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Setting up your dependants for a sustainable financial future

Published

2018

Tue

21

Aug

Johannesburg: According to Stats SA, in 2017 there were approximately 71 million unemployed youths globally. Roughly 53% of South African youths, between the ages of 15 and 34, are heavily indebted. Furthermore, the OECD conducted an Adult Financial Literacy Competency study that shows that South Africa has one of the lowest level of adult financial knowledge. 2,813 South Africans aged between 18 and 79 attained an average score of just 30% in the financial knowledge questionnaire.
 
This poses a challenge for South Africans who wish to leave money to their dependants when they pass away. These statistics show us that beneficiaries, young and old, may not be in the position to manage a large lump sum pay out.
 
According to the recent MetLife Paycheck or Pot of Gold Study, the average length of time before a lump sum payment is depleted is five years. But where does that leave loved ones that still have their entire lives ahead of them?
 
Typically, life insurance or funeral cover provides beneficiaries with a lump sum payment. This often results in beneficiaries falling into the “lottery effect”. This happens when people, who suddenly come into a perceived large sum of money, squander it instead of using it effectively to support their lifestyle. 
 
“Understanding the South African financial landscape is complex. We must empower our clients with the right solutions to make financial freedom possible for themselves and their loved ones, says Kresantha Pillay, Head of Lifestyle Protector at Liberty.
 
“This is why Liberty has introduced the Death Income feature to its Lifestyle Protector Life Cover benefit. This feature gives our clients the option of leaving monthly annuity payments to their beneficiaries, meeting an often overlooked, yet fundamental, market need.”
 
Up to 8 nominated beneficiaries can fall under one cover. Clients are also afforded flexibility to assess the needs and competencies of their beneficiaries and suitably adjust the income portion that will be paid out, prior to a claim. This can help avoid indebtedness in the long-run, since a monthly income helps limit wasteful expenditure and, can make sure that basic household costs are managed on a regular basis.
 
Speak to your financial adviser to find out how you can turn your beneficiary's lump sum into a monthly income.
 
Source: Edelman
 
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Admissible Assets:

Assets available to meet the liabilities and margin of solvency of a life insurer after valuation in accordance with the Long-term Insurance Act. Also known as admitted assets.
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