2-in-1 savings solutions

2014-08-31 15:00

On the back of Savings Month in July, Old Mutual has launched a new “two-in-one” savings product to encourage you to save while simultaneously catering for an emergency fund.

Research from the Old Mutual Savings and Investment Monitor this year revealed the majority of South Africans are concerned about their lack of emergency funds.

This gap leads to them dipping into their savings unnecessarily or taking on debt to cover emergency costs. An emergency is any situation where you require funds unexpectedly. For example, an insurance excess when you are involved in an accident, or upfront costs should you require hospitalisation.

How it works

The two-in-one savings plan has two different pockets for your savings – a long-termsavings pocket and a short-termsavings pocket that you can dip into for emergencies. The long-termsavings pocket is an investment in the OldMutual Smoothed Bonus Fund, which you are tied into for a minimum investment period of two years, while the short-termsavings pocket is invested in the OldMutual Money Market Fund. You must make a minimum of 12 short-term contributions.


The minimum contribution is R150 a month and this increases to R165 a month if you choose the premium waiver option, which allows you to stop paying your premiums if you are retrenched, for example. You can increase or decrease the contribution you make to your short-termsavings after one year, but the increases or decreases have to be R20 or more.

Note that you are not allowed to change the contribution you make towards your long-termsavings. You do have the option to reduce the short-term contribution to zero, but you remain tied into the long-term investment component or the OldMutual Smoothed Bonus Fund for the full ­10-year period.


If you want to boost your short-termsavings, you are allowed to make “savings top-up” contributions, but these are restricted. You can start making savings top-up contributions after the first month.

The minimum top-up amount is R250 and the maximum is R5?000.


The fees on this product are steep, with an overall fee amounting to 15% of the long-termsavings contribution. This includes the cost of the advice, as well as initial and ongoing costs.

The first two withdrawals you make each year from the OldMutual Money Market Fund or your short-termsavings pocket are free, thereafter you pay a fee of R50 per withdrawal.

You are allowed to withdraw some of your money from the long-termsavings pocket or the OldMutual Smoothed Bonus endowment policy after five years. The minimum part-withdrawal is R300 and the maximum part-withdrawal is the total fund value at the time of the withdrawal. The cost of this withdrawal is as follows:

.?An administration fee of R300.

.?A variable fee of 15% of your fund value if you make the withdrawal after five years, decreasing to 0% after 10 years.

The administration fee and the variable fee are capped at a cumulative 30% of your fund value.

The same charges apply if you choose to stop making savings contributions but leave the money you have saved to date invested until the end of the 10-year term. This is referred to as a paid-up policy.

The paid-up charges only apply to the long-termsavings pocket. But if you choose this option, you are no longer allowed to make part-withdrawals.


This savings product is easy to use, with a minimum contribution that is lower than most other savings products on the market.

If you want to invest in unit trusts, for example, the minimum contribution is at least R300, with the exception of Sanlam Unit Trusts, which you can invest in for R200 per month. But the fees are high and you are tied into an endowment policy for 10 years.

National Treasury has announced plans to make certain savings vehicles “tax-free savings accounts”, with initial reports indicating endowment policies may not be included in this category.

I would wait for more definite information regarding tax-free savings accounts before committing my funds to a product that locks me in for 10?years. Also, if you really wanted to save for the short term and longterm, there’s not much stopping you from doing it yourself. All you have to do is open a money market fund account or a flexi-fixed deposit account for your short-termsavings and invest in a unit trust for the longterm.

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