds in South Africa and across the world. The investments of the Woolworths Group Retirement Fund were therefore also affected.

South Africa’s financial markets share in the fortune or the misfortune, as the case may be, of the global markets.

South Africa HAS ITS OWN specific challenges

Some challenges are having a negative impact on the economy in South Africa and continue to pose significant risks to investment returns going forward:

  • structurally low economic growth
  • seriously high unemployment
  • high debt levels and low savings rates
  • political risks and uncertainty – national elections are coming up and several state-owned enterprises are in crisis, especially Eskom.

Staying invested for the long haul

In order to earn good investment returns over a long time horizon, we must accept that the investment market will at times give us low, or even negative returns, as we are experiencing now. This is an uncomfortable but natural function of the market.

When investment markets perform badly, it is important to recognise the opportunities that this provides for long-term investors, like most of the Fund’s members:

  1. When investment returns are negative, it means that the prices of the investments have fallen.
  2. The Fund’s asset managers use this opportunity to buy investments that are cheaper than normal.
  3. When the cycle eventually turns, prices will increase again, resulting in good returns on those assets that were bought at cheap prices.

However, it is impossible to know when the cycle will turn. It could take weeks, months or even years, depending on underlying factors.

To reap the benefits of this natural cycle you must stay invested throughout the cycle. You need to experience the temporary pain of the fall in investment prices, in order to reap the rewards of the rise in the prices that will follow. Avoid acting out of fear when markets go down, or you may end up experiencing the fall in prices but never the eventual rise.

You will benefit from PERIODS OF STRONG INVESTMENT RETURNS IN THE FUTURE, PROVIDED that YOU keep your savings invested.

The graph above shows the returns of the Fund’s main portfolio over different time periods to 31 December 2018, compared to inflation. This is the return that the investments of most members in the Fund would have earned.

NOTE: The long-term return (10 years) has been good, even though the recent returns (especially the one-year return) have been poor. This is the benefit of taking the long-term approach to your retirement investments.

For Members who are Closer to Retirement

designbythink 2019, Quarter 1 Newsletter 2019

FOR Members who are closeR to retirement

Up to age 56 At age 57 At age 58

At age 59 At age 60 At age 61

From age 62 to 63

You may be closer to retirement age than other members, and may need to access your retirement savings sooner.

This means that you do not have the luxury of a long time horizon during which you can remain invested in the Fund and recover from a fall in investment prices.

If you have six years or less to retirement, you can be confident that the Fund is designed to protect your retirement savings in a market downturn.

If you study the table above, you will see that from age 57 and upwards, your retirement savings in the Fund are gradually moved from the High Growth portfolio into a more conservative investment strategy, called the Stable portfolio.

This helps to protect your savings as you get closer to retirement, in the event that the investment markets experience negative investment returns.


In the table below, you will notice differences in the returns compared to the graph in the previous section, especially over the one-year period (2018).

This is because the Fund is designed to invest your money more conservatively as you approach retirement, protecting your investments from potential losses by giving up some of the higher returns possible when exposed to riskier investment markets.

As you near retirement, you do not have the time to wait for the investment cycle to turn and to reap the potentially more significant rewards. Therefore in 2018, the Fund’s investment strategy protected your retirement savings.


The graph above shows the returns you would have earned over different periods leading up to 31 December 2018, if you retired (you turned 63) in 2018. The returns are compared to inflation.