Is it really worth having a pension/provident fund?

[Toxxyc]

Well, if you are gonna use my posts:

LOL, well then you exclude SA equity from your own investments right? If you have no confidence in SA economy and equity going forward, just say so. If you are basing your opinions on old life insurance company RAs, you must base your opinions on other things that are old, on cellphones and Windows 95 and 98 and computers and TVs from '90s and older tech, ok?

Performance of 10X in the other years (before fees):
2013 - 20,8%

2014 - 12,6%

2015 - 8,3%

2016 - 1,8%

2017 - 13,3%

2018 - -3,3%

If I had the full current fund value back in 2013, the result would have been more than 6.4%, the 6.4% you refer to is my individual performance over 5 and whatever years.

Mine's 4% since inception, also at 10X. I lost quite a bit back in 2016~7 thanks to Zupta. It's increasing now, though, with the last year being 4.9%. Most of what I've lost during the 2016 loss has been recouped in the last year to date, so I'm optimistic for it going forward. 10X is great. I feel they make this whole process relatively painless and "simple to understand". If you lose, like I did, they also don't go "yeah sorry not our fault", they properly explained where and why money was lost, which I liked.

 

[Tman*]

Mine's 4% since inception, also at 10X. I lost quite a bit back in 2016~7 thanks to Zupta. It's increasing now, though, with the last year being 4.9%. Most of what I've lost during the 2016 loss has been recouped in the last year to date, so I'm optimistic for it going forward. 10X is great. I feel they make this whole process relatively painless and "simple to understand". If you lose, like I did, they also don't go "yeah sorry not our fault", they properly explained where and why money was lost, which I liked.

On a good day, you are maybe beating inflation with these returns

The sad thing is, 10x is most probably one of the best companies, with the lowest fees. I dont want to know how return is looking like at other investment houses.

 

[Splinter]

Basically what you are saying is: "the new policies are much better, but they havent been here long enough to be able to prove this conclusively, but trust me, they are".



Because the average working man will never ever be able to retire on a pension/RA?

Point to my original post is that there are many other options available as opposed to traditional retirement savings vehicles that everyone should consider. They have proven to be expensive and provide generally kak (in this very thread - 6.40% ) return.

Firstly, there is absolutely no promise given anywhere by any pension or provident fund that a member will be able to retire comfortably based on it. In fact, most retirement fund experts recommend that additional savings are made by individuals.

Secondly, a major reason why many folks couldn't retire comfortably is because they cashed in their pension or provident funds when changing jobs.

Retirement vehicles are tax efficient vehicles for the average man. There are always exceptions of course - like with anything in life.

 

[3WA]

Are there seriously people arguing against RAs, and provident/pension funds? With the tax break, that's a 30-40% gain instantly. Only a TFSA can compare, but that's capped too low to provide fully for retirement.

 

[hellfire]

i dont have one

i will work till im dead

And if you become incapacitated?

 

[backstreetboy]

On a good day, you are maybe beating inflation with these returns

The sad thing is, 10x is most probably one of the best companies, with the lowest fees. I dont want to know how return is looking like at other investment houses.

Lol really?

http://www.stealthywealth.co.za/2018/01/the-best-ra-in-south-africa.html

1. Sygnia Skeleton 0.65% TAC
2. 10X 1.026% (at worst) TAC
3. Easy Equities 1.026% TAC

Then there's Nedbank/Absa that's way cheaper as well.

 

[mushroom]

Hi Everyone,

So I just started working this year, and the company I work at makes it compulsory for employees to have medical aid and a pension fund. This is all cool, I have no issues with that. Over the weekend, I thought now is the time I should have a look at the pension, and noticed the total reflected in there does not add up to the monthly contributions taken from my remuneration package. Upon skimming through everything, it looks like my pension fund has been losing money (I saw one of the documents mention approx. 1K was lost in disinvestment's). I am on Alexander Forbes Pension Fund.

I know my question sounds a bit silly, but, is it really worth having pension/provident fund, when your provider gets to play with your monthly contributions and you end up losing money [at least that is how I see it]? I am still new to all this, so I was a bit shocked. What alternates would work?

the govement give everyone allpay when they get 60 years old so i dont think u need to safe yourself but my work also just take my money for the old penson i did evans ask if they can stop it but they did tell me no

 

[Willie Trombone]

Hi Everyone,

So I just started working this year, and the company I work at makes it compulsory for employees to have medical aid and a pension fund. This is all cool, I have no issues with that. Over the weekend, I thought now is the time I should have a look at the pension, and noticed the total reflected in there does not add up to the monthly contributions taken from my remuneration package. Upon skimming through everything, it looks like my pension fund has been losing money (I saw one of the documents mention approx. 1K was lost in disinvestment's). I am on Alexander Forbes Pension Fund.

I know my question sounds a bit silly, but, is it really worth having pension/provident fund, when your provider gets to play with your monthly contributions and you end up losing money [at least that is how I see it]? I am still new to all this, so I was a bit shocked. What alternates would work?

Pension funds are not for short term. Don't look at it after Y1.

 

[Willie Trombone]

The answer is mostly yes. Big tax benefit that's pretty hard to beat with discretionary investments, the discretionary investments, are on the back foot from the start.

That depends. I read an article by a financial advisor who retired and admitted he could have made more paying tax and investing elsewhere. That said, pension funds are designed to be 'no touchy!' while other investments are not, and people are mostly not disciplined enough to leave them alone.

 

[supersunbird]

the govement give everyone allpay when they get 60 years old so i dont think u need to safe yourself but my work also just take my money for the old penson i did evans ask if they can stop it but they did tell me no

No they don't (if your means exceeds and you don't lie) and it's just like R1600pm

 

[Vis1/0N]

And if you become incapacitated?

Same end result, thanks.

 

[Toxxyc]

On a good day, you are maybe beating inflation with these returns

The sad thing is, 10x is most probably one of the best companies, with the lowest fees. I dont want to know how return is looking like at other investment houses.

Yeah it sucks, but it is what it is. At one stage it grew by like 11% in one year. That was a good times.

 

[hellfire]

Same end result, thanks.

Nope. If you die, great.
If you're incapacitated you're a burden on your family

 

[Cage Rattler]

That depends. I read an article by a financial advisor who retired and admitted he could have made more paying tax and investing elsewhere. That said, pension funds are designed to be 'no touchy!' while other investments are not, and people are mostly not disciplined enough to leave them alone.

Correct. Most people do not take the full life cycle into account and only look at tax break pre-retirement and not the post-retirement tax effects either. The holistic picture to end of life will often show that a RA is not the optimal solution ... very simple example below with a RA and a discretionary investment with the former requiring an extra R50 monthly contribution to match the overall return of the discretionary investment approach.

 

[RonSwanson]

Are there seriously people arguing against RAs, and provident/pension funds? With the tax break, that's a 30-40% gain instantly. Only a TFSA can compare, but that's capped too low to provide fully for retirement.

Basically deferment, you have to pay tax eventually. And then you have to use a fund that is compliant with Regulation 28 of the pension funds act (and whatever else the govt throws at it). The difference is quite a few percentage points -- for example, compare Coronation's Balanced Plus fund (14.2%) with Coronation's Top 20 fund (17.3%), the latter not suffering from pension fund regulation.

 

[3WA]

Basically deferment, you have to pay tax eventually. And then you have to use a fund that is compliant with Regulation 28 of the pension funds act (and whatever else the govt throws at it). The difference is quite a few percentage points -- for example, compare Coronation's Balanced Plus fund (14.2%) with Coronation's Top 20 fund (17.3%), the latter not suffering from pension fund regulation.

Yeah, but by the time you pay tax on your RA, you have less annual earning so much lower brackets and marginal rates. I'd rather earn 14% on R100k than 17% on R100k after 35% tax.

 

[supersunbird]

Correct. Most people do not take the full life cycle into account and only look at tax break pre-retirement and not the post-retirement tax effects either. The holistic picture to end of life will often show that a RA is not the optimal solution ... very simple example below with a RA and a discretionary investment with the former requiring an extra R50 monthly contribution to match the overall return of the discretionary investment approach.

View attachment 694081

There are other benefits though, like protecting you from yourself. No one talk you out of your RA/LA to invest in Sharemax (I know about someone who put all their savings, something like R4 mil, into that) or their pub or their restaurant or the Surtie Inheritance.

If one can run the numbers and have the skills, time and discipline, then yes, other avenues are available.

 

[Splinter]

That depends. I read an article by a financial advisor who retired and admitted he could have made more paying tax and investing elsewhere. That said, pension funds are designed to be 'no touchy!' while other investments are not, and people are mostly not disciplined enough to leave them alone.

I would love to see his calculations. I bet he took his total contributions and chose some decent investment return somewhere to work out an imagined total.

What a lot of people don't seem to get is that your full contribution doesn't get invested - a portion is spent on risk cover. Which can be death cover, disability cover, or both. And yes, a portion for admin expenses. But that's small.

 

[Splinter]

Correct. Most people do not take the full life cycle into account and only look at tax break pre-retirement and not the post-retirement tax effects either. The holistic picture to end of life will often show that a RA is not the optimal solution ... very simple example below with a RA and a discretionary investment with the former requiring an extra R50 monthly contribution to match the overall return of the discretionary investment approach.

View attachment 694081

Where is this wonderful piece of art obtained from?

 

[JayM]

Yeah, but by the time you pay tax on your RA, you have less annual earning so much lower brackets and marginal rates. I'd rather earn 14% on R100k than 17% on R100k after 35% tax.

That's assuming there isn't a money grab and tax rates for pensioners aren't increased.