The red and yellow hues have infiltrated the suburbs of Jozi, and one can hardly believe that it’s over a year since we commenced wearing masks and sanitising our hands with such zeal.

Autumn 2020 will forever remain in the memory as we trodded down the grass, circumnavigating our gardens as we attempted to stay running fit, hoping beyond hope that we would be permitted to run in our streets again. Any thoughts of self-pity were extinguished when we learnt of all the folks out there who were confined to small living spaces and lived alone.

With all the immediate pressing issues affecting our health and income, it is easy and understandable that one would lose focus on the critical end game, i.e. to retire with sufficient means to live a good life until we leave the planet.

This thought prompted some research into the history of retirement and delivered what we hope are some interesting facts. Retirement, or the practice of leaving one’s job or ceasing to work after reaching a certain age, has been around since the 18th century. Retirement as a government policy began to be adopted by countries during the late 19th century and the 20th century.

Before the 18th century, the average life expectancy of people was between 26 and 40 years. Due to this, only a small percentage of the population reached an age where physical impairments became obstacles to working. There had been a long practice beginning in the Roman empire to the modern nation-states of providing pension to those who had served in the military.

In the mid-1800s, certain United States municipal employees, including firefighters, police, and teachers, started receiving public pensions. In 1875 The American Express Co. created the first private pension plan in the US for the elderly and workers with disabilities. Early pension benefits were designed to pay out a relatively low percentage of the employee’s pay at retirement and were not intended to replace the employee’s total final income. By the 1920s, various American industries, from railroads to oil to banking, began offering pensions.

Retirement as a concept began to be widely adopted in the United States after the period of the Industrial Revolution, where numerous ageing factory workers started to show signs of ageing: slowing down assembly lines, taking excessive sick days and usurping the spots of more youthful, more profitable men with families to bolster. Also, older workers brought about unemployment among the youthful population by declining to resign. The Great Depression exacerbated things. Though some viewed retirement as an essential adjustment, many among the older populace resisted the idea of retirement.

In South Africa, the existence of retirement funds as we know them today is primarily due to the industrial revolution and the continuous competing need for high quality, skilled workers by large corporate companies. One way employers found to attract better quality workers was to provide some form of reward for long, loyal service to the company. And so, the pension fund was born. By the early 1920s, tax incentives were introduced by the government to inspire saving for old age, and due to this benefit, more and more companies started offering pension funds to their employees.

In 1956, the South African Government introduced what is generally considered the world’s first-ever Pension Funds Act that was specifically designed to regulate the business of pension funds. In the decades that followed, pension funds became more sophisticated with the growth of available investment vehicles and international investment channels.

According to the Mental Health Foundation, one in five present-day retirees experience depression. Those living alone because of bereavement or divorce are more at risk. Physical health problems can also make people more vulnerable to mental health issues. Recent studies have indicated that “retirement increases the chances of suffering from clinical depression by around 40 percent and having at least one diagnosed physical illness by 60 percent”. On the other hand, many workers have adopted scaling back on their jobs at around 55 or 60, or even changing careers, but still working for 15–20 more years.

As we rush into the next chapter of combatting this pandemic and the resultant economic challenges, we urge you to consider life after your career is over and how you can plan and provide for those future days: a retirement plan will be as necessary as an effective vaccine.

Medical Schemes

Medical aid scheme cover remains the number one insurance vehicle for accessing comprehensive private healthcare in South Africa. However, for many South Africans, medical aids are becoming increasingly unaffordable. This is reflected by the increasing number of existing scheme members downgrading their plans to more cost-effective options, and the scheme membership beneficiaries remaining stagnant for the last four years, with only 14.9% of the country’s population being insured.

The public sector currently provides healthcare for 85% of the population and accounts for approximately 48% of total healthcare spending. We cannot deny that NHI will play a major role in addressing this inequality. South Africans wait with bated breath for the full implementation of NHI and the positive changes it will bring to the healthcare industry.

Simphiwe Mofokeng, Senior Healthcare Consultant, looks at alternative options available to South Africans who wish to access private healthcare.

Covering Hospital Expenses

Health Insurance
Health Insurance policies are often perceived as a more affordable alternative to covering medical expenses when compared to Medical Schemes. However, the lower premium is representative of the limited cover provided. These policies may cover defined emergency hospitalisation stabilisation or illness, up to a specified rand value amount. This means one would not be covered for planned or non-emergency admissions through this type of policy. Health insurance cover should not be used in replacement of Medical Scheme cover.

Payment of a claim is usually made directly to the insured person and not the healthcare service provider. An example of this would be for accident treatment, a person may be insured for up to R150 000 per insured event with an excess of R600 being applicable. This type of policy is governed by the Long-Term or Short-Term Insurance Act; therefore the underwriting criteria and legislation differs from that of medical schemes.

Covering Day-to-Day Medical Expenses
Through Health Insurance policies, insured persons may claim for GP consultations, blood tests, x-rays, dental, optical, medication, etc. and the settlement of these claims may be made directly to the contracted healthcare service provider. Some health insurance policies cover chronic condition management; however, the conditions are specified and subject to a defined chronic medicine list. Oncology treatment is excluded.

Telemedicine
Recently we have witnessed a spike in the utilisation of telemedicine services – which provides healthcare services through virtual consultations. Modern technology has enabled doctors to consult patients by using telephonic and video conferencing tools. These consultations tend to be cheaper when compared to face-to-face consultations.

Prepaid Vouchers and Prepaid Card Systems
South Africa has entered the prepaid vouchers or prepaid medical cards system. Through these platforms, individuals will be able to purchase a voucher or load a rand value amount on the medical card which will enable them to consult and purchase medication through contracted healthcare service providers. However, some service providers such Discovery Health and Netcare Plus have been instructed by the Council of Medical Scheme to cease conducting the business of a medical scheme without the requisite approval from the CMS, Discovery has since appealed this decision by CMS, we await further updates in this regard.

If one cannot afford comprehensive medical cover, it is important when considering other forms of medical insurance to:

• identify the risk they want to be insured against and ensure that the policy of choice meets that specific need
• understand the exclusions, limits, co-payments applicable to that policy

It remains to be seen whether these new healthcare services will appeal to the needs of the uninsured South African population. While these products provide an entry access point to private healthcare, comprehensive cover remains limited to medical scheme cover.

The financial services industry and the media alike have been abuzz with news about the government’s announcement of tax changes to be implemented on 1 March 2021 (also referred to as T-day).

Raschin Naidoo, Head of Legal, Technical and Consulting Support, focuses on two of the most pertinent changes, annuitisation of provident funds and access to retirement funds upon emigration.

Annuitisation of provident funds

From 1 March 2021, new contributions to any retirement fund will be subject to the same tax dispensation, and these contributions, and growth on them, will be subject to the same annuitisation requirements when members retire (that is, that no more than one-third may be taken in cash and the rest must be taken in the form of a pension).

Vested rights

Vested rights have been protected, so members who have contributed to provident funds before 1 March 2021 will still be able to receive their benefits in respect of those contributions in the form of lump sums at retirement. Provident fund members over 55 years of age on that date will be able to receive lump sum benefits in respect of contributions made to those funds after 1 March 2021, but only if they remain in the same fund. If these members changed funds before retirement, the member’s contributions to the new fund will be subject to the new annuitisation rule. These measures have been designed to protect vested rights to lump-sum retirement fund benefits and ensure a gradual transition to the new annuitisation requirements. The first low-income retirees from provident funds will begin to be affected by the new rules from 2025 to 2030. The full transition to the new system is expected to be completed around 2060.

De minimis

A member will still be able to take the full amount in cash if the member’s value at retirement is below R247,500; this includes members over 55 who have transferred to new funds after T-day.

Am I allowed to take my full benefit when I resign?

A frequently asked question at member education workshops is whether a member will have access to his or her full benefit if the member left their employer fund. The annuitisation rule only affects members at retirement, not resignation and therefore, the short answer to the question asked is, ‘yes, you may!’ (subject to the applicable tax tables).

Access to retirements funds upon emigration

Currently, individuals are able to withdraw the full capital value from their retirement annuities, as well as the remaining balance in their pension/ provident preservation fund (i.e., the balance after a previous once-off withdrawal), upon the successful completion of their formal/financial emigration. With effect 1 March 2021, individuals must be tax non-resident for an uninterrupted period for three years or longer on or after 1 March 2021 before they can access their retirement benefit lump sums (RAs and preservation funds).

Are the changes an improvement?

The changes are largely positive, as they aim to encourage saving and protect members after their working lives. A uniform retirement system will allow all members to receive the same tax treatment of the money they contribute and how their benefits will be paid at retirement.

Concluding remarks

The annuitisation of provident funds are a culmination of the tax reform of the retirement industry, which were first announced by the Minister of Finance in his 2012 budget speech. The changes to the expatriate tax laws which started in March 2020 are largely aimed at non-compliant expatriates who have been operating under the SARS radar.

Vaccines on the horizon

South Africa is set to receive its first batch of vaccines from the Serum Institute of India. The global demand for vaccines, coupled with the greater buying power of wealthier countries, amongst various other theories, has resulted in South Africa lagging behind in the race to vaccinate its population.

President Cyril Ramaphosa, writing in his weekly public newsletter, stated that through extensive, albeit ‘protracted’ negotiations with various manufactures, and initiatives with COVAX and AVATT, the country should have sufficient vaccines to contain the spread of the virus.

Deputy Director-General for the National Department of Health, Dr Anban Pillay, speaking in an interview with SABC, confirmed that South Africa at this point does not know what portion we will receive of the 150 million vaccines to be released in the first quarter distribution by COVAX. When South African receives its full tranche from COVAX, this will cover 10% of the population.

As the media swirls around the higher prices South Africa has paid for vaccines from the Serum Institute of India as compared to EU countries, Dr Pillay says the lower prices these countries are paying is a result of their earlier financial investment into the research and development of the vaccine. SA has paid the standard price as determined by the country’s economic status.

Experts are predicting a third wave as a result of the vaccine delay, and some vaccine developers are warning that the vaccines may need to be updated periodically to maintain its efficacy.

While South Africa faces a myriad of battles for the acquisition of the vaccine, perhaps its biggest battle is against time. Will South Africa receive enough vaccines to achieve herd immunity, and will we receive them in time?

Vaccine roll-out

The roll-out of the vaccine for South Africa will be phased, the basis of the strategy for the vaccine is:

Phase One

• Front line health care workers (HCW). Target population: 1,250,000

Phase Two

• Essential workers. Target population: 2,500,000
• Persons in congregate settings. Target population: 1,100,000
• Persons older than 60 years. Target population: 5,000,000
• Persons older than18 years with co-morbidities. Target population: 8,000,000

Phase 3

• Other persons older than 18 years. Target population: 22,500,000

Private Healthcare System

The Covid-19 vaccine has been included in the amended Prescribed Minimum Benefit regulations, as approved by Minister of Health, Dr Zweli Mkhize. This essentially means the vaccine will need to be funded by medical schemes.

According to CMS, there are still several issues that need further exploration:

• A clear criterion of ‘prioritised populations’
• Clinical guidelines and protocols
• Guidelines on medical schemes liquidity management and scheme reserve requirements
• The vaccine finding model and mechanism
• Other persons older than 18 years. Target population: 22,500,000

It has been reiterated that the vaccine roll-out will be led nationally, there will be one procurement approach and the government will then work with provincial colleagues and the private sector for distribution.

The medical schemes will ultimately be led by government’s phased approached in the roll-out of the vaccines to its members.

Global Access

South Africa’s dual-health system has joined forces, resulting in the private sector pledging funding for millions of vaccines for uncovered South Africans, a step in the right direction as the world faces the moral dilemma of equitable access to vaccines.

Dr Tedros, Director-General of the World Health Organisation fittingly said, “No vaccines in history have been developed as rapidly as COVID-19 vaccines. The scientific community has set a new standard for vaccine development. Now the international community must set a new standard for access globally.”

Podcast

Kim Potgieter and Head of Healthcare for Chartered Employee Benefits, Paramesh Dayaram, discuss the rollout of the Covid-19 vaccination.

PLEASE NOTE: During the podcast, Paramesh Dayaram stated that there were only 1,5 million COVID cases recorded. He apologizes for this as it is actually 105 million cases recorded.

As we reflect on 2020, for most of us, it will be a year we will never forget. All started well during the first quarter of the year; however, on the international front concerns were being expressed about the Coronavirus and its threat to the global economies. South Africans started to see the impact of the virus across Europe, through social media and our local television channels, blissfully unaware of the impact this was to have on all of us. Then in March, we heard about our first case in Hilton, and suddenly on the 26 March, we were confined to our homes as South Africa completely locked down. While the debate rages on as to whether this drastic step was the correct manner in which to tackle the crisis, we can look back on the significant impacts on our lives.

Working from home (WFH)

For years, people have argued the benefits of working from home (WFH), such as saving commuting time, increasing productivity, and creating a better work-life balance. Many companies were sceptical until Covid-19 forced offices to close indefinitely, ushering a new era of mass telecommuting. Many of us were uncomfortable, unprepared, and unmotivated by the concept, but after settling into the rhythm of working from home, many now prefer the ‘new normal’. Some companies have even decided to let their employees work remotely after the pandemic ends. For obvious reasons, WFH is neither practical nor possible for some industries, such as manufacturing, tourism, hospitality and travel – these industries suffered heavily under the lockdown measures declared by many countries and have only recently started to show some signs of recovery.

Some positives effects

While the pandemic put millions out of work and forced many to a adjust to a life of WFH, the lockdowns resulted in a positive effect on our climate, with fewer cars, buses, trains and planes in operation, which resulted in less pollution and better air quality. The reduction in commuter traffic also meant there were fewer accidents. Many used quarantine circumstances to improve their cooking skills and prepare healthier meals. In many cases, it resulted in stronger relationships with loved ones (some might say it was taxing!). It brought home the message that being hygienic is no longer just a good habit, but essential for our survival. The ‘new normal’ also challenges us to become more innovative to sustain our organisations, our clients and our employees.

What we missed in 2020

Going to school (some kids might not agree!); attending and participating in sports events (our beloved Two Oceans and Comrades ultramarathons were cancelled); the Olympic Games; going to the movies; concerts and even watching our favourite soapies or series, because production had to be halted. But most of all, because we are social beings, we missed socialising with family and friends.

Looking forward – we shall overcome

Pfizer, one of many pharmaceutical companies working on finding a vaccine against the virus, announced the results of their clinical trials, which showed that its vaccine was 90%-95% effective at preventing symptomatic Covid-19 in clinical trials. Other pharmaceutical companies, AstraZeneca, Moderna and Johnson & Johnson, are in the late stages of testing; this bodes well for the fight against Covid-19 as the entire world waits for an effective vaccine. Countries everywhere are still fighting this pandemic, but we will surely overcome this challenge – we are a race of survivors! Yes, the battle is hard and long, but the human spirit is resilient – we shall overcome!

Thanks to all our clients for the laughs and frustrations as we figured out Teams and Zoom meeting platforms together. While there were challenges, together we never wavered in our efforts to ensure all appropriate measures were taken to protect the well-being of each other during emotionally and financially stressful times.

From all of us at Chartered Employee benefits we would like to take this opportunity to wish you a relaxing festive season and a Happy New Year! We look forward to hopefully meeting you again in person in the new year, and until then, please be safe and well.

Kind Regards
Andrew

In this month of X-press, we explore financial triggers and how to manage them, so they do not derail your financial planning. It’s a great introduction that can spur introspection on the reason behind some of the behaviours that impact financial decisions, provided by our strategic partner, Interface Employee Financial Solutions.

What are financial triggers?

We all have financial or spending triggers, activated by deeply rooted emotions in us and often resulting in unwise financial decisions. Fortunately, we are not at the mercy of these triggers that may result in overspending, creating more debt and depleted savings, all of which jeopardise our financial success.

Since financial triggers can have a significant impact on your financial well-being, it is important to identify your triggers.

How to identify your financial triggers

Some of the most common emotions that lead to poor financial decisions include stress, excitement, boredom, sadness and peer pressure.

When stressed or sad, many people turn to ‘retail therapy’ splurging on a new outfit or buying luxuries they can’t afford to make them feel better. Others overspend on their family to ease the guilt of not spending enough time with them. Some are simply bored, just browsing through a shopping mall or online store – and end up with bags full of shopping they don’t need and can’t afford.

Maybe peer pressure or FOMO (Fear of Missing Out) is your trigger – making you spend money you don’t have on meals, drinks or entertainment, to keep up with friends. Or perhaps you feel celebratory on a birthday or after a promotion, or maybe, after a long hard week, you feel that you deserve a special treat.

Think about the times and the situations in which you made unplanned purchases, overspent, increased your debt or dipped into your savings. It will help you identify some of your most significant or most consistent financial triggers.

How to manage your financial triggers

When you know your triggers, you can manage them.

This means you can recognise an emotional state that triggers you, then take steps to change the emotion or your response to it by having a set of alternative positive responses.

Let’s say you often want to sit down and enjoy a meal without the cooking and cleaning after a long tiring day, and you readily give in to the temptation to eat out or get take-aways. To counter this trigger, you could indulge in other ways to relax; stock up on prepared dinners that are ready in minutes, and look out for specials so you can dine out for less on occasion.

Simple ways to avoid over-spending

• Stay disciplined.
• Avoid making financial decisions when in a ‘good mood’ or ‘bad mood.’
• Identify spending patterns and the financial triggers linked to them.
• Budgeting is a key factor to financial discipline, set yourself a limit, for example, if boredom is a trigger for you, you may want to set a limit for ‘fun money.’
• Learn to say ‘No’ to yourself.

As we approach the festive season amid a strained economy, and in a period that has caused a multitude of emotions, lets practice making informed financial choices.

Warm regards,
Trevor

After a packed matric preliminary examination schedule, my eldest son requested a break from the stressful Grade 12 routine. He expressed a desire to take four of his school mates for a hike into the Drakensberg. En route to Giants Castle, our point of departure for the hike, one of the young men in the car stated that no one in our party should point at the mountain where we were attempting to ascend, as somebody had told him on a previous trip that such an action would result in poor weather or bad luck. I, of Irish descent, and thus a superstitious fellow, took this statement to heart.

Rockfall!

We commenced our hike at midday on Saturday and reached Bannerman Hut without much difficulty. This a basic hut where hikers can rest and sleepover before continuing their journey. After a restless night that was punctuated with baboon calls and the cry of an owl, we drank our coffee and began climbing out of the pass.

I was fourth in line and suddenly heard the shout “rockfall!!!”. My son, directly in front of me, dived to the left, and I was left facing this large rock that was hurtling at me at some speed. I was not agile enough to pick a side and was struck on the side of my knee and knocked off my feet and started rolling down the pass. Fortunately, my backpack caught on to some vegetation and arrested my fall. I quickly established that I could move my legs and that nothing was broken, except for my confidence. After taking a painkiller and redistributing some of the contents of my backpack to others in the party, I climbed out of the pass with a tender knee, and we descended reasonably quickly.

Spare Key?

We arrived at a deliciously cool pool and had a quick drink and “shower”. As we were loading our backpacks to set off, I noticed a tear in the bottom pocket of my pack, and my heart sank- the key to my H1 Hyundai bus had been in that pocket. It must have fallen out when I fell in the pass. There was a stony silence when I announced the news to the rest of the party. After some thought, the light bulb moment then struck- I had just purchased the vehicle the day before our journey and was fairly confident the spare key was in the cubby- hole.

I hiked with more vigour as there was now hope on the horizon and arrived at Giants Castle to find the matriculants lying exhausted outside the reception. There is no cell phone signal in that area, but the team at Giant Castle allowed us to use their landline to warn loved ones of our predicament and that we would arrive very late that evening. We summoned a locksmith who eventually retrieved the spare key, and we left Giants Castle at dusk.

The journey home

Life was good again, and the party was full of joy until we reached Van Reenen’s Pass to cross the provincial line back into the Free State. We could see the stationary lights stretching for miles, and the net effect was a 2-hour duration to travel 17km.To make matters worse, my son and I are fanatical Liverpool Football Club supporters, and we picked up on the Supersport app that Liverpool was on the receiving end of their worst defeat since 1963.

As we left Van Reenen’s and raced to that welcome coffee at Harrismith, the one young lad in the bus piped up “so who was it that pointed at the mountain?”

At last, we all arrived safely home

A carefully planned journey can still result in the unknown, much like most of life, a tale like mine reminds us how important appropriate insurance cover is. When I sit back and think of the potential alternate endings, I feel relieved that I have sufficient cover in place, if the worst-case scenarios had played out, my family and I were in a sound position.

The current global economic shock and decline in living standards caused by Covid-19 is evidently unparalleled and will undoubtably have long lasting effects on our daily living and in the business fraternity. It has disturbed the thread of every social and economic structure across nations, continents, and communities at large – exposing our vulnerability to unprecedented health disasters.

The relevance of maintaining your insurance

Reality has revealed an urgent need to review our approach on many aspects, amongst them being the need to relook at how we address financial and risk planning. In an attempt to manage expenses in these tough economic times, many employers and employees reduced salaries for a period of time. This has resulted in employers and employees requesting contribution holidays towards their retirement savings to alleviate the impact of lower salaries. While having done that, it is important to maintain the risk insurance cover. This will provide members with protection should they lose income due to illness, disability, or in the event of death – all depending on scheme’s risk insurance structure. As tempting as the thought might be to cancel some of these policies, the risk of not having the cover in place will leave the members dependants in a financially vulnerable position should the insured event be realised. The financial consequence could be too much to bear, as compared to the sacrifice of rearranging their budget to continue with the premiums, despite the reduced income.

How comprehensive is your insurance?

At the height of the pandemic, many members realised how their current insurance covers fell short of mitigating the financial risks they, or their dependants, would be exposed to in the case of a risk event. In addition, they realised the importance of having adequate disability or critical illness cover, many insurers confirmed cover remained unaffected due to the Covid-19 outbreak . This might be in the form of tweaking existing life covers to cater for the risk of virus outbreaks, or lump-sums to those who can prove their inability to earn an income for a specific period. One agile insurer has already instigated a Pandemic Shield insurance policy which operates in this fashion. This will greatly assist lives assured who are commission earners, informal traders, freelancers, and independent contractors.

Will insurance providers keep up with the times?

Some insurance providers are focusing extensively on the increased exposure to healthcare workers, having seen many in the healthcare sector succumbing to the virus in a short space of time. Whether these risk products will replace any traditional risk policies already in place remains to be seen and may be interrogated using financial life planning fundamentals provided by your Certified Financial Planner- which include forging a balance between your healthcare and other insurances alike.

A conundrum is faced by the middle- and lower-income groups to buy more insurance cover in an economy that has plunged by over 50% in its GDP in the second quarter of 2020, the steepest decline since 1960. Exacerbating the need for adequate insurance coverage, yet, with less earnings.

It is apparent that actuaries have a complicated task ahead, of remodelling mortality and morbidity rates as they consider increased exposure to certain socio-economic groups with varying accessibility to adequate healthcare facilities, inclusive of the deferring risk of exposure to those living in urban cities as compared to rural living.

It can be concluded that money conversations about for the financial ramifications of increasing or decreasing risk should be conducted with your financial planner, as it is paramount for you and your dependants financial security in the uncertain times the world is experiencing as a result of the Covid -19 pandemic.

We are fast approaching medical scheme product update season, and there has been much speculation around what to expect for 2021 amidst the Covid-19 outbreak, and its impact on the private healthcare sector.

South African medical schemes have historically increased contributions well above inflation, with a weighted average of around 9-10% mark.

As the economy has taken strain, and many citizens are impacted financially, a review of expenses becomes critical, and insurance is usually at the top of the list.

Our evolving dual healthcare system still places membership to medical schemes as key to access quality private healthcare. A review of your current cover is prudent as it can help you understand if you are over-insured or under- insured, maximising your benefits, and what changes you can implement to possibly save on medical expenses overall.
We share some practical information that you can use to review your current cover.

Key Benefits

Hospitalisation
The fundamental reason members join a Medical Aid is to ensure cover for hospitalisation. Consumers know that the cost of private care hospitalisation can be exorbitant and often financially crippling without the right level of cover.
Most schemes offer unlimited cover for hospitalisation. There are still a few options with overall annual hospitalisation limits that are aimed at providing some level of cover for lower-income earners as opposed to no cover at all.

Schemes also provide options that impose restrictions on what hospital members may use for a planned admission. This allows them to charge a lower contribution. So, if this is your option, make sure that you are familiar with the hospitals on the list.

Day-to-Day
The new generation plans offer a Medical Savings account that caters for day-to-day expenses, subject to available funds. There are a few traditional model options on the market; however, they are generally highly-priced. Hybrid options offer a mix of benefits funded from medical savings and risk pools. The extent of day-to-day cover is where most of the variation occurs in terms of options available and can affect the overall contributions substantially.

Scheme Rate
This refers to the medical scheme’s rate of reimbursement for related accounts. Schemes can cover from one time, and up to three times, the medical rate, depending on the plan option.

Questions to consider

• Are you comfortable with hospital restrictions for planned admissions?
• Do you have a Gap Cover product?
• What are the total out-of-hospital expenses for everyone on the membership? Tip: Use an average of the last three years.
• What chronic conditions do you require cover for? Are you accessing cover available from the schemes Chronic Benefit?
• What routine checks and tests do you have done? Are you utilising the Screening Benefits available on your option?
• Are there any upcoming expected treatments that you and your family require in the next twelve months?
• Can you afford to pay day-to-day expenses out of your own pocket?

Important documents
To assist you with your review, you can request these documents from your provider:

• Claims Transaction History Statement
• Self-Payment Gap reconciliation report (if your plan has this component)
• Chronic Benefits Guidelines
• Screening Benefits Guidelines
• Plan Brochures

The most effective way to review your medical aid plan is to compare your plan option and benefits on a like-for-like basis, factoring in your specific healthcare needs in a comprehensive review with your financial adviser.

South Africa’s Minister of Finance, Tito Mboweni, delivered the 2020 Supplementary Budget review, on 24 June 2020. This was planned and tabled in response to significant changes in projected revenue generation and expenditure channelling in the aftermath of the Covid-19 outbreak, and was aimed at managing and tackling the immediate challenges facing the treasury.

Highlights

Some of the significant highlights from the supplementary budget review include the following:

• The expectation is that tax revenue collections for 2020/21 will be R304.1 billion (21%) lower than the initial February 2020 Budget estimate (R1.425 trillion).
• Revenue shortfalls are said to include tax relief measures (R26 billion) in foregone revenue implemented as part of the COVID-19 relief packages, and the expectation is now that the tax base will temporarily shrink as businesses close, and the resultant loss of jobs.
• No new tax measures/tax increases were presented in the Supplementary Budget; however, moderate future tax increases were proposed. Future tax increases are expected to be R5 billion in 2021/22, R10 billion in 2022/23, R10 billion in 2023/24 and R15 billion in 2024/25.
• The 2020 Medium Term Budget Policy Statement (due in October 2020) is expected to revisit these projections, and the Minister of Finance will announce tax policy proposals in the February 2021 Budget.
• Additional tax revenue is expected to come from improved tax collection as enforcement is strengthened to enhance compliance.
• The budget balance is now expected to widen to 14.6% of Gross Domestic Product (GDP) in fiscal year 2020/21 (February projection was -6.8%) and the Gross National Debt is projected to increase to 81.8% of GDP (February projection was 65.6%). The expansion is mainly due to lower revenue collections and higher pay-outs from the Unemployment Insurance Fund (UIF).

In-year spending adjustments

National Treasury now anticipates spending to increase from the R1,537 trillion expected in the February 2020 budget to R1,573 trillion. The increase represents primarily the assistance provided to state-owned entities, the COVID response efforts and the costs of servicing debt. Although the rise in the overall spending represents a rise of R36bn, the cumulative fiscal response to the pandemic has resulted in additional R145bn of spending. Of this number, R122bn was allocated to the fiscal relief package, R3bn to the restructure of the Land Bank, and R19.5bn to temporary allocations for Covid-19 fiscal aid. National Treasury has been able to reprioritise R109bn, with the remaining R36bn to be funded by increasing the main budget deficit. Government spending was adjusted through the implementation of various measures.

Revenue

The shortfall was higher than was anticipated; tax reprieve initiatives, company closures and lower personal income taxes due to mass retrenchments are projected to result in the current financial year’s R304.1 billion tax shortfall. National Treasury noted that the highest shortfalls had been seen in domestic VAT and Pay-As-You-Earn tax categories.

National Treasury anticipates that tax collections will increase over the medium-term expenditure framework (MTEF) based on improved tax collection. This includes, among others, enhancement of enforced compliance and revenue collection measures which will be introduced, for example, to eliminate syndicated fraud related to value-added tax refunds and import valuations.

Herculean task

Although the supplementary budget painted a more serious picture of the existing conditions, it did not contain much information about how President Ramaphosa’s administration intends to deal with the Herculean task of “closing the mouth of the hippopotamus.” However, The Minister of Finance revealed that more information will be supplied in the Medium -Term Budget Policy Statement (MTBPS) expected in October 2020, on how the government plans to simplify the budget.