Provident fund question

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kahoel117

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Do you think it's wise to change your Provident fund portfolio to a money market option?

For a while now our annualized return has been low. So I figure that the safest and guaranteed return would be money market. Although low return.

Any thoughts?
 
kahoel117 said:
Do you think it's wise to change your Provident fund portfolio to a money market option?

For a while now our annualized return has been low. So I figure that the safest and guaranteed return would be money market. Although low return.

Any thoughts?
Click to expand...

You can put a huge % of the available money into a money market... and its guaranteed!

I would still max the regulation 28 rule to invest oversea’s.

I personally have interest bearing funds in my preservation fund myself.
 
kahoel117 said:
Do you think it's wise to change your Provident fund portfolio to a money market option?

For a while now our annualized return has been low. So I figure that the safest and guaranteed return would be money market. Although low return.

Any thoughts?
Click to expand...
There are some tax implications - just check that once that's factored in you're still coming out ahead
 
Pho3nix said:
This I didn’t know. Could you elaborate further?
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It's taxed at your nominal rate above the threshold (I think R23,500 in interest)

Also, investing in a provident fund or RA reduces your taxable income (meaning you pay less tax). This won't happen with a money market investment
 
eehellfire said:
It's taxed at your nominal rate above the threshold (I think R23,500 in interest)

Also, investing in a provident fund or RA reduces your taxable income (meaning you pay less tax). This won't happen with a money market investment
Click to expand...
this so you essentially only pay tax but your investment is about 500k then (MM)
 
Seems there is a few things to be aware off before thinking of changing. Reason for the question : was because of a recent employer Provident fund statement. The normal annualized interest was between 2 and 3 % for the portfolio I am apart of. And the money market was 8+ % annualized. That's excluding the months up to May 2020.
89efb04bbc887ee0e90664b37708be8c.jpg
 
Last edited:
eehellfire said:
It's taxed at your nominal rate above the threshold (I think R23,500 in interest)

Also, investing in a provident fund or RA reduces your taxable income (meaning you pay less tax). This won't happen with a money market investment
Click to expand...

My understanding from the question is, I resign and pull my pension. Take the 18-23% hit.
Then put all that money in a Market link account for guareenteed 5-12% a year instead of moving to another pension fund.

Would the return be better + still tax efficient.
 
Pho3nix said:
My understanding from the question is, I resign and pull my pension. Take the 18-23% hit.
Then put all that money in a Market link account for guareenteed 5-12% a year instead of moving to another pension fund.

Would the return be better + still tax efficient.
Click to expand...

101 in provident funds : NEVER CASH OUT ! Re-invest the full amount again (pay tax when you are 55+)

You cant rewind time in savings
 
eehellfire said:
There are some tax implications - just check that once that's factored in you're still coming out ahead
Click to expand...
There will not be any tax implications, return earned in the fund attracts tax at 0% so it is irrelevant in what underlying asset class the investments are held
 
Koosvanwyk said:
There will not be any tax implications, return earned in the fund attracts tax at 0% so it is irrelevant in what underlying asset class the investments are held
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You're correct. I misread that he wants to shift his portfolio to be money market investment as opposed to just changing investment options within his fund
 
The JSE (reg 28) is a sure fire way to get nowhere really slowly.

Personally, I’ve cashed out before and I’ve stopped my RA. Make of that what you want.
 
zerocool2009 said:
101 in provident funds : NEVER CASH OUT ! Re-invest the full amount again (pay tax when you are 55+)

You cant rewind time in savings
Click to expand...

Just to put the “tax hit” in perspective: the JSE in which the bulk of your provident/pension/RA is invested in has averaged under 3% P.A. over the last five years, 5% in the last decade.

These funds are available to you on every platform out there:

1596647959898.png
1596648046147.png

1596648112840.png

Obviously it can all go South but the point is: the tax hit is nothing but “thing”. Its not unrealistic to make up the tax hit within a year.
 
kahoel117 said:
Seems there is a few things to be aware off before thinking of changing. Reason for the question : was because of a recent employer Provident fund statement. The normal annualized interest was between 2 and 3 % for the portfolio I am apart of. And the money market was 8+ % annualized. That's excluding the months up to May 2020.
89efb04bbc887ee0e90664b37708be8c.jpg
Click to expand...
I don't think it's a good idea to make investment decisions based off returns over a one year period. Its too short to be meaningful.

Your current fund is probably mostly invested in shares, as a long term investment should be.

Your age is also an important factor when deciding whether to switch funds.

And fees.
 
Eti1 said:
I don't think it's a good idea to make investment decisions based off returns over a one year period. Its too short to be meaningful.

Your current fund is probably mostly invested in shares, as a long term investment should be.

Your age is also an important factor when deciding whether to switch funds.

And fees.
Click to expand...

Personally i wont cash out! Being hit with tax once off.... then what?

If you make interest or dividends, SARS will hold their hands too.

I changed jobs in 2008. Didnt cashout, and let it snowball over time.

RA’s is another story, let them work for you, or you are enriching them.

If you wanna be wise-> cash out-> buy Tesla shares
 
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