Sanlam Financial Glossary

Accident cover

Accident cover insures you against the effects of accidents or violent situations in which you may lose a limb, your eyesight, your hearing or even your life. It differs from disability cover - should you for instance lose a limb and you are not permanently disabled; you'll still be paid out the policy benefits. You can take out accident cover either as a separate policy or as a rider benefit on a life insurance policy.

Added benefits

Added benefits are the benefits of life and disability cover added to retirement benefits for members of retirement funds. Members may take out some of these benefits without any medical tests, up to certain limits. Because retirement funds are operated on a group basis, the costs involved for providing these benefits are somewhat cheaper than they would otherwise be.

Agent

An agent, or tied agent, or adviser (as they are more commonly known), is an insurance salesperson who works for one particular company and sells that company’s products only. Some companies allow certain advisers to sell competitors' products and refer to them as 'independent advisers'.

Aggressive

Your primary investment goal is long-term capital growth. You can tolerate substantial fluctuations in the value of your investment in the short-term in anticipation of the highest possible return over a period of 10 years or more.

Annuity

An annuity is a fixed interest investment that pays out a regular payment to the policyholder, called an annuitant, over a selected term. These payments may start immediately, after an amount has been invested in the annuity - this is known as an immediate annuity. Your payments can also be deferred to some future date, and the annuity is then known as a deferred annuity. The payments may be made monthly or annually and may be for a specified term or for the remainder of a person's life.Do not confuse this annuity with a retirement annuity, which is a specialised savings product aimed at making financial provision for retirement. The above annuity is usually bought along with retirement savings, after which the payments serve as retirement income, or pension.

Annuity with growth

As the name implies, this annuity offers you a pension that grows by a fixed percentage each year. When purchasing this pension you will start with a smaller pension as opposed to, for instance, a single-life annuity without a guaranteed term. But it will increase steadily, thereby helping to protect your income against inflation. The percentage increase is decided beforehand.

Assets

An asset can be almost anything that has a monetary value, where such an asset has a tendency to hold its real value in times of unexpected high inflation. It usually implies physical, tangible assets such as gold or property.

Assumed

In executing an estate, ‘assumed’ refers to other persons nominated by the executor to be appointed as co-executor, to assist the executor of the estate.

Assured

This is the person whose life is insured in terms of the basic policy.

Annexures

This is an addition to a will in which a variety of items are specified, to be divided among specific heirs.

Balanced Fund

This fund, which aims for stable growth, provides a balance between maximum capital growth and security, in the medium- to long term. As a market-related fund, it can fluctuate in line with prevailing market conditions. Up to 70% of the fund may be invested in shares, with the rest invested in property and interest-bearing investments, aiming to maintain a sound balance between the two. An optional guarantee can be added to the fund - this will assure you minimum growth of 4,5% per year on the net investment.

Bear Market

A bear market refers to a period of time where stock market prices are on the decline and investors generally lack confidence.

Beneficiary

A beneficiary is a person receiving a benefit. The policy beneficiary is the person the policy will be paid out to. This can be anyone that the policyholder has designated. It is better to always name a beneficiary in your policy, as this will ensure that the policy will pay out directly to that person, should you die.

Bequeath

To ‘bequeath’ is to award or give something to someone by means of a Will.

Bill of exchange

A bill of exchange is a bill that arises out of the sale of goods on credit. The bill for the amount owing is then sold to a bank at a discount to face value, after which the bank guarantees repayment and sells it into the market, where it becomes a tradable security.

Bond

A bond is a binding agreement for a borrower to pay a lender specified amounts of money at specified times until the loan is repaid. For instance, your home loan agreement with the bank is referred to as a bond.

Broker

A broker is a financial adviser who isn't attached to any specific financial services company - they may therefore sell the products of more than one company, and like financial advisers, they get paid commission on the products they sell.

Bull market

A bull market refers to a period of time during which stock market prices are on the increase and investors are generally confident. It is the opposite of a bear market.

By Representation per stirpes

'By representation per stirpes' means that where a beneficiary predeceases the testator, his portion of the inheritance will go to his children (the children of the beneficiary). If some of the children have already died, the predeceased child's inheritance is divided equally amongst that child's children.

Capital

'Capital' refers to the total amount / lump sum that you have available to invest.

Capital gains tax

Capital gains tax is a tax charged on the profit made on the sale of an asset that was purchased at a lower price, eg. from the sale of stocks, bonds, precious metals and property. This tax was implemented in South Africa in October 2001.

Capital Market

The capital market is the market for long-term securities.

Capitalise

To capitalise means that the income is reinvested and will be added to the capital.

Cash

Cash is a very short-term investment, earning short-term interest, e.g. treasury bills and bank deposits.

Cautious

Your primary investment goal is capital protection. You require fairly stable growth and/or a moderate level of income. Your investment term is 3 years or more.

Co-trustee

‘Co-trustee’ refers to more than one person or institution appointed to administer the assets in a trust (capital and income), for the benefit of the beneficiary until termination of the trust.

Codicil

A ‘codicil’ is an addition to an existing will. It must comply with the same laws that are applicable to wills.

Compound interest

Compound interest (as opposed to simple interest) means that you earn interest, not only on your investment, but also on your investment plus the interest earned in the previous years, meaning that you earn interest on interest.

Compulsory annuity

When you reach retirement, you are compelled by law to use the proceeds from your pension fund or retirement annuity policy to purchase what is known as a compulsory annuity from a life insurer. This is a life-long pension purchased with the amount from the proceeds of a retirement annuity policy or a pension fund.

Conservative

Your primary investment goal is capital protection. You require stable growth and/or a high level of income, and access to your investment within 3 years.

Convertible loan stock

'Convertible loan stock' refers to a bond that may be converted into something else on specified terms, usually into shares in the same company.

Creditors

Creditors refer to persons / businesses to whom you owe money.

Cross subsidy

By pooling the money of a number of employees into one fund, some of everyone's money can be used to the benefit of everyone.

Declare

'Declare' refers to the official declaration of your decision in the context of wills, estates and trusts.

Deferral of tax

The amount that you contribute towards providing for your retirement - up to 15% in certain instances - may be deducted from your income before tax is calculated. This means that you are taxed on a lower amount - your actual income minus your retirement contributions. It doesn’t mean that you won’t have to pay tax on that money - the payment of the tax is deferred until retirement.

Defined benefit fund

This type of retirement fund isn’t based on the contributions, but on the promise of a defined benefit, or pension, to be paid to you after your retirement. When you leave the service of your employer before retirement age, you’ll only receive part of the accrued money in the fund. At retirement you’ll receive a monthly pension instead of being paid out the full amount, although you may take up to one third of the value in cash.

Defined contribution fund

This type of retirement fund is based on a regular fixed contribution made by you and your employer to the fund. At retirement – or earlier if you leave the service of your employer – your employer will pay out the combined contributions, plus the accrued growth from the investment of your money. The assumption is that you should use this money to purchase a pension.

Direct

To 'direct' implies giving a command or order, in the context of wills, estates and trusts.

Direct investment

A direct investment means that you hold an underlying asset, like a share, a gilt or property, directly as opposed to an indirect investment such as a unit trust.

Direct marketing

This refers to the marketing and sales of financial products directly to the client without the assistance of an intermediary – by means of mail, telephone sales or media advertising.

Disability cover

Disability cover means that you enter into an agreement with a life insurer to cover the risk of you becoming permanently disabled. In exchange for your monthly premiums, the life insurer will provide you with a certain amount of money if you do become permanently disabled, to ensure that you can support your family when you are no longer able to work because of your disablement. Disability cover works in the same way as life insurance and also falls under the category of risk cover. It can be taken out on its own, or as an extra (rider) benefit on a life insurance policy. When taking out disability cover it is very important to note the specific definition that particular company attaches to the term 'disability'.

Discountable

In the context of wills, estates and trusts, ‘discountable’ implies to realise before the expiry date, with the deduction of a certain amount by way of a discount.

Discretionary Trust

A discretionary trust is a trust created in your will in which the Trustees are empowered to use their own discretion to provide for the needs of the heirs concerned.

Dread disease/Trauma cover

When you take out trauma or dread disease cover, you ensure yourself against a list of serious illnesses, for instance cancer, a stroke or a heart attack. Should you then be diagnosed with any of these illnesses, the insurer will pay out an agreed amount. Trauma or Dread disease cover is mainly used as a rider benefit on a life insurance policy.

Employee Benefits

Sanlam Employee Benefits provides life insurance, investment and annuity solutions for group schemes and retirement funds, and fund administration for retirement and umbrella funds.

Endowment

An endowment is a savings policy with a specific term (usually 5 - 10 years), with a choice of various investment funds depending on your risk profile. Additional benefits, such as life cover, can be added to this product.

Equity

Equity refers to ordinary shares in a company. It gives the holder of such shares a share in the residual profits of a company, after claims.

Estate

'Estate' refers to a person's assets and liabilities.

Estate duty

Estate duty is a tax paid on a deceased person’s estate – usually 20% of the nett taxable estate (assets less liabilities and administration expenses, less bequests to the surviving spouse). A R3,5 million deduction is allowed for each estate. No estate duty is payable where the nett taxable estate is less than R3,5 million.

Estate planning techniques

These are estate plans you implement to reduce estate duty, income tax, VAT, CGT, etc.

Exclusions

Some life insurance policies define situations or happenings under which they won’t pay you out. These are called exclusions and may include suicide (particularly within a certain time after the inception date of the policy) or taking part in dangerous activities, e.g. flying or mountaineering.

Execute

In the context of wills, 'execute' means to validate by signing.

Executor

The executor is the person or institution nominated in the will or by interested parties, whom the Master of the High Court will appoint to administer the estate of a deceased person.

Expert

'Expert' refers to a person with extensive and proven knowledge and experience of estate planning, wills, trusts and deceased estates as well as all the laws and estate planning techniques involved.

FAIS

FAIS, the Financial Advisory and Intermediary Services Act, is legislation that impacts on the financial services industry and aims to regulate the giving of advice and rendering of intermediary services to clients, as well as certain other issues.

FICA

The Financial Intelligence Centre Act (FICA), also known as the Anti Money Laundering Act, requires that clients provide certain documentation for the purposes of verification of identification (e.g. bar-coded ID document) and proof of residential address (e.g. utility bill) when a new application is received or for certain transactions on a policy / trust

Financial adviser

A financial adviser is a person who assists you in drawing up a financial plan by taking into account your risks and investment goals. He or she should have the relevant product knowledge and insight to advise you on the best method of attaining these financial goals. A financial adviser may or may not be attached to a specific financial services company. They get paid a commission on the products they sell.

First dying

In the context of estate planning and wills, ‘first dying’ refers to the spouse – either the husband or the wife – who predeceases (dies before) his/her partner in marriage.

Fixed interest stock

In the investment context, ‘fixed interest stock’ refers to a security invested for a defined term, where interest and capital repayments are fixed at the outset.

FSB

The Financial Services Board is a unique independent institution established by statute to oversee the South African Non-Banking Financial Services Industry in the public interest. The FSB is committed to promote and maintain a sound financial investment environment in South Africa.

FSP

FSP is an abbreviation for Financial Service Provider. Sanlam is an example of an FSP.

Fund of Funds

This fund offers an easy way of investing in a selection of South African unit trusts, without you having to decide on the exact funds for yourself. The fund's sole purpose is maximum returns and the fund manager's mandate is to outperform 75% of all South Africa's unit trusts. The risk is moderate to moderately high, but because the fund invests in a variety of unit trusts and the risk is therefore spread, it’s lower than if you invested e.g. in a single unit trust.

Funeral cover

Funeral cover is aimed at covering your funeral costs. If you have enough life cover you normally don’t need funeral cover. However, should you have nothing else; funeral cover will ensure that your next of kin aren’t burdened with additional financial problems after your death.

Gilt

'Gilt' refers to fixed interest stock issued by the Government, with the aim of raising money through drawing investments with which to finance public sector borrowing.

Guaranteed Capital Fund

This low-risk fund guarantees your net investment during the entire term of the investment. The fund’s growth is added to your investment as a bonus that becomes part of the investment and cannot be lost – bonuses are added daily or monthly, depending on the type of investment. All the accumulated bonuses are payable when the investment or policy matures, and are tax free, in terms of current tax legislation.

Guarantees

In volatile investment markets where investors are looking for ways to protect their investments against a possible decline in the market, some funds offer guarantees. Keep in mind that high potential growth and guarantees are mutually exclusive. There are, however, instances when guarantees are needed to protect your investment. For instance, if it's your only retirement capital, you don't want to expose it to unnecessary risk. Examples of the kind of guarantees you can expect is a guarantee for a minimum investment return or a guarantee that later fluctuations in the market won't affect the growth that you have already earned, thereby letting you keep the good of the good times, whilst not exposing you to the bad of the bad times. Guarantees come at an additional cost of around 1-2% of the investment per annum.

Guardian

A legal guardian is a person who has the legal authority (and the corresponding duty) to care for the personal and property interests of another person.

Heir

An heir is a person or institution who benefits from a will.

Husband

In the context of wills, estates and trusts, 'husband (spouse)' refers to the man to whom a woman is legally married.

Inheritances

Inheritance is the practice of passing on property, titles, debts, and obligations upon the death of an individual.

Insured

The person(s) or party(ies) protected by an insurance policy, synonymous with assured.

Inter Vivos Trust

An Inter Vivos trust is a trust that you register and implement during your lifetime.

International Balanced Fund

The International Endowment Balanced Fund offers a 100% offshore exposure in overseas assets, with investments in equities, fixed-interest investments and cash in selected foreign currencies. The share component of the fund consists of equities listed on overseas stock exchanges, whilst the fixed-interest investments consist of overseas government bonds.

International Equity Fund

The International Endowment Equity Fund provides the potential for the excellent capital growth offered by investing in equity funds, but can also include fixed-interest investments and cash in selected foreign currencies. The share component of the fund consists of equities listed on overseas stock exchanges.

Intestate succession act

This is the law that prescribes how your estate will be divided, should you die without leaving a valid will (i.e. if you die intestate).

Investing directly in an overseas currency

This method for investing overseas is for those investors who wish to have the proceeds of their investment paid out in an overseas currency. According to present regulations, South Africans may, on approval of the S.A. Reserve Bank, invest up to R2 million overseas. This amount can be converted to any other currency for purchasing offshore investments and the proceeds are then paid out overseas in that country's currency. You’ll also need a tax clearance certificate from SARS (the SA Revenue Services).

Investment funds

An investment policy offers investors, big or small, the opportunity to invest in an array of investment funds. It also makes investment easy, as very few people have the financial knowledge to manage their own investment portfolios. Examples of the different investment funds are those in Sanlam's well-known Stratus Investments.

Investment policy

An investment policy is a financial product aimed at providing some form of growth on your savings to ensure the value of your money is not depleted by inflation. You can invest by means of a single- or recurring premiums and the benefits are normally paid out after a contractual period of five years or longer term.

Investment-linked life annuity

An investment-linked life annuity is ideal for people who want to build capital rather than simply draw a monthly pension. Investment-linked life annuities invest in unit trusts, and their monthly pension and capital growth are dependent on the investment returns of the underlying portfolio, which implies certain risks.

Joint will

A single document incorporating the instructions (will) of two or more persons, dealing with the disposal of their estates at the death of any one of them.

Joint-life annuity

A joint-life annuity provides a pension that will continue until the last survivor in a marriage dies. It offers the option of a reduced pension after the death of the first insured, which means that the original pension will be larger and may be a good option if both partners have made retirement provision. A joint-life pension also comes with an optional term guarantee, which will pay out the pension until the end of a specified term.

Key person insurance

'Key person' refers to an employee in your business that is of particular value to its ongoing success. It’s good practice to insure this person's life or against disability as his/her death or possible disablement may have a detrimental effect on the business. The practice of insuring such a person is referred to as key person insurance.

Legacies

In a will, a legacy is a preferential bequest of specific assets before other inheritances (for instance, the residue of the entire estate) can be taken into account. There is also a pre-legacy, which has priority over an ordinary legacy. Such bequests are usually stated first of all when inheritances are detailed in the will.

Life annuity

A life annuity refers to the pension you have to buy with the returns of your retirement annuity. Your retirement annuity is the savings vehicle for your retirement. When you reach retirement age, you draw the money and buy a pension from a life insurer, which is then paid out monthly for the rest of your life. Because of the tax benefits you have during the savings phase you are obliged to buy a pension – the life annuity. There are a number of different options when buying a life annuity; it can be structured to your specific needs.

Life-long partner

In the context of wills, estates and trusts, 'life-long partner' refers to a man or woman in a civil union. (i.e. not married)

Liquidate

'Liquidate' refers to the selling of the assets of a company, close corporation or a partnership, the payment of the liabilities and the paying over of the residue to the shareholder, member or partner.

Long-term insurance vs. short-term insurance

All insurance protects you against the negative financial impact of certain risks. With long-term insurance you’re covered against the risks of death, disablement or old age. With short-term insurance you cover your property against theft, fire or other means of losing it.

Lump sum

Your lump sum at retirement refers to the cash amount that you're allowed to withdraw from your retirement fund. According to current legislation, you're allowed a lump sum withdrawal of up to one third of your accrued retirement savings, of which the greater of R120 000 or R4 500 X n - where 'n' constitutes the number of years that you contributed to a particular retirement fund - is tax free.

Married in community of property

'Married in community of property' means two parties are married without a contract and they both own the joint estate (assets and liabilities).

Married out of community of property

The parties are married by an ante-nuptial contract. There is no community of property and both parties own their own estate (assets and liabilities).

Master of the High Court

The Master of the High Court usually takes control over deceased estates, insolvent estates, minor's interests, curators and guardians. The Master is assisted by deputies, assistants and other personnel. There are Master of the High Court offices in Bloemfontein, Cape Town, Kimberley, Umtata, Grahamstown, Durban, Pietermaritzburg, Pretoria, Thohoyandou, Port Elizabeth, Johannesburg, Mmabatho, King William's Town and Polokwane with a Master in charge of each of these offices.

Minor

A minor is a person under the age of 18 who hasn't been emancipated.

Moderate

Your primary investment goal is capital growth. You can tolerate some fluctuations in the value of your investment in anticipation of a higher return. You don't require an income and you are prepared to invest for 5 years or more.

Moderately aggressive

Your primary investment goal is capital growth. You can tolerate a fair level of fluctuations in the value of your investment in anticipation of possible higher returns. You don't require an income and you are prepared to invest for 5 to 10 years.

Money market

The money market is the investment market in which large amounts of short-term funds are loaned and borrowed.

Natural guardian

Both biological parents are the natural guardians of a minor child.

NCA

The National Credit Act is a move to ensure, before issuing clients with a credit facility, that they are able to afford to pay back the loan. Essentially it seeks to protect the client from unfair and irresponsible credit providers.

Offshore Balanced Fund

The Offshore Balanced Fund seeks a balance between optimal capital growth and stable returns. It offers exposure to shares not available with an investment in South African equities. The fund manager's aim is to obtain a stable return in dollar terms. The fund invests in more stable markets and sectors, for example in overseas government stocks and bonds as well as blue-chip shares listed on stock exchanges in North America, Britain, Europe and Japan. Any decrease in the value of the Rand against other denominations will increase the return on the underlying assets in the portfolio.

Offshore banking

Offshore banking is somewhat different to offshore investing. Investing refers to saving your money in a particular investment product with the purpose of growth and eventually good returns. Offshore banking, on the other hand, is a facility that offers access to overseas financial and banking services. It enables you to make purchases or payments anywhere in the world, offering an option of currencies such as pounds sterling, US dollar and the Euro.

Offshore Equity Fund

The Offshore Equity Fund is suitable for those investors looking for the potentially excellent capital growth associated with equity funds while wanting to benefit from adverse movements in the value of the Rand against other currencies. The fund manager's aim is not only to achieve good performance in dollar terms, but also to benefit from a possible decrease in the value of the Rand. It invests in blue-chip shares listed on stock exchanges in North America, Britain, Europe and Japan. Any decrease in the value of the Rand against other denominations will increase the return on the underlying assets in the portfolio. This is a Rand-denominated offshore fund and you don’t need permission from SARS (the South African Revenue Services) to make the investment.

Offshore investment

Investing offshore means taking your money outside the borders of your own country and investing it in overseas markets. Its main purpose is to spread the risk of your investment over more than one economy. So, should the South African economy experience a downward trend, you have at least some of your investment stashed in another country and another economy, thereby protecting it against the possible negative returns you may experience locally. Offshore investments can take place in one of two ways, in Rands or in an offshore currency.

Paid-up value

In certain instances a policy may be made paid-up instead of surrendered. This means that the policy won’t lapse, even though no further premiums are paid. Note that a policy can only be made paid-up if it has a surrender value.

Pension with capital repayment

This unique investment product retains your capital while paying out a pension.A pension with capital repayment allows you to invest your retirement fund money and draw a lifelong monthly pension, while at the same time the full amount of your investment is preserved for your next of kin. Not all insurance companies offer this annuity.

Per stirpes

Policy

A policy refers to the contract between you and a life insurer - it can refer to either a structured savings plan or a life insurance and sets out the premium you have to pay and the conditions under which the life insurer will pay out at either maturity date or at death. The policy document serves as a record of what has been agreed between you and the life insurer and binds both parties to that agreement. It can also contain the name of your beneficiary in case of a life insurance, in which case it will pay directly to that person when you die.

Policy benefit

A 'policy benefit' is much the same as policy proceeds, but whereas ‘proceeds’ refer more directly to investment policies, 'benefits' relate more to risk policies, life or disability. Both have to do with the policy 'paying out'.

Policy proceeds

The proceeds of a policy refers to the combination of your investment – either by way of recurring premiums or a single premium investment – plus the investment growth paid out to you after the policy term. This is usually five or ten years with new-generation policies, but may be longer, as in the case of certain endowment policies or retirement annuities.

Policy returns

The returns on your investment policy is basically the same as the proceeds and relate mainly to what you got back from the insurance company in return for what you invested.

Policyholder

The policyholder is the person in whose name the policy is registered. It may or may not be the same person as the one who stands to benefit from it. For example, you may take out a life policy and although you are the policyholder, the policy will eventually be paid out to someone else (referred to as 'the insured'). Most policies are payable to the policyholder but he or she has the right to make it payable to someone else.

Power of assumption

The power of assumption means that an executor, guardian or curator, nominated in a will, has the power to appoint another person to assist him.

Premium

When you take out any policy, your premium will be the agreed amount that you pay according to your contract with the insurance company, to enable you to reap the benefits of the policy at some later stage. A premium may be paid monthly or annually, in which case it is referred to as a recurring premium. A once-off investment is called a single premium investment.

Prodigals

In the context of wills, estates and trusts, 'prodigals' are persons who waste money and cannot handle their own financial affairs beneficially.

Property

'Property' can refer to anything that can be owned, but in investment terms it refers to land or buildings.

Public auction

An asset can be sold by public auction. Potential buyers bid against each other under the guidance of the auctioneer, and usually the highest bid will be accepted. A public auction must comply with several laws.

Public tender

An asset can be sold by public tender. The public are invited (usually through the press) to provide a written tender by a specific date. The highest tender will usually be accepted.

Pure endowment

A pure endowment is a policy that pays out a benefit only at the end of a specified term. It can therefore also be called a savings policy. Should the policyholder die during this term the policy will only pay out the accrued value up to that specific point in time.

Rand hedging

Rand hedging is another good reason for investing offshore. Over the past few years the South African currency has shown landslide depreciation compared to the major currencies of the world, e.g. the British Pound and the US Dollar. By investing some of your money in these currencies you would have benefited from this decline in the value of the Rand.

Rand-denominated offshore investments

With Rand-denominated offshore investments, the fund manager of your chosen investment portfolio uses the money (Rands) that you invest to purchase offshore investments by means of an asset swap with an offshore partner. It offers a choice of investment portfolios and excellent access to offshore investments for newcomers to the market. The returns are paid out in Rands.

Real rate of return

One invests money in the belief that it will be 'returned' to you at a later stage, showing an amount of growth. Your returns are the money you make out of an investment. The 'real rate of return' refers to your returns after the effect of inflation on your money – i.e. your return after inflation.

Residue

'Residue' refers to the remaining portion of the estate, which has not been specifically bequeathed. Unless the entire estate is specially bequeathed, a residuary heir must be nominated.

Retirement annuity

A retirement annuity, or RA, is a savings plan specifically tailored to provide money for your retirement. As with other types of policies, you agree to pay a certain amount each month, in return for a lump sum and monthly pension after you retire – between the ages of 55 and 69. As an incentive to save for retirement, the government gives tax relief on the premiums paid towards a RA. It also offers other benefits like protection against creditors.

Retirement fund

The sole aim of a retirement fund is to provide money for the years of your life following your retirement. It works in very much the same way as a savings policy, but in this case it offers you a specialised vehicle to save for a very specific reason – retirement. Most employers offer a retirement fund, as it gives them an opportunity to provide added benefits for employees. The government also offers generous tax savings on retirement fund contributions.

Revocation clause

When making a new will, it’s important that the testator revoke all previous wills, codicils, or any other document of a testamentary nature that he may previously have made, individually or jointly with someone else, if it is his intention that they should be revoked. If he fails to do this, the provisions of such previous documents remain in force, and they will be read together with the new will. If there are contradictory provisions in an old and a new will, the provisions of the latter will apply. If a new will omits reference to assets bequeathed in an older will, the stipulation in the old will, as it concerns those assets can still be valid. The testator can also of course destroy a previous will, which will then not exist at his death. If a testator dies within three months from the date of his divorce or annulment of his marriage, his will will be interpreted as though his former spouse had died before the dissolution of the marriage. However, should the testator have clearly indicated in his will that his former spouse must benefit despite the dissolution of the marriage, his wishes will be carried into effect. (Sec. 2B.)

Rider benefit

A rider benefit is an added benefit on your risk policy. For instance, if you take out a life insurance policy you may add 'trauma cover' or 'accident cover' as rider benefits for a small additional premium. Should you then be diagnosed with a specified illness in the case of trauma cover, or lose a limb in a motor car accident in the case of accident cover, the insurance company will pay out a specified amount of money to you. Usually this doesn’t affect the benefits of your original life policy.s

Risk

One of the most important factors in any investment is to make a sensible assessment of the risk. The old adage of "the higher the potential growth, the higher the risk" is very true - always keep that in mind when making an investment. The factors to consider in evaluating the risk are: the type of investment your particular fund invests in, and how the portfolio is compiled from the various types of investment. The strategy of the investment manager also influences the level of risk. The types of investments in which a fund can invest include shares in listed companies - either listed on the Johannesburg Stock Exchange or on overseas stock exchanges - property, interest-bearing investments (such as government bonds or money market funds) and cash. The composition of the fund's portfolio plays a part in the fund's risk level. For instance, a fund that invests mostly in shares will carry a higher risk than one investing in cash.

Sanlam Employee Benefits (SEB)

Sanlam Employee Benefits provides life insurance, investment and annuity solutions for group schemes and retirement funds, and fund administration for retirement and umbrella funds.

Sanlam Equity Fund

The Sanlam Equity Fund is suitable for the investor who wants maximum growth on his investment and is prepared to accept the risk of market fluctuations. Through the fund's investment in shares on the Johannesburg Stock Exchange, the investor gains exposure to the growth potential of dynamic South African companies. The fund’s growth is determined by growth in the underlying assets, in other words those shares that have been invested in, and fluctuates according to movements in the market. The risk level is high and no guarantees are offered.

Security

In investment terms, 'security' refers to the measure of certainty with which one can expect income, or that capital will be repaid. It also refers to the measure of certainty with which an investment can be traded. Sometimes, however, it includes any investment, whether it can be traded or not.

Simple interest

'Simple interest' is interest calculated on a sum that does not include previous interest charges.

Single will

A 'single will' refers to a single document incorporating the instructions (will) of one person, which deals with the disposal of his/her estate at his/her death.

Single-life annuity with a guaranteed term

The single-life annuity with a guaranteed term pays a pension for a specified guaranteed term. Should you die before the end of the term, the pension continues to be paid out to your dependents or nominees until the end of the term. The guaranteed term most often used is ten years.

Single-life annuity without a guaranteed term

The single-life annuity without a guaranteed term is a simple and straightforward pension option. After purchasing the pension you will receive a regular pension until the day you die, when the pension will stop. You are therefore assured of a pension for life. However, if you die soon after retiring, your next-of-kin won’t benefit from your retirement savings.

Spouse

In the context of wills, estates and trusts, the term 'spouse' refers to the man or woman in a marriage or a partner in a civil union.

Surrender penalty

The surrender penalty refers to the deductions that are made when a policy is surrendered.

Surrender value

Whole-life- or endowment policies build up a value over time. Should you wish to end the policy before the end of its normal term, the insurance company then decides on a surrender value, i.e. the monetary value of the policy at that specific time, to be paid out to you in a cash amount, after which the policy lapses.

Survivor

In the context of wills, estates and trusts, 'survivor' refers to a person who survives another.

Tax rate

Income tax is levied on your income at a certain rate – either at your average tax rate or your marginal tax rate. Your average tax rate is the actual amount of tax paid, divided by your taxable income and multiplied by 100. Your marginal tax rate is the percentage of tax you pay on any additional income you earn. Your average tax rate is the friendlier one.

Term insurance

Term insurance is very similar to a whole-life policy, with the exception that it's valid for a specific term. This means that, should you die within this period, the policy will pay out the agreed amount to your next-of-kin or beneficiary. Term insurance is usually bought to cover debt, for example if you buy a house, a car or even a business on credit and you want to ensure that your family doesn't inherit this debt. The benefit that is paid out, therefore, goes towards covering your debt. Should there be a balance, it'll go to your next-of-kin.

Testamentary writings

'Testamentary writings' refers to a document containing your wishes (similar to a will).

Testator

A testator is the male person for whom a will is drawn up.

Testatrix

A testatrix is a female person for whom a will is drawn up.

To realise

'To realise' refers to the act of selling an asset.

To realise trust assets

This refers to the selling of an asset of a trust.

Trauma/Dread Disease cover

When you take out trauma/dread disease cover, you ensure yourself against a list of serious illnesses, for instance cancer, a stroke or a heart attack. Should you then be diagnosed with any of these illnesses, the insurer will pay out an agreed amount. Trauma/Dread disease cover is mainly used as a rider benefit on a life insurance policy.

Trust assets

Trust assets refer to the capital and assets of a trust under the administration of trustees.

Trustee

A trustee is a person or institution appointed to administer the assets - capital and income - in a trust, for the benefit of the beneficiary, until termination of the trust.

Unit trusts

Apart from policies, insurance companies also sell unit trusts. A unit trust is not a policy; it is basically a pool of money to which many people contribute. This pool of money is invested by experts called portfolio managers, mainly in shares on the Johannesburg Stock Exchange (JSE), as well as in securities and cash. Unit trusts are used mainly for investment.

Unmarried

In the context of wills, estates and trusts, the term ‘unmarried’ refers to a person who is currently not married.

Unnatural Causes

Any cause of death that cannot be attributed to natural causes/sickness e.g. an accident or murder.

Vesting Bonus Fund

This is a relatively new investment fund, which aims to produce steady growth over the long term. Any growth forms part of the investment and cannot be removed if market conditions deteriorate. It remains in force for the full term of the policy until it matures. The growth on the policy takes place by bonuses being declared, based on the expected long-term return on the fund. Up to 70% of the fund can be invested in shares – this is a suitable investment fund for those who invest in Stratus Capital Growth or the Topaz Retirement Annuity.

Voluntary annuity

If you’re a member of a defined contribution provident fund, you’ll receive your retirement benefits as a cash lump sum. In this case, you’re not compelled to purchase a pension, although this is an option you should seriously consider. This pension is referred to as a voluntary annuity.

Whole-life policy

A whole-life policy is life cover in its simplest form, and falls into the category of risk cover. With a whole-life policy, you enter into an agreement with a life insurer to insure your life for a certain amount of money, to be paid out to your next-of-kin when you die. The policy is kept alive for as long as you are alive and paying the agreed premium. This is the most basic form of financial planning, as it ensures that your family can be looked after when you can no longer do this.

Wife

In the context of wills, estates and trusts, 'wife (spouse)' refers to the woman to whom a man is married.

Witness

A witness to a will must be at least 14 years of age and must be competent to testify in a court of law. The testator must sign the will in the presence of the two witnesses or acknowledge in their presence that the signature is his. It isn’t necessary for the witnesses to know that the document that they are signing is a will; they merely acknowledge that the signature is that of the testator and that, at the time of the signing he was of sound mind and not acting under duress.

Worldwide Balanced Fund

The Worldwide Balanced Fund offers simultaneous exposure to both local and overseas markets, and thus provides a balance between maximum capital growth and security in the medium- to long term. The fund manager is mandated to invest between 40% and 60% of the portfolio in the South African market and the remainder in overseas assets. The fund comprises investments in equities, fixed-interest investments and cash. The equities are a mix of shares on the Johannesburg Securities Exchange and overseas exchanges.

Worldwide Equity Fund

The fund manager of the Worldwide Equity Fund is mandated to invest between 40% and 60% of the portfolio in the South African market and the remainder in overseas assets. The fund comprises investment mainly in equities, but can also include fixed-interest investments and cash. The share component of the fund is a mixture of equities listed on the Johannesburg Securities Exchange and overseas stock exchanges.

Worldwide Property Fund

The Worldwide Property Fund is ideal if you wish to diversify into property investments, with simultaneous exposure to both local- and overseas markets, as the fund manager is mandated to invest 50% of the portfolio in properties in South Africa and 50% in overseas assets. The fund comprises investments in commercial properties in South Africa and shares of overseas companies investing in commercial properties.

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