Dan writes: I am working as a teacher at a public school and will be retiring next year. According to the Government Employees’ Pension Fund, I will receive a gratuity of R1.6 million and a monthly annuity of R37 000 when I retire. How much will I be receiving of the gratuity after tax? If I invest the R1 million in a fixed deposit account, how much income would I receive?ty Press replies: It is great to see a teacher being able to retire on a reasonable income. This shows the power of leaving your pension to grow and never cashing it in.
There are two sets of taxes you need to consider – the tax on the gratuity (lump sum) and income tax on the monthly annuity. It is advisable that you speak to a professional financial planner.
You calculate the tax on your gratuity based on the retirement tax tables. On a lump sum of R1.6 million, the tax would be in the region of R350 000. Other things to keep in mind are:
You can avoid paying tax on the gratuity by taking the R500 000 tax-free and investing the remaining R1.1 million into a living annuity. You can draw between 2.5% and 17.5% of your living annuity each year, but that income is added to your total taxable income.
– If you invest an after-tax amount of R1 million in a fixed deposit, any interest you receive above R23 800 per year will be added to your taxable income (this interest exemption increases to R34 500 when you turn 65).
For example, if you invested in the RSA Retail Bond for five years, you would receive about 9% as interest income. That would be R90 000 a year. Of this, R66 200 would be added to your annual taxable income. You would need to make provision for this in your tax return.
Should I keep my home loan facility?
Tebogo writes: I am about 10 months away from paying off my home loan, and that will be with more than 15 years to spare. Should I close off the account and get back the title deed or keep the account open and pay the monthly fee of R69? I would then wait for the full term to pass before getting my title deed.
City Press writes: The decision you need to make is whether you might want to access the home loan in the future. If you removed the mortgage over the property and in the future wished to take a mortgage against the property, then you would have to pay for bond registration costs again. Your current home loan facility is a relatively inexpensive credit line, and if you have the discipline not to use it for other purposes, it does give you options if you have other opportunities in the future that you wish to fund. If you decide to close the facility and have the title deed returned to you, then you should give the bank at least three month’s notice. Remember, now that you are debt-free, you need to focus on building up your investments. Don’t just use the additional free money for lifestyle.
Where do I report a debt collector?
Ethel writes: For some time now, I have been receiving both SMS and email messages from a debt collector advising me that my municipal account is overdue for payment. I receive these messages almost every second day, and I am getting very frustrated as this account was closed four years ago when I sold my property. How do I get these people to stop?
The Council for Debt Collectors replies: A consumer may lodge a complaint on our website, under “Complaints”. Consumer supporting documents or evidence must be attached. If a complainant is experiencing technical problems on the website, they can contact our office for further assistance on 012 804 9808 or send an email to firstname.lastname@example.org; email@example.com or firstname.lastname@example.org.If there is sufficient evidence against a debt collector for improper conduct, such debt collector may be subjected to the council’s disciplinary processes and dealt with accordingly. If a debt collector is charged for improper conduct, depending on the severity of charges or offences involved, an admission of guilt fine may be fixed to avoid appearance. Other sanctions include:. If subjected to a disciplinary hearing, a fine may be imposed;. A debt collector may be reprimanded;. The council may withdraw the registration of a debt collector or suspend their registration for a specified period, or pending the fulfilment of a condition; and. The council may order reimbursement to the aggrieved party.
Should I use a bond originator?
Kgaugelo writes: I am buying my first home. Is it advisable to use a bond originator?
City Press replies: Bond originators such as Ooba and Better Bond apply for a home loan at multiple banks on your behalf. This does provide you with the ability to compare quotes and interest rates without applying individually to each bank. You should, however, also apply to your own bank in your personal capacity. If you have a good track record with it and you have managed your accounts well, you may find that it provides you with a better rate. As part of doing your homework, apply for your credit record and make sure there are no negative listings and that your credit record qualifies you for a home loan. If not, identify the issues and catch up any missed payments. You can also improve your application by having a deposit saved and ready to pay when you decide on a property to buy.