The Sanlam Unity Umbrella Fund aims to provide a simple, cost effective and administratively efficient retirement funding and group insurance solution.
The Fund has a formal investment strategy in place that aims to provide stable long term returns in excess of inflation that suits the majority of the members’ long-term investment needs. In terms of this strategy, 100% of members’ retirement saving contributions are invested in the Sanlam Stable Bonus Fund in order to achieve its objectives.
This strategy is positioned well for members who wish to achieve inflation beating real returns over the medium to long term, but who are particularly concerned about protecting against significant short-term volatility. The 100% allocation to the Sanlam Stable Bonus portfolio offers investors stable, smoothed returns with a partial guarantee on benefit payments when exiting the Fund. A bonus, which consists of a vesting and non-vesting component is declared monthly in advance. Bonuses may equal 0% but cannot be negative. The portfolio offers 100% capital guarantee and partially vesting bonuses. See Sanlam Unity Fact Sheet for more detailed information.
Government has recently confirmed its intention to proceed with the so-called Two-Pot System retirement reform from 1 September 2024. The Honourable Minister of Finance, Enoch Godongwana, confirmed as such in his Budget Speech delivered to Parliament on 21 February 2024 by stating:
“Contributions to retirement funds will be split, with one-third going into a savings component and two-thirds going into a retirement component. From 1 September 2024, the first cash withdrawals could be made from the savings pot. The two-pot system ensures that we strike a balance between preserving contributions to safeguard a better retirement for members, while addressing the plight of the people to access some of their retirement funds to help ease their financial burdens in times of distress.”
The Board of the Sanlam Unity Umbrella Fund has considered whether any changes should be made to the Fund’s investment strategy in the light of this impending new legislation. Our research and modelling suggest that close to 10% of the Fund’s assets might be withdrawn from the Savings Pot shortly after the legislation becomes effective.
This implies that an increased short-term focus needs to be placed on liquidity for the Sanlam Unity Umbrella Fund specifically in order that these payments can be made quickly and efficiently and without the risk of capital losses if there is a market downturn around that time.
The Board has therefore resolved to invest all monthly contributions to the Sanlam Unity Umbrella Fund in the SIM Cash Fund with immediate effect and for the period leading up to 1 September 2024 (or until 10% of the Fund’s assets are held in such portfolio). The portfolio earns a competitive interest rate (8.9% for 2023), and thus the change should have a minimal impact on the long-term performance of the Fund’s investment strategy whilst also bolstering the Fund’s liquidity to meet the anticipated member demands for Savings Pot withdrawals. See SIM Cash Fact Sheet for more detailed information.
Please refer any queries on this matter to your Sanlam Client Relations Manager.