Dear reader,
The first step is to determine whether you will need to access any of these funds on a monthly basis.
There are two key considerations: the investment vehicle you choose and the underlying investment strategy you follow.
- Investment vehicle: You have several options. If you require full liquidity, it would be more appropriate to consider a voluntary investment. This type of investment vehicle essentially has no restrictions – you are able to contribute funds at any stage and withdraw them whenever needed, offering maximum flexibility. However, it is important to note that these funds will form part of your estate.
- Sinking fund or endowment structure: Alternatively, you could invest via a sinking fund or endowment, either partially or in full, depending on your need for access. This vehicle carries certain restrictions, particularly within the first five years. While it is still treated as a deemed asset in your estate, it offers the benefit of allowing you to nominate beneficiaries. This can be especially valuable if you have financial dependants, as it ensures a smoother and more efficient transfer of funds.
When deciding on the underlying investment strategy, it again depends largely on your intended use of the funds. If you do not require full liquidity in the short term, a more diversified approach should be considered.
Investing solely in interest-bearing assets, as is currently the case, may not deliver the most optimal outcome from a tax perspective.
The annual exemption on interest income is relatively limited (R23 800 for individuals under 65 and R34 500 for those over 65), and any amount above this is taxed at your marginal rate.
In addition, we are likely moving into a lower interest rate environment. While inflationary pressures linked to global events may delay this, the broader trend suggests that returns from these assets may struggle to keep pace with inflation.
I would therefore recommend incorporating a broader range of asset classes within your portfolio. No single asset class should be viewed as a substitute for another.
By including a combination of cash, bonds, and growth assets – such as local and global equities – you create a more resilient portfolio that can perform across different market and economic cycles.
Equity exposure, in particular, offers two key advantages.
Firstly, it provides the potential for higher long-term returns, which is essential to maintain purchasing power and keep pace with inflation.
Secondly, it can improve your tax efficiency. Unlike interest income, equities are taxed on a capital gains basis, and tax is only triggered upon disposal. There is also an annual capital gains exclusion, which was increased in the most recent budget.
Finally, selecting the right wealth manager is one of the most important decisions you will make. I would suggest considering a well-established, preferably listed firm, as these typically operate under stricter compliance standards and offer deeper expertise and experience. A strong, proven track record is also important.
Read:
Should I invest in a three-year or five-year fixed deposit at retirement?
What inflation and return assumptions should I use for retirement planning?
It is equally valuable to consider the scale of assets under management, as well as to compare fee structures and the quality of advice provided. This helps ensure you are receiving appropriate and competitive guidance.
With any financial advice, it is essential to remain grounded in realistic expectations. For example, if the broader market is delivering returns of around 10%, it would be unreasonable to expect consistent returns of 20%.
Read: Back to basics: Simple ways to take control of your money in 2026
Lastly, independent advice remains crucial. A wealth manager should have the flexibility to work across different platforms and portfolios, providing objective recommendations and adapting those recommendations as markets and circumstances evolve.
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