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Have We Passed The Point Of Maximum Pessimism?

Have We Passed The Point Of Maximum Pessimism? 1024 555 James

The last few weeks have seenwhat is hopefully, a point of maximum pessimism for our political and economic future.

Land Expropriation Without Compensation, threats to the Reserve Bank’s independence,  Eskom and other SOE’s  draining whatever is left of tax-payers money after years of looting,  and now a seemingly unworkable National Health Insurance Bill, soon to be law – all evidence of  a sharp lurch to the Left by the ANC and a determination, it seems, to follow the same failed policies that have given rise to the current social and economic misery that today can be found in Zimbabwe and Venezuela.

Emigration of skilled individuals is accelerating. The JSE is tending flat to down for the 6th successive year, the Rand is sharply weaker and a Moody’s downgrade of our sovereign debt seems to almost be a certainty within the next year or or so. Many believe that due to continuing  inaction by government on the moribund economy, within a year or two we will be going begging to the International Monetary Fund,  which will force us into far-reaching austerity measures with unknowable political consequences. 

Government’s ‘remedy’ to this seems to be to force private Retirement Annuities and other private sector pension schemes to invest a portion of their assets in Government & SOE Bonds ( the last time ‘Prescribed Assets’ was introduced was  in the late 1970’s under the Apartheid regime… the impact on returns was severe).

There are however some green shoots:  The NPA has asked us to be patient for a while longer and then we should see some high-profile prosecutions which should serve to weaken the destabilizing influences within Government. The Zondo (and other) Commission is gathering evidence which will be ultimately used by the NPA.  We had a winter (in Gauteng at least) with virtually no load-shedding. The Public Protector is facing possible action by Parliament to remove her. There has been an acknowledgement from the Health Minister that the NHI Bill has indeed caused panic  with some attempt by the Minister to allay well-founded fears (of what would almost certainly be an impractical and unaffordable Eskom-like nightmare as currently conceptualized) through emphasising the incremental nature of the NHI roll-out and reiterating that medical aid schemes are expected to cover the NHI shortfall in services until at least 2026.  A turn-around plan for Eskom is due to be published in the next few weeks (though the long awaited appointment of a group CEO is still pending). 

Our Finance Minister released a pro-growth plan (includes less government) for discussion last week, which at least forces the rest of Government to reflect on the soundness of its policies and inaction (COSATU and even others within the ANC have however already rejected it as a right wing agenda conflicting with party policy).

Against this uncertain background, a fresh look at your overall South African risk situation, including opportunities for offshore hedging and offshore direct investment and perhaps even a re-look at the structure of  your Retirement Planning and Will, might be warranted.

Let us know if we can assist in any way?

Get Assistance –

Go For The Gap!

Go For The Gap! 1024 678 James

The debate around Gap cover in South Africa seems to have finally reached a conclusion, with the new demarcation regulations having taken effect from 1 April 2017. At long last, it is now possible to explain exactly what Gap cover means to the consumer, and what limitations these policies have.

What is Gap cover?

One of the most frequently asked questions clients ask is why their medical aid did not cover the full cost of a hospitalisation event, if their option is advertised as paying 100% (or in some cases 200%) of the scheme rate in hospital, and is unlimited. The confusion arises because of the rate charged by Specialists, who often charge in excess of the scheme rate.

The purpose of Gap cover is to fund the difference between what your medical scheme pays for in-hospital specialist costs, and what the specialist actually charges.

It is important to remember that Gap cover only covers specialists when you are admitted to hospital. Out-of-hospital consultations are not covered, even though there usually is a shortfall in what medical aids covers, and specialists charge.

What has changed?

Historically, the medical scheme industry and government argued that Gap cover policies encourage medical scheme members to downgrade to cheaper options on their medical aid, and supplement shortfalls by taking out Gap cover. In an attempt to prevent this, regulations have now been passed and as of the 1st of April 2017, benefits on any new Gap cover policy taken out are limited to R150 000 per person per annum.

If you have an existing Gap cover policy, these benefit limits must take effect by 1 January 2018.

Do I need Gap cover?

Medical scheme membership in South Africa is getting more expensive every year. Gap cover, on the other hand, is relatively inexpensive. The reason for this is that medical schemes are more strictly regulated, and cannot pick and choose to cover only healthy members – whatever your age and health status, an open medical scheme must accept all applicants, and can only place limited waiting periods, exclusions or penalties on your membership.

Gap cover providers, on the other hand, are allowed to impose stricter exclusions on benefits, as well as charge higher premiums for older clients. Because of this, Gap cover policies are less expensive, and are still seen as good value for money for most South African families.


As medical schemes continuously try to contain expenses by limiting what they will refund on medical expenses, most people find that they need additional cover, especially for expensive in-hospital events. When advising clients on a medical aid option, I usually advise purchasing additional Gap cover, no matter what rate their medical scheme option reimburses at.

However, this does not mean that I would advise clients to take out, or downgrade, to a less expensive medical scheme option. The old maxim of “you get what you pay for” is very apt when deciding on a medical scheme option, or when deciding whether to take out Gap cover. If you downgrade your medical scheme option, or decide on a lower option when initially taking out medical aid cover, you might be sacrificing additional benefits not related to in-hospital expenses.

Speak to an advisor

There is no question about the value of Gap cover to the consumer, even if you take the new benefit limits into account. However, because every client has unique circumstances and requirements, obtaining advice from a qualified financial advisor is vital.

Why Do You Need A Financial Needs Analysis?

Why Do You Need A Financial Needs Analysis? 1024 700 James

Just get it done!

Why YOU need an up-to-date Financial Needs Analysis!

If you are like most people, the demands of work and family on your life seem to be increasing every year. Taking the time to meet with a qualified financial advisor and discussing your financial requirements and goals for the future might not be the most exciting way to spend a couple of hours, but in the long run it could mean the difference between enjoying a financially stable life, and spending sleepless nights worrying about where your next meal will come from.

Having an advisor complete a professional Financial Needs Analysis (FNA) is important for everyone, not just those who have financial dependants, are saving for a comfortable retirement, are saving for their children’s education or for a lifetime dream such as an around-the-world cruise.

A Complete And Professional FNA Will Cover The Following Aspects:

  • Your current financial strengths and vulnerabilities, including those often overlooked potential situations where you and your dependents are at risk of serious financial loss on the death, disability or critical illness of any of the main bread-winners in the family (Risk Planning).
  • Advice on increasing your wealth from year- to- year while minimizing your taxation liabilities (Investment Planning).
  • Achieving your long-term financial goals, like providing for a comfortable retirement over your working years, while at the same time accommodating your current financial needs (Budget Analysis and Retirement Planning).
  • Looking at your Medical Aid and Long and Short-Term Insurance alternatives on an annual basis so as to arrive at the optimum value-for-money solution for your needs and changing circumstances.
  • Ensuring that, in the event of your death, you have a valid Last Will and Testament; that your estate has sufficient liquidity and that the distribution will be dealt with speedily according to your wishes and in the most tax-efficient manner (Estate Planning).

In addition to preparing and presenting a professional FNA, your financial advisor must also be able to implement his recommendations and complete annual reviews to ensure that your financial plans are sustainable over the long-term and match your financial goals as they change over time.

It is important to remember that not all FNA’s are created equal – some financial advisors will charge you a hefty fee to prepare a “personalised” FNA, and then present you with a few paragraphs informing you that you are under-insured and not saving nearly enough for your retirement, and that the only solution would be to purchase whatever products he is offering you.

The best way to ensure that you don’t end up buying unnecessary insurance or investment products is to have a trusted financial advisor – preferably one who has been recommended by someone you know and trust, and who has had business dealings with the advisor in the past.

Checking on the advisor’s qualifications and accreditation should be done as a matter of course – all financial advisors in South Africa have to be registered with the Financial Services Board, and you can confirm their good standing online at Financial advisors also have to conform to strict educational requirements.

Omega Wealth (Pty) Ltd, FSP 45461, has consultants who specialize in all areas of financial planning, and who can assist in preparing a professional FNA, using the most up-to-date professional software, at no charge to you. Contact us today and speak to one of our specialist consultants

Medical Aid Quiz

Medical Aid Quiz 1024 678 James


Test your knowledge of medical aids with this quick test – simple Yes or No answers please…

  1. Are you currently finding yourself with an SPG which have increased during the year because you did not use a DSP for your PMB condition?
  2. Have you exceeded your threshold and started claiming from your ATB, only to find that your SR is lower than the rate your doctor charges, and that the sub-limits on your unlimited option mean that you still have to pay out of your pocket for your medical expenses?
  3. Are you left wondering why your member guide says you have unlimited cover for major medical expenses at 100% of your scheme’s rate (which any reasonable person would assume to mean everything in hospital should be paid for), but you still end up paying a small fortune to Specialists after being discharged?
  4. Do you regularly find yourself having to fork out your hard-earned money to cover the co-payments on your chronic medication which, according to your interpretation of PMB’s, should be covered in full, but suddenly isn’t because your doctor did not prescribe medication which falls within your scheme’s formulary? And what on earth is a formulary, in any case?
  5. Are you paying for a Loyalty Programme which was supposed to give you discounts on round-the- world cruises, free movies for the entire family, and gym membership where the gym would end up paying you to exercise? And how did that work out for you?

Thank you for taking the time to complete our quiz. If you understood at least 3 of the 5 questions asked, please forward your CV to our HR Manager. However, if you, like the majority of South Africans attempting this quiz, now have a blinding headache and raised blood pressure comment and tell us!

At Omega Wealth, we are experts at deciphering medical aid jargon, and will be happy to show off our years of knowledge and explain your medical aid and its benefits to you – and advise you on whether you are on the right option to suit your needs!

Medical Scheme Increases For 2017

Medical Scheme Increases For 2017 1024 603 James

Financial forecasts have never been more depressing, and South Africans are feeling the pinch in all aspects of life. Wherever you turn, it seems that prices are spiralling out of control, and many of us are having sleepless nights worrying about where to cut monthly expenses. Unfortunately Medical Scheme Increases For 2017 are not going to help the current situation.

High increases

Medical aid increases for 2017 have been especially high, and many members are starting to consider downgrading or cancelling their medical aid membership, as they simply cannot afford the increases. Before making such a decision, it is important to speak to an expert who can advise you on alternative options available to you.

Downgrading to a lower option could sound like a good idea and save you money in the short term, but the long-term effect of having less cover for your family’s healthcare needs must be carefully considered.

On the one hand, it is better to have some cover than none at all, but if you downgrade to a plan which does not cover your specific needs, you will be wasting your hard-earned money.

Considering cancelling?

Deciding to cancel your medical aid membership is a huge financial risk. Clients often tell me that with what they pay every year in medical scheme contributions, they could easily save enough money to self-fund medical expenses.

This argument would make sense if you had the gift of predicting the future – imagine cancelling your medical aid and being diagnosed with a serious illness, or being involved in a car accident, before you have been able to save the hundreds of thousands of Rand which you would have to pay to be treated in a private hospital!

Best for you

At Omega Wealth, we realise that the realities of the economic climate cannot be ignored, and that keeping your current level of cover is sometimes not an option. That is why our consultants will assist you in identifying the most suitable options for you and your family, to ensure you get the best healthcare cover you can afford.

Medical Aid Waiting Periods

Medical Aid Waiting Periods 1024 682 James

I often deal with clients who, when joining a medical aid, do not understand why waiting periods or exclusions have been imposed on their membership.  Medical aid waiting periods can sometimes be a contentious issue so in this article I will shed more light on this topic.

Medical schemes in South Africa

Medical schemes in South Africa cannot refuse membership to any potential member, except in the case where you were previously a member of the scheme and did not pay your contributions, or if you apply to a restricted scheme (for example GEMS which only covers government employees) and do not qualify for membership of the scheme. Because of this, schemes are at risk when older and sickly members want to join, without having previously contributed to the risk pool.

To Combat The Increased Risk, Schemes Are Allowed To Impose The Following Waiting Periods And/Or Exclusions:

  • If you have not been a member of a South African medical scheme for the past 90 days or longer, you are seen as a new entrant to the market, and a scheme could impose a 3-month general waiting period, as well as 12-month exclusions on pre-existing conditions.  During the waiting period you will have no cover at all. Not even for emergencies.  Should a scheme cover emergency care during this time, it is a concession made by the scheme, and not a legal requirement.
  • If you have been a member of a South African medical scheme for the past 24 months or longer, and you do a voluntary change of medical schemes (for example, you change schemes for better rates or benefits), the new medical scheme may impose only a 3-month waiting period, and no  twelve month exclusions on pre-existing conditions.  However, during the 3-month waiting period, you are covered for life-threatening conditions and emergencies. This cover will only be at the scheme’s designated service provider and will be ICD 10 code-based. So you need to check the limitations with the new scheme you join, and not assume that you will be fully covered during the three month waiting period.
  • If you have been a member of a South African medical scheme for less than 24 months, and you do a voluntary change of medical schemes, the new medical scheme may impose only a twelve month exclusion on pre-existing conditions, and no three month waiting period.
  • When moving from a ‘restricted’ scheme (such as a medical scheme only available to employees of a certain company) to an ‘open’ scheme (which any member of the public may join), due to a change in employment, no waiting periods or exclusions may be imposed.  But you do need to join the new scheme within 90 days of leaving your old scheme – otherwise, you will be seen as a new entrant to the market, and full waiting periods and exclusions will apply.

The above underwriting criteria is what medical schemes could impose. Some schemes are more lenient and do not necessarily impose these waiting periods and exclusions, but this is always done at the scheme’s discretion.

Speak to a specialist

From the above, you can see that joining a new scheme and knowing your rights with regard to waiting periods and exclusions can become quite confusing. This is why a medical aid specialist is the best person to contact when considering changing medical schemes.  They can guide you through the process and ensure that you are not forced into accepting unfair terms when joining a new scheme.  It is always better to speak to a specialist in the field than to negotiate on your own behalf.

Should you wish to know more about changing schemes, or whether the waiting periods imposed by your scheme fall within the rules. Please contact one of our medical aid specialists for advice.

New Tax Deduction Rules For Retirement As Of March 2016

New Tax Deduction Rules For Retirement As Of March 2016 1024 682 James

As of 1 March 2016, the government has changed the Tax Deduction Rules for contributions to retirement funds. This article will explain the benefits of reviewing your retirement plan, and how you can maximise the benefits of these tax changes.

Retirement funding in South Africa falls into three categories:

  1. Retirement Annuity Funds,
  2. Pension Funds
  3. Provident Funds.

In the past, deductions allowed against contributions to the three categories were calculated differently, but as of 1 March 2016 this has changed, and below I have compared the old tax method to the new, for each of the three categories.

The important thing to remember is that deductions for all three categories are now taxed in the same way.

Pre March 2016

Retirement Annuities

The greater of R1 750, or R3 500 less current contributions to a pension fund, or 15% of taxable income from non-retirement funding employment could be deducted.

Pension Funds

The greater of R1 750, or 7.5% of remuneration from retirement-funding employment.

Provident Funds

Not tax-deductible.

Post March 2016

Retirement Annuities

27.5% of the greater of remuneration or taxable income, capped at an annual limit of R350 000. This includes all contributions to retirement funding (Retirement Annuities, Pension Funds and Provident Funds).

Pension Funds

Included in the 27.5% limit above.

Provident Funds

Included in the 27.5% limit above.

When reviewing your retirement planning

The following points, in addition to the above, should be kept in mind:

  • Contributions to a Pension or Provident Funds made by your employer are now taxed as a fringe benefit in the hands of the employee, and deemed to be made by the employee. This means that these contributions now form part of the above mentioned limit of 27.5%.
  • By retiring late, or deferring the purchase of a compulsory annuity with the proceeds of your retirement savings, you can benefit even more from the new tax rules.
  • Retirement Annuity Funds and Compulsory Annuities fall outside of one’s estate, and are thus not subject to 20% Estate duty. Retirement Annuity Funds are also protected against certain creditors (excluding an ex-spouse).
  • Although this article aims to simplify the new tax rules to do with retirement funding, it is important to get professional advice from a reputable advisor, as there are many finer points not mentioned here, which need to be taken into account when planning for your retirement.

In my next article on retirement funding, I will explain the tax implications of early withdrawals of lump sums, as well as how you will be taxed on lump sums taken on retirement.

Hospital Plan Vs Medical Aid

Hospital Plan Vs Medical Aid 1024 682 James

Do you know the difference between a Hospital Plan vs Medical Aid? There’s no disputing the fact that being a member of a medical aid in South Africa is expensive. When you decide to join a medical aid, you are in effect paying for a service which, in many other countries, you get for free.

True, you can make use of government hospitals and doctors, and it will cost you nothing or very little, but the service levels at these government hospitals are notoriously lacking – but that’s a subject for another day!

Let’s discuss your options, when you do decide to opt for ‘private cover’.


Because of the high cost of medical aid cover in South Africa, many families are these days only interested in obtaining cover for the major medical expenses that can have a long-lasting effect on their lifestyle, such as an extended hospital stay. When they start investigating the costs of these ‘hospital plans’, a huge discrepancy seems to exist.

On the one hand, a hospital plan offered by a registered medical scheme could, for a family of four, range in price from about R2 500 per month, to R4 000 – quite a large chunk of the family budget!

Then you see adverts on TV offering hospital cash plans (or hospital insurance) from as little as R1 200 per month, for the same family size. The consumer, not having made an in-depth study of the subject, invariably decides to go for the cheaper option, with the result that only when a claim is submitted, they realise that they are not covered for the full hospital event.


While there definitely is a place in the market for both products, consumers need to be aware of the differences between the two, in order to make an informed decision:


  • Regulated by Medical Schemes Council.
  • Cannot refuse cover to any individual, irrespective of age or health.
  • Have to cover the full cost of life-threatening conditions, regardless of the cost.
  • Regulated as to the nature of waiting periods or exclusions.
  • Pays the hospital / service provider directly.


  • Short-term insurance product.
  • Can refuse cover, or stop cover at any stage.
  • Pays only a stated benefit for certain procedures. (could be a short-fall in your hospital account)
  • Can permanently exclude certain conditions.
  • Reimburses the policy holder. (service provider not guaranteed payment)

While a hospital insurance plan is a good policy to have in addition to a medical aid. It is never a good idea to rely on such a plan to fully cover you for a hospitalisation event. Reimbursement from a hospital insurance policy will assist you financially while you recover from your illness, while your medical aid will take care of the cost of the hospitalisation.

Another important point to take note of is that a medical aid could charge you a Late Joiner Penalty if you are not a member of a medical aid by the age of 35, depending of the number of years you have not been a member of a scheme. Many younger people opt for hospital insurance plans. When they get older and want to join a medical aid, they are subject to these penalties.

A financial planner who specialises in medical schemes will be able to advise you on a suitable plan for you and your family. Just remember, it is never a good idea to simply go for the cheapest option, and then end up financially compromised when you have to claim.

Leaving A Legacy

Leaving A Legacy 1024 681 James

Many people either have an out-of- date will or no will at all. This can leave your family at best, inconvenienced, and at worst suffering severe financial hardship should you pass away. Start planning today about Leaving a Legacy.

Cost of Death

In addition to the above, keep in mind that the cost of dying can eat into the legacy you leave behind. Taking into account 20% Estate Duty, a maximum of 16,4% Capital Gains Tax (assets in your estate are deemed to be disposed at death to the estate and trigger CGT subject to an ‘at death’ exclusion of R300 000), and Executor’s Fees of a maximum of 3.99%, a poorly executed estate plan can incur costs/liabilities totalling millions of Rands.


We recommend you have a proper estate plan drawn up (and reviewed annually thereafter) calculating existing Estate Duty and CGT implications and then working with your financial advisor to minimise these costs. All policy beneficiaries should be checked and updated and be in line with your most recent estate Plan. The proceeds from a Retirement Annuity Fund are excluded from the estate and policies (and other assets) where a spouse is the beneficiary, or assets bequeathed to a spouse, are deductible from the estate in terms of Section 4Q of the Income Tax Act.


Other than creating a trust during your lifetime (which would keep major assets outside of your estate), another way of minimizing costs is to use insurance. Capital Legacy, for example, other than doing professional wills under the guidance of your Estate Planning Specialist/Financial Advisor, have a Legacy Protection Plan which provides estate cost cover of up to R2.4million with NO medicals required.

This not only keeps one’s legacy intact for heirs but also provides much needed liquidity for the estate. A detailed Estate Liquidity Analysis is part of any professionally drawn up Estate Plan and highlights any projected shortfalls.

A will which bequeaths certain assets directly to heirs will have the wishes of the testator frustrated if there is a cash (liquidity) shortfall in which the Executor has to sell one or more of these assets to pay unquantified or unrecorded liabilities of the estate.

Leaving a Legacy

Therefore, a good Estate Plan and will, regularly updated, provide the peace of mind that you are indeed leaving the legacy you intended for your loved ones.