A solid half year for the Fundisa Fund
The Association of Collective Investments (ACI) used last week’s quarterly update to report back on the progress of its recently announced Fundisa Fund initiative. The public-private partnership, a joint venture between the Department of Education and the ACI, kicked off on 12 November 2007. Billed as a savings scheme for further and higher education, the Fundisa Fund hopes to reduce poverty on two fronts. The first is through boosting savings – with the fund providing a much needed savings vehicle for lower income South Africans. And the second is to enable more students to take up tertiary (or higher) education, with the long-term knock-on effect on employment and economic growth.
Another partner, the National Student Financial Aid Scheme (NSFAS) will ensure that Fundisa funds are utilised for their intended education purposes only. Fundisa investments can be made through StanLib, Nedbank, Standard Bank or http://www.fundisa.org.za/.
A well-received savings aid
So far the Fundisa Fund has been well received. ACI chief executive Di Turpin says the first six months confirm the potential of this education savings tool. Despite a limited marketing effort the initiative attracted 1 765 investors to June 2008. These investors account for R1.1 million with the average account size currently standing at R600. Turpin says this demonstrates that the product is by-and-large being taken up by the intended market. She also notes that many offshore Non-Government Organisations have “complemented South Africa on putting this initiative in place…”
The Fundisa Fund assists parents (and guardians) to save funds to allow children to progress their education beyond secondary school. Contributions start from as little as R40 per month and savers are encouraged to make these monthly contributions by debit order. One of the requirements to open a Fundisa Fund account will be an Mzansi (or similar) transaction bank account. Once off payments will be allowed and there will be no penalties if instalments are missed. And here’s the kicker...
The private-public partnership has pooled R34 million for a three year pilot project that will see each account holder benefit from an additional 25% of contributions made in a given year. This bonus payment is capped to a maximum of R600, or 25% of an annual R2, 400. There are some reasonable conditions attached. Should the saver be forced to withdraw the saved portion at any point in time for use other than education of the child beneficiary, then the balance held in the bonus portion of the account will fall away. And the child beneficiary must use the fund before they are 35 years of age.
R100 723 in 15 years
The earlier you start saving for your child’s education the better. Using a basic R200 per month calculation the ACI illustrated how these payments would compound to R100 723 over a period of 15 years. Over this period the saver would have contributed R36 000 and the private-public partnership R9 000, with the balance compliments of the magic of compound interest. The fund will be conservatively invested in income funds, mainly in money market securities, bank deposits and government bonds though it might be feasible to consider various equity alternatives at a later stage. Turpin challenged participants in the scheme to take an additional step in ‘adopting’ a child as a beneficiary in the scheme. It’s certainly one way to get involved in addressing South Africa’s long-term education requirements.
There’s not a great deal of incentive for financial intermediaries to get involved with this product. The ACI has set a maximum 1% cap on broker commissions – so a broker assisting a client in signing up for this product will receive R2.00 per month for a R200 per month Fundisa Fund contribution. We’re sure most intermediaries would at least mention the Fundisa Fund to their clients as a useful addition to existing education savings structures.
Editor’s thoughts:
The Fundisa Fund has got off to a steady start. We thought the uptake would be far higher than it has been; but as ACI chief executive Di Turpin mentions there hasn’t been a huge marketing effort as yet. Have you recommended this product to any of your clients – and if so what have your experiences been? Add you comment below, or send to [email protected]
Comments