Settle ABSA bond or keep savings in UK ?

My monthly income from my UK account on the amount required to settle my bond is R1050 , and the monthly interest on my ABSA bond account is R3589

So if I do the math I would save

Approx int paid to ABSA for 24 months R86000
Approx int earned in UK bank for 24 months R25,200

I have investigated and decided on the methods to move my money out of SA when the time comes, so at this stage I'm leaning towards settling the bond now.

I have no intention of formally emigrating - I work abroad spending only my holidays in SA, so when the time comes I'll just leave.
 
Good choice!
Apparently one of the cardinal rules of making money is that you should not invest if you have outstanding debt, as it is likely to be the REAL expense.
(but don't believe everything you read! cause even that can be incorrect in certain circumstances!)

I'm glad you came to logical decision and didn't get whipped by a couple of okes comparing their "e-penises"!!! on this thread :D
 
ant101 said:
I'm glad you came to logical decision and didn't get whipped by a couple of okes comparing their "e-penises"!!! on this thread :D
Click to expand...

I feel your last statement was a little unnecessary and you may do well to actually read those posts... would it have been better for all of us to remain silent and then come in and applaud once the decision had been made, and try to bask in glory by agreeing, like others on here?
 
My humble apologies sir LancelotSA, I retract my statement!
All kudu's to Frankie!:)
 
Frankie said:
I can comfortably settle my ABSA bond using part of my savings currently in my UK account - this choice is complicated with my decision swaying heavily towards packing up and leaving SA.
I was thinking of selling my property in 2010 thinking that we will have a good idea at that time if the ANC was still hell-bent on creating a Zim 2.0, and if so I'd be looking at moving the money out of SA.

Although the interest earned in the UK is very low, the gains in SA may be negated by the Rand depreciating.

What would you do?
Click to expand...

settle the bond. dont think twice.
get rid of all your depts. and go from there by opening a savings account and deposit access money in it. cant go wrong with that. :cool:
 
Hi Frankie

I've been thinking about my offshore investments a lot this year and like you I find it difficult to decide how much to invest in SA and how much offshore. At the moment only 15% of my net assets are offshore (combination of sterling-denominated interest-bearing assets and Yen-denominated equity). But I want to increase it to 30% ASAP.

Conventional wisdom seems to range between a 15% and 30% offshore exposure for South Africans - for diversification purposes. Oh yes, and some argue that 30% of our SA inflation is imported, so to really keep your purchasing power here, you need a 30% exposure. I don't totally agree with the latter argument, but that's another story.

I find it more practical to think of the lifestyle you see yourself living one day. How much time will you be spending overseas? Do you ideally want to spend every summer in Europe (or Mexico or wherever your dream spot is). What % of your annual expenses will you have to pay in euros or pound sterling? (In my case I think that may be closer to 30% in a few years' time).

It sounds like you have quite a lot of money offshore and it may be even more than 30% of your net assets (after you've deducted that ABSA loan). But I'd still be hesitant to bring the money back into the country while we still have relatively strict exchange control regulations in place.

When do you think you will need your offshore money? Any specific reason why you have it all in cash? If it's a long-term investment, don't you rather want to move it to a balanced or an equity portfolio and get a higher return over 10 or 20 years?
 
Barefoot Billionaire said:
Hi Frankie

I've been thinking about my offshore investments a lot this year and like you I find it difficult to decide how much to invest in SA and how much offshore. At the moment only 15% of my net assets are offshore (combination of sterling-denominated interest-bearing assets and Yen-denominated equity). But I want to increase it to 30% ASAP.

Conventional wisdom seems to range between a 15% and 30% offshore exposure for South Africans - for diversification purposes. Oh yes, and some argue that 30% of our SA inflation is imported, so to really keep your purchasing power here, you need a 30% exposure. I don't totally agree with the latter argument, but that's another story.

I find it more practical to think of the lifestyle you see yourself living one day. How much time will you be spending overseas? Do you ideally want to spend every summer in Europe (or Mexico or wherever your dream spot is). What % of your annual expenses will you have to pay in euros or pound sterling? (In my case I think that may be closer to 30% in a few years' time).

It sounds like you have quite a lot of money offshore and it may be even more than 30% of your net assets (after you've deducted that ABSA loan). But I'd still be hesitant to bring the money back into the country while we still have relatively strict exchange control regulations in place.

When do you think you will need your offshore money? Any specific reason why you have it all in cash? If it's a long-term investment, don't you rather want to move it to a balanced or an equity portfolio and get a higher return over 10 or 20 years?
Click to expand...

If I may ask, what investment/s are you referring to above? I am interested and have heard similar to what you have said above. (20/30% offshore thing)

Thanks
 
The sterling account is just the cash in my UK bank account (opened it while I worked there and send some money over once home as part of my R2m allowance). I should probably move it to a higher interest account, but on the other hand it's a nice emergency fund now, even thought the interest rate is almost non-existing.

The Yen equity is Allan Gray Orbis's Japanese Equity Fund. If I remember correctly the structure is an open-ended investment company (OEIC), i.e. another type of collective investment scheme like a unit trust. I don't plan on touching that money within the next 20 years, though. The nice thing about Allan Gray's new offshore platform is that you only need R100 000 for your first investment and R20 000 for top-ups. I know R100 000 is not small change, but it's much lower than the minimum investment amounts of other companies. Oh yes, and you need to use your R2m allowance for this investment as well.
 
Settle Bond. I'm not even sure why this is being debated.

As stated, you will save a crap load in interest paid eventually. So the money you save now on bond repayments you can push back into a savings account here. So by 2010 you should have a nice sum of money to be able to afford to go over and not worry about anything else.
 
Not quite as simple. You're forgetting the inflation rate differential (our exchange rate should depreciate at an annual rate of our inflation minus UK inflation over the long term). The interest Frankie's saving will not be worth much in pounds sterling in a few years. In addition, if he invests in global equity, he'll have that growth on top of the inflation differential.
 
Barefoot Billionaire said:
Hi Frankie

I've been thinking about my offshore investments a lot this year and like you I find it difficult to decide how much to invest in SA and how much offshore. At the moment only 15% of my net assets are offshore (combination of sterling-denominated interest-bearing assets and Yen-denominated equity). But I want to increase it to 30% ASAP.

Conventional wisdom seems to range between a 15% and 30% offshore exposure for South Africans - for diversification purposes. Oh yes, and some argue that 30% of our SA inflation is imported, so to really keep your purchasing power here, you need a 30% exposure. I don't totally agree with the latter argument, but that's another story.

I find it more practical to think of the lifestyle you see yourself living one day. How much time will you be spending overseas? Do you ideally want to spend every summer in Europe (or Mexico or wherever your dream spot is). What % of your annual expenses will you have to pay in euros or pound sterling? (In my case I think that may be closer to 30% in a few years' time).

It sounds like you have quite a lot of money offshore and it may be even more than 30% of your net assets (after you've deducted that ABSA loan). But I'd still be hesitant to bring the money back into the country while we still have relatively strict exchange control regulations in place.

When do you think you will need your offshore money? Any specific reason why you have it all in cash? If it's a long-term investment, don't you rather want to move it to a balanced or an equity portfolio and get a higher return over 10 or 20 years?
Click to expand...
Since 1997 I have been employed abroad hence all my earnings were paid into personal accounts abroad - I have this in high interest bearing accounts (5.6%) - that's why it's in cash (wages).

It's not a case of needing offshore money, but bring only the bare minimum into SA.
 
How are you able to be employed by an offshore company and paid over there while you're in SA? I'm keen to know cause I wouldn't mind doing that...
 
AcidRaZor said:
How are you able to be employed by an offshore company and paid over there while you're in SA? I'm keen to know cause I wouldn't mind doing that...[/QUOTE
I work abroad and spend only my holidays and time between assignments in SA.
Click to expand...
 
Barefoot Billionaire said:
Not quite as simple. You're forgetting the inflation rate differential (our exchange rate should depreciate at an annual rate of our inflation minus UK inflation over the long term). The interest Frankie's saving will not be worth much in pounds sterling in a few years. In addition, if he invests in global equity, he'll have that growth on top of the inflation differential.
Click to expand...

I would love to argue this assertion but I am too tired (after a long day at work) and lazy to do the research (to make sure of the facts).

...but even without the research to back it up, the exchange rate is affected by a lot more than the two respective inflations. Further to this the worth of Frankie's interest saving does not need to be worked out in a few years via your exchange rate calculations as it will be an immediate saving right now... he will no longer be paying interest right now.

You also appear to have made another assumption and that is that his property value will not increase over the period before he leaves... or at worst you have just failed to factor it into your calculations...

You are also basing your entire investment decision on rand hedging. This is fine and dandy but it is based purely on the premise that the rand WILL depreciate against these currencies. I know a number of people who, based on the general advice at the time, did that exact same thing in the late 90's and early 2000's, and a lot of them are only now making that money back. It is not as sure a thing as you appear to be asserting. Yes, it may happen, as it may have back then... but it also may not! His interest on his bond, however, is GUARANTEED!



Anyway I said I would not argue it so let me leave it at that...


EDIT : OK did a little bit of research :

Between January 2003 and January 2005 the exchange rate went from R14.58 per pound at one point down to R10.80 per pound at one point .
Over the same time the UK had inflation annual inflation of 2.1 and 1.4% for 2003 and 2004 respectively.
South Africa had inflation of 9.9 and 5.9% for 2003 and 2004 respectively..

This is just an example but who says this could not happen again over the next two years....
 
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LancelotSA said:
You are also basing your entire investment decision on rand hedging. This is fine and dandy but it is based purely on the premise that the rand WILL depreciate against these currencies. I know a number of people who, based on the general advice at the time, did that exact same thing in the late 90's and early 2000's, and a lot of them are only now making that money back. It is not as sure a thing as you appear to be asserting. Yes, it may happen, as it may have back then... but it also may not! His interest on his bond, however, is GUARANTEED!
Click to expand...

LancelotSA, I concede. I did not take risk into account and yes, the interest on the bond is guaranteed. Anyway, it sounds like Frankie has the bulk of his portfolio offshore and the amount that he needs to settle his bond won't even make a dent in his offshore account.

Hope tomorrow is a better day at work. :)
 
@Frankie do you actually intend selling your property if you *do* leave? Also, why not invest some of the cash here? Our higher interest rates means that your "high yield" investment will easily be outweighed by just a medium risk investment here?
 
Well I'd definately say, seeing as though he's not a permanent resident of this country, bringing over the money shouldn't be the problem and pay off the bond now.

If Frankie does decide to leave, I'd leave the property in tact and rent it out. Because he has no bond to pay off his rental income should be a nice little savings form (the monthly income can go right into a high yield investment like kingmonty said)
 
AcidRaZor said:
Well I'd definately say, seeing as though he's not a permanent resident of this country, bringing over the money shouldn't be the problem and pay off the bond now.

If Frankie does decide to leave, I'd leave the property in tact and rent it out. Because he has no bond to pay off his rental income should be a nice little savings form (the monthly income can go right into a high yield investment like kingmonty said)
Click to expand...

I am in the process of moving the money over - I put a hold on the conversion which I'm glad I did seeing what's happening this morning - the conversion will be done towards the end of today - I let you know how it went.

Talking of rental property!
One property I rent out works out like this:
Rent - R4950
Agent fee - R495
Body Corp levies - R771
Muniicpal Rates - R545
In my pocket - R 3,139

Bond payment for property of this value +- R11,000 / month
 
On Friday afternoon late I exchanged my £ at R15.55
This Thursday my bond will be settled
I was advised to keep the bond open just in case I wanted to use it - what is the cost of this and what's your opinion/advice?
 
You will have to ask your bank about the cost of keeping it open (I was under the impression it's free, well almost, maybe a R10 admin fee per month or something).

Just remember it will cost you several R1000's to register a fresh bond, should you ever need it one day.

PS: Good exchange rate. Nice one...
 
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