Money Matters
Issue 42

December 2021 / January 2022

Maybe it’s just me, but when it comes to climate change, I feel compelled to stick my head into the proverbial hole as the issues appear intractable, depressing and so much beyond my sphere of influence. The repeated reminders, that if we do nothing, the impact on our children and grandchildren will almost surely be catastrophic only add to my anxiety. I was relieved when I came across Bill Gates’s new book “How to avoid a climate disaster” eloquently summarised by Nic Andrews, where he sets out in simple words, the most important issues to focus on as well as remedies and solutions. We have included Nic’s summary in this issue.

On a different note, for those of you who are feeling a little battered by the local and global events of the past few years, we thought we’d include an article written by Francois Cilliers which is bright and positive – “2022, five reasons to be positive”.

Finally, for those tax conscious investors looking for tax saving opportunities we include a short article reminding one of the benefits of a Retirement Annuity.

We, at Stone Wealth Management, recognize that your total return is not just defined by your investment performance – it includes tax and estate savings achieved by blending the correct investment vehicles.

Linda Stonier

For the uninitiated, trying to establish a sensible approach to climate change is not easy. For each grave warning or claim of a solution, there are counter arguments and complex trade-offs.

Bill Gates’s recent book, “How to avoid a climate disaster” provides a comprehensive but easy to understand explanation of the problem, as well as outlining what the most important things to focus on are and some potential solutions.
The book offers many valuable, practical insights and I found the context it provides extremely useful to understanding and unpacking some of the key issues and numbers and thereby be able to engage more constructively in the debate.

Two important numbers to remember:

51 billion
tons of greenhouse gases are the approximate current global emissions which are added to the atmosphere each year.
 
Zero
is the number we need to get to by 2050, to stop global warming and avoid its worst effects.

Five reasons to be optimistic about 2022

It is very natural to be circumspect of anyone who touts optimism in light of what we have all been through over the last two years. In fact it is in our natures not only to expect that the most recent past is the best likely predictor of the future, but also because most of us are in the habit of lying awake and worrying about what could all go wrong. 
 
While the doom-and-gloom articles will likely be in abundance as we go into 2022 (it is always easier to be negative) we thought it might be useful to also consider some of the reasons as to why the coming year might not be quite as bad as many would predict.
 
1.   Problems have been aired and are now clearly identifiable
 
It would be reckless of us to suggest that there are not a myriad of potential reasons for concern, including from an investment and political – local as well as international – perspectives. As fewer news headlines are being grabbed by ongoing Covid concerns (which is almost certainly not yet a thing of the past), attention turns to the many weaknesses which the last two years have exposed and brought to light. The upside of problems aired however is that it allows us the opportunity to realistically assess what was previously an unknown – a bit like opening the curtains in a dimly lit room where we previously only saw outlines or shadows lurking.

It is almost the end of the tax year.  If you have some extra funds available, consider adding to your savings in a retirement annuity (RA) or tax-free savings account (TFSA), thereby enjoying the significant tax benefits these products offer.
 
Why invest in a RA?

1. RAs can be viewed as gifts from the taxman. For example, if you are currently paying tax at a rate of 45% and contribute R100 000 to your RA in the year of assessment, you effectively only contribute R55 000 of the R100 000, while SARS contributes the balance. Tax will be applicable when the funds eventually pay out at retirement, but due to the tax-exempt portion of the lump sum, as well as the tax rebates for individuals over 65 and 75, you will pay less tax at that time.

2. You do not lose your tax benefits, even if you contribute more than the maximum annual tax deduction (excess contributions). If you contribute more than the maximum (excess contributions), your tax benefit will roll over to the next tax year of assessment. Any excess contributions in subsequent tax years will continue to be rolled over. This means that you could receive a tax benefit at retirement, after retirement or your beneficiaries could benefit when you’ve passed away, as explained in the diagram overleaf.