Are You Paying Too Much (Or Too Little) For Your Medical Cover?

Navigating medical schemes and health insurance in South Africa can be overwhelming. With so many options, it’s easy to end up underinsured (not having enough cover) or overinsured (paying for more than you need). Both scenarios can drain your finances and impact your access to quality healthcare. Let’s break it down and help you find the right balance.

Underinsured? These Warning Signs Could Cost You

In South Africa, over 8 million people rely on medical aid, yet many find their cover inadequate when they need it most. With private healthcare costs rising by an average of 10% annually, getting the right cover is more critical than ever. If you’re underinsured, you might experience:

High medical bills: Paying a lot out of pocket for doctors, hospital visits, or medication.
Limited treatment options: Certain medical procedures or medicines aren’t covered, leaving you stuck with expensive bills.
Delaying or avoiding care: Skipping doctor visits or tests due to cost, which can worsen health issues.
Medical debt stress: Struggling to pay off unexpected medical expenses.

Overinsured? You Could Be Wasting Money Every Month

Medical aid is a significant expense - yet 60% of insured South Africans don’t use all their benefits, meaning they could be paying for cover they don’t need. Signs you might be overinsured:

Old plan, new needs: If you’ve been on the same plan for years without reviewing it, your needs may have changed.
Unutilised savings benefits: Not making use of your Medical Savings Account (MSA) effectively, leading to unused funds that could have been allocated elsewhere.
High premiums with low utilisation: Your medical aid premiums take a big chunk of your salary, but you hardly use all the benefits.
Not utilising network providers: Opting for non-network providers can result in higher out-of-pocket expenses, even when your plan offers incentives for using network providers.

The Importance of Gap Cover: A Must-Have Today

Even with comprehensive medical aid, there can be shortfalls between what your medical scheme covers and the actual costs incurred, especially for in-hospital procedures. Gap cover is designed to bridge this gap, ensuring you're not left with unexpected expenses.

Tariff shortfalls: Medical specialists may charge above the medical scheme tariff, leaving you to cover the difference. Gap cover addresses these shortfalls, ensuring you're not out of pocket.
Co-payments and deductibles: Certain procedures might require co-payments or deductibles. Gap cover can assist in covering these additional costs.
Oncology benefits: For treatments like chemotherapy or radiotherapy, gap cover can help manage the substantial costs that exceed your medical aid's limits.

Get Expert Advice Without Paying Extra

Many people don’t realise that expert healthcare advice is already included in their medical scheme premium - there’s no extra charge for using a healthcare consultant. A specialist can help you avoid paying for benefits you don’t need or guide you to better cover without unnecessary costs. It’s about making sure every rand you spend on medical aid works for you.

How to Find the Right Balance

The key to getting the right cover is regularly reviewing your medical aid plan to ensure it matches your needs and budget. Here’s how:

Assess your needs: Consider your health history, lifestyle, and future medical needs (e.g., family planning, chronic conditions, upcoming surgeries).
Compare plans: Medical schemes change yearly—make sure your current plan is still the best fit.
Check for gaps: If your plan has shortfalls, gap cover insurance might be a cost-effective way to avoid unexpected bills.
Get expert advice: Consulting with a healthcare advisor can help you find the most affordable, suitable plan without the hassle of figuring it all out alone

Retirement Reimagined: Why Playing It Safe Might Cost You More

When retirement is on the horizon, many people instinctively shift their pension investments to low-risk options like bonds and money markets. It feels like the safe move - protecting savings from market downturns. But what if this conservative strategy is actually holding you back?

Most of your retirement fund’s growth happens in the last five years before you retire. And if you still have decades to live after you stop working, you’ll need that money to keep growing. According to Stian de Witt, Head of Financial Planning at NMG Benefits, maintaining an aggressive investment approach - even in retirement - can be the key to financial longevity. The secret? A well-structured portfolio, professional guidance, and a smart withdrawal strategy.

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The Case for Staying Aggressive in Retirement

1. Living Annuities Let You Keep Growing

Traditional life annuities lock in your income and portfolio structure at retirement, limiting growth potential. But living annuities allow for flexibility, keeping your savings invested in higher-return assets like equities and property. This means your portfolio has time to recover from market fluctuations - helping your money last longer.

2. Timing the Market Pays Off

Market dips are inevitable, but history shows that high-risk investments tend to rebound and even outperform conservative portfolios over time. If you have additional income sources, holding off on withdrawals during downturns can give your investments time to recover - leading to better long-term returns.

3. Inflation is Your Biggest Threat

Moving too much of your retirement savings into cash or bonds can mean your money isn’t growing fast enough to keep up with inflation. Over time, this erodes your purchasing power. Keeping a significant portion in equities ensures your investments continue to outpace inflation, sustaining your lifestyle for years to come.

4. Diversification is Key

Don’t put all your eggs in one basket - especially not just in the local market. De Witt recommends holding at least 30-40% of your assets in offshore equities to hedge against local market risks and benefit from global economic growth. A well-balanced portfolio enhances resilience and long-term performance.

5. Managing Sequential Risk

One of the biggest risks in early retirement is a market crash. If your portfolio takes a hit in the first two years and you’re forced to withdraw from it, you could shorten your retirement income by as much as seven years. The solution? A “cash bucket” strategy - keeping a portion of your funds in cash to cover short-term needs while allowing your more aggressive investments time to recover.

6. Don’t Ignore the Tax Advantage

Taxes can take a significant bite out of your retirement income if not managed properly. Strategic tax planning - such as withdrawing from different investment vehicles at the right time - can reduce your tax bracket and stretch your savings by an extra 2-4 years.

The Case for Staying Aggressive in Retirement

The old-school approach of playing it safe with low-risk investments in retirement is no longer the best way forward. With smart planning, diversification, and an aggressive yet structured investment strategy, you can ensure your money not only lasts but continues to grow.

Want to make the most of your retirement savings? Speak to a Certified Financial Planner who can help tailor a strategy to your needs.

Why an independent financial planner matters?

In today's increasingly complex financial landscape, individuals need more than just basic savings accounts and insurance policies. To navigate this intricate environment and achieve their financial goals, people require comprehensive, unbiased advice. This level of guidance can only come from an Independent Financial Planner (IFP) who can help create a holistic financial plan tailored to each individual's unique needs and circumstances.

Unbiased advice vs. product sales

Understanding the distinction between a 'tied agent' and an IFP is crucial. A tied agent, affiliated with a specific company, can only sell that company's products and cannot charge for advice. Their primary goal is to sell products from their employer, often leading to a conflict of interest. In contrast, an IFP operates independently and can offer advice on a fee basis without being obligated to sell any product to earn an income. This independence allows IFPs to prioritise their clients' best interests over sales targets.

Imagine visiting a doctor who is paid based on the medication they prescribe rather than the accuracy of their diagnosis. You would likely receive a lot of unnecessary prescriptions. Similarly, a tied agent might push products that earn them a commission, while an IFP would focus on diagnosing your financial needs and providing unbiased advice. For instance, if you are concerned about saving for retirement but have a high level of interest-bearing debt, an IFP would advise paying off the debt before investing in a retirement plan, even if it means earning less commission in the short term. This unbiased approach ensures that clients receive advice that truly benefits their financial health.

However, when the time is right to discuss investment products, IFPs are not limited to selling the products of a single company. They have the flexibility to mix and match products from various providers to create a financial plan tailored to individual needs. This flexibility allows IFPs to design a more diversified and effective investment strategy. Additionally, IFPs can manage existing investments without incurring unnecessary costs or tax penalties, further enhancing their clients' financial wellbeing.

What is the difference Between an IFP and a CFP®?

An independent financial planning (IFP) offers a holistic view of an individual’s financial situation, often acting as the conductor of the financial orchestra. They coordinate with accountants, attorneys, bankers, and even risk and audit resources to ensure that all aspects of their clients' finances are in harmony. Certified Financial Planners (CFP®s) take this expertise a step further. They have pursued advanced studies and qualified as professionals through a rigorous Board Examination process, similar to that of a Chartered Accountant. This qualification enables CFP®s to handle complex estate planning, retirement planning, investment strategy, and intricate tax matters, both domestically and offshore.

This integrated approach is especially valuable for individuals who need to balance personal tax planning, investment strategies, and estate planning. By partnering with CFP®s, individuals can ensure that their financial goals, whether building multi-generational wealth or securing a comfortable retirement, are achieved. The expertise of CFP®s ensures that all elements of a financial plan are optimally aligned to serve the client's best interests.

What to look for when partnering with an independent financial planner?

When seeking a CFP®, the Financial Planning Institute (FPI) website is a good place to start. The FPI maintains a database of qualified IFPs and CFP®s and ensures that these professionals obtain the requisite 35 continuing professional development (CPD) points every year. In contrast, agents need just 18 CPD points. This ongoing education ensures that IFPs and CFP®s stay current with the latest financial strategies and regulatory changes, providing their clients with the most up-to-date advice.

An IFP should also be able to demonstrate two critical aspects: succession planning and professional indemnity (PI) cover. Succession planning means that in the event an individual IFP with whom a client has a relationship passes away or retires, there is a plan in place to ensure the client’s matters are continuously managed. This continuity is vital for maintaining the stability and consistency of the client’s financial planning.

Professional indemnity (PI) cover is a type of insurance that protects policyholders, in this case, the IFPs, and by extension, their clients, if they are found liable for losing their clients’ money through professional negligence or omissions. This cover provides an additional layer of security, ensuring that clients are protected even in the rare event of professional errors.

Independent financial planners tangibly benefit your financial health

NMG Benefits recently helped an individual save significantly in taxes by restructuring her financial setup. These changes were crucial for her financial stability during the COVID pandemic. She confirmed that without these changes, she would have faced significant financial loss. This example underscores the tangible benefits that an IFP can provide.

Similarly, partnering with an IFP like those at NMG Benefits, who provide unbiased, comprehensive financial advice that goes beyond mere product sales, can help you achieve your personal financial goals. Whether you are planning for retirement, saving for your child's education, or looking to invest wisely, an IFP can offer tailored advice and strategies that align with your unique financial situation and aspirations.

In conclusion, the value of an independent financial planner cannot be overstated. Their unbiased, comprehensive approach ensures that individuals receive advice and strategies that are truly in their best interests. By partnering with an IFP, you can navigate the complexities of the financial landscape with confidence, knowing that your financial future is in capable and trustworthy hands.

T&Cs apply. NMG Consultants and Actuaries (Pty) LTD is an authorised financial services provider FSP 12968

Why you need to plan for a longer retirement

As life expectancy rises and quality of life improves, South Africans are facing the pressing need to ensure financial security post-retirement. Insights gathered from our extensive experience in the industry indicate that maintaining your lifestyle after retirement requires significant financial preparation. Experts suggest having at least 15 times your annual salary as a safe cushion to ensure a comfortable retirement.

However, our observations show that the majority of South Africans have not formally planned for retirement. Even among those who have, there is a prevailing lack of confidence in their ability to support themselves long-term, particularly in light of inflationary pressures and the current economic climate.

Janice Masencamp, Head of Retirement Fund Consulting at NMG Benefits, says that while there’s no mandatory retirement age in South Africa, retirement age is often written into employment contracts, and employees need permission from their employers to keep working beyond that age to be able to sustain their lives and those of their dependents.

“By working for only four extra years, post-retirement income can increase by about 10%. By working for an additional 10 years, this income can almost double,” says Masencamp.

Studies suggest people who work longer retain higher levels of energy and mental awareness and retain a continued sense of purpose and belonging. However, for most ‘unretirees’, the biggest advantage of staying in the workforce is the ability to generate additional income and having more years to save towards retirement.

Now, that we live for longer, we’re getting to a point where we should start planning as if we’re going to live to 100. This will impact the way we do financial planning. And those who don’t have enough retirement savings will keep working until they’re no longer able to,” says Masencamp. South Africans need to start actively planning for retirement as early as possible. This includes speaking to a financial planner, to help navigate the numerous options for investing your retirement income based on your personal needs, especially with the implementation of the two-pot system. “A planner will help you understand your various options and alternatives when it comes to deciding to withdraw or not, and what the ramifications of those decisions will be.”

T&Cs apply. NMG Consultants and Actuaries (Pty) LTD is an authorised financial services provider FSP 12968