Investment banking group Umbono Capital has joined forces with the South African Post Office to make an investment product available to low-income earners throughout South Africa.
Called the Postbank As'Investe Plan, the product has been available since 2004 in Johannesburg.
Totsie Memela-Khambula, the managing director of Postbank, says the product exceeded all expectations and, as a result, has been rolled out nationally.
The Postbank As'Investe Plan is available as a starter pack that you can buy off the shelf at 100 post office branches around the country for R62. Thereafter you pay a premium of R62 a month.
The package offers you an investment in an Umbono unit trust fund as well as funeral assurance and accidental death insurance.
The funeral assurance and accidental death insurance are only for you, the policyholder. Your family will receive a pay-out of R5 000 on your death, or R10 000 in the event of your accidental death.
The term of the policy is 10 years and at the end of that period you can withdraw your savings and the growth on it as a lump sum.
As a policyholder, you are entitled to make one withdrawal from your savings in the As'Investe Plan during the 10-year term of the policy. You are allowed to skip premium payments up to six times, should you experience financial difficulties or emergencies.
During this time, your cover is not compromised and your benefits remain uninterrupted.
When you buy the policy with your initial R62 premium, the post office teller will record your contact details and within two days an agent will call you to activate the policy.
The starter pack contains the contract information and a card bearing your policy number. You will need to present the card at the post office when you pay your monthly R62 premium in cash.
Of the R62 that you pay, R41 goes towards your actual investment while R21 is deducted for underwriting of the insurance component, fees and commissions. The amount deducted for fees and commissions can be broken down as follows: R15.08 for funeral cover underwriting and administration costs, R1.87 for the Post Office handling fee and R4.05 for commissions.
Initially, the policy was sold through dedicated sales agents who marketed this and other financial products to users of the Post Office. However, the new starter pack, which is now sold directly through the Post Office, is aimed at containing the costs of the policy and will facilitate a faster roll-out.
"The investment component of the client's R62 contribution is invested in two Umbono unit trust funds, an absolute return and a balanced fund," says Tendai Musikavanhu, the chief executive of Umbono Capital.
"These constitute an investment portfolio with carefully managed risks. The unit trusts have performed well since inception and are covered in the financial press," Musikavanhu says.
Old Mutual is the underwriter and administrator of the product, and holds a 40 percent share in Umbono As'Investe.
Umbono Capital plans to extend the service to 1 200 Post Office branches within a year. To date, over 33 000 policies have been sold through the Post Office.