Explain: Retirement Annuity.

[xrapidx]

also remember that with the National Social Security becoming compulsory in a few years time (was supposed to start in 2011) employers have to deduct pension. This will hit people very hard if companies have not started making provision for it - think about getting up to 15% deducted from your salary :-(

What? Any links to this? Not sure how it'll apply to contractors

 

[Rouxenator]

Very interesting thread. I am in the position where the company I have been with for 9 years recently got bought out by a big multinational based in SA. They have their own in-house pension fund and you are forced to either join that or a Sanlam provident fund. Luckily for me my RA contribution is only 8% of my gross income so now I can use the pension fund to get some tax back. When the pension fund pays out I can simply put the money into my existing RA. Although, that is in 25 years time so I am not sure if I will ever see the money.

 

[xrapidx]

I've just decreased my RA contributions to R1000 until I decide what to do.

 

[Jola]

I heard the limit is up to 15% of your taxable income now. Anyone able to confirm that?

It's 15% of your non-pensionable income.

 

[xrapidx]

Can anyone confirm whether there is a surrender/cancellation penalty fee on RA's? I don't mean cancellation in terms of changing it to cash - but rather if you want to move from company X to company Y (Section 40 transfer).

I saw someone regarding a new RA policy this weekend, and noted a % charge should you cancel it before maturity - I was told this is standard on all RA's - but I know for a fact its not part of the ABSA RA I cancelled contributions too.

 

[Celine]

rapid if i was you i would invest into something better. look at guy's investment it has done nothing in 2 years. people have continually advocated these RA's. they are nothing but a pain in the rear end as far as i'm concerned. take out an interest bearing account at a bank. you may not get a huge interest amount but you will profit in the long run if you leave the money in the account.
yes you get the 15% tax deduction on your tax return, but when the RA matures and you have other income you will pay in every single year on retirement. this is a fact. when you add all your income together you will find that you haven't paid enough tax over the year and all your income will push you into a different tax bracket. i have seen this with my clients over and over each year. it's a fact that these consultants do not tell people when they sell these RA's.

 

[volstruis]

I have had my RA 5 years now ,it has grown R6000. Monthly contributions is R3000.
I'm canning mine, as its not worth it. Take the R 186 000(60xR3000 +R6000) put it down as a deposit for a flat.
Then use the monthly contributions I used to pay and the money I get from the tenant to pay the bond.
Then when its sorted I will have a income for the rest of my life in that investment that would also grow.
Getting R6000 after 5 years isnt money.
Then the stupid advisor tells me its the markets they are bad bleh bleh bleh.
I can manage my money myself from now on.

 

[xrapidx]

The RA isn't my main source of retirement funding - its basically a backup with a tax benefit... but its not going to be if the penalty fee is a requirement.

 

[volstruis]

With all the fees and crap going with it the little tax deduction that you do get it's a worthless advantage.

 

[xrapidx]

Ok - that's your opinion - it doesn't answer my question.

 

[volstruis]

Would also like to know if there is any cancellation fees ect. To get the money out however with anything now a days I suspect is going to be a pain.

 

[xrapidx]

I been doing some reading - and I think I have a better understanding...

You get two types of RA's - one through a provider which is effectively a contract, and should you change it you get penalized. Then you get RA Unit Trusts - where you don't get penalized. I think they trying to sell my a standard contractual based RA - which I do not want. The ABSA RA is Unit Trust based.

I found this snippet interesting, and it leaves a sour taste in my mouth after this weekends meeting

The units stay yours until you retire from the fund. There is complete transparency and flexibility on these RAs but unfortunately, there is (was) also significantly less commission to be earned upfront and as a result, any target-chasing salesperson would sell a life RA every time as opposed to the unit trust option.

Read more here:
http://m.news24.com/fin24/Money/Money-Clinic/Should-I-move-my-RA-20110413