New South African Retirement Savings Tax

Every year the National Treasury throws a few curveballs into the Medium Term Budget Policy Statement (MTBPS), and this year is no exception, with some changes announced to the taxation of retirement savings vehicles and microbusinesses.

From March 1 2009, pre-retirement withdrawals from designated retirement savings vehicles will be taxed, at rates shown below.

Proposed rate structure of pre-retirement withdrawals from retirement savings

R0 - R22500 - to be taxed at 0%
R22501 - R600000 - to be taxed at 18% of the amount above R22500
R600001 - R900000 - to be taxed at R103950 + 27% of the amount above R600000
R900001 and above - to be taxed at R184950 + 36% of the amount above R900000

Isle of Man Enhanced Depositor Protection Plan Does Not Cover Offshore Bondholders

The Isle of Man Treasury has confirmed that savers in offshore bond wrappers will not get any individual cover under the enhanced depositor protection scheme.

On the 23rd of October the Manx government raised protection levels from £15,000 to £20,000 for non-individual depositors previously covered under the 1991 scheme, including charities and businesses.

However, according to Isle of Man Finance director John Spellman, these changes do not provide cover for individual clients with investments in offshore wrappers. He says: “My reading of the legislation is that offshore bond savers are only covered under a corporate cover of £20,000. It is up to the scheme adviser but my understanding is that it’s one cover per insurance company.”

Bank Depositors' Guarantees

If you feel uneasy about the financial position of your offshore bank, read on.

It has come to my attention that the Financial Supervision Commission of the Isle of Man (which forms a part of the British Isles) has just this week (Wednesday the 15th ) launched a compensation scheme aimed at protecting both local (Manx) and foreign (everyone else) depositors who have balances in Manx domiciled bank accounts.

The scheme has a maximum limit of £50,000 per depositor. That means that you will be protected up to that amount, no matter how many accounts you may have with that bank.

This scheme does not apply to Jersey and Guernsey domiciled bank accounts as the Isle of Man decided to take this step and not the British government.

For further information, you can go to the Isle of Man’s FSC’s website, www.gov.im/fsc

Sharp Rally in Global Equities

Equities rallied sharply on Monday and to a lesser extent also Tuesday in response to the previuos week's utter collapse. Japan enjoyed a public holiday on Monday which showed on Tuesday as the Nikkei225 soared over 14%.

We'll have to see how long this lasts. By all indications, it may already have petered out.

European Central Bank Reduces Lending Rate

The Governing Council of the ECB, by means of teleconferencing, has taken the following monetary policy decisions:

The minimum bid rate on the main refinancing operations of the Eurosystem will be reduced by 50 basis points to 3.75 %, with effect from the main refinancing operation to be settled on 15 October 2008.

The interest rate on the marginal lending facility will be reduced by 50 basis points to 4.75 %, with immediate effect.

The interest rate on the deposit facility will be reduced by 50 basis points to 2.75 %, with immediate effect.

In the euro area, upside inflationary risks have recently decreased further. It remains imperative to avoid broad-based second-round effects in price and wage-setting. Keeping inflation expectations firmly anchored in line with our objective and securing price stability in the medium term will support sustainable growth and employment and contribute to financial stability.

Bank of England Reduces Bank Rate

The Bank of England's Monetary Policy Committee yesterday voted at a special meeting to reduce the official Bank Rate paid on commercial bank reserves by 0.5% to 4.5%.

The Monetary Policy Committee held a special meeting on Wednesday 8 October, some hours in advance of its normal schedule. After that meeting, the Bank of England, in conjunction with the Bank of Canada, the European Central Bank, the US Federal Reserve, Sveriges Riksbank, the Swiss National Bank and the Bank of Japan, released a joint statement which can be read at www.bankofengland.co.uk/publications/news/2008/067.htm

US Fed Announces Reduction in Federal Funds Rate

The Federal Open Market Committee yesterday decided to lower its target for the federal funds rate 50 basis points to 1-1/2 percent. The Committee took this action in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures.

Incoming economic data suggest that the pace of economic activity has slowed markedly in recent months. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit. Inflation has been high, but the Committee believes that the decline in energy and other commodity prices and the weaker prospects for economic activity have reduced the upside risks to inflation.

The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.

The US$ Strengthens as the global banking system needs funding

The US$ has surged again in recent days against the Pound as funding is attracted to help the global banking system out of its quagmire. This strength has caught many currency traders off guard. They felt that the recent surge was a temporary one that was over now. They may not be far wrong as this may still prove to be a short term spike. However, I feel that it is a cyclical turning point too and that the US$ will most likely enjoy a period of strength for some several months.

The US Senate Approves the 2nd Bailout Draft

The US Senate approved the 2nd draft of the $700bn bailout plan of the financial industry late on Wednesday. The vote was 74 for theplan and 25 against it.

The bill is aimed at reinvigorating worldwide credit markets and interbank lending which had stalled.

Fears had emerged that failure to pass such a rescue plan could plunge the US and possibly also the global financial system into total turmoil.


This latest draft will now go to the House of Representatives, where a vote will probably be made on Friday.


US President George W Bush praised Senate passage of the package and urged the House to quickly do the same.

Treasury Secretary Henry Paulson, whose original three-page proposal grew to hundreds of pages when Congress got involved, praised the Senate vote and urged the House to act swiftly to ratify it.

Should the House uphold the bill, it would go to the White House for signature into law by President Bush within a couple of days.