Life annuity

lkpat said:
I'm not seeing the benefit.
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How about the underlying value of the bond going up by inflation every year along with the income? the 5.25% is on top of the underlying investment keeping pace with inflation. At the end of the term the inflation adjusted capital is returned to you
 
Shayd said:
How about the underlying value of the bond going up by inflation every year along with the income? the 5.25% is on top of the underlying investment keeping pace with inflation. At the end of the term the inflation adjusted capital is returned to you
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Ah got it. We'll that makes sense if you want your investment to grow and can afford to live on the smaller monthly return.
 
Shayd said:
How about the underlying value of the bond going up by inflation every year along with the income? the 5.25% is on top of the underlying investment keeping pace with inflation. At the end of the term the inflation adjusted capital is returned to you
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One thing to note - the amount added to the capital for inflation is taxed as interest, not capital gains. Sounded too good to be true, and is.
 
JayM said:
One thing to note - the amount added to the capital for inflation is taxed as interest, not capital gains. Sounded too good to be true, and is.
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Good to know. Makes sense since it's still a bond after all.

In any case if the tax treatment is an issue for your friend he can't be as hard up as I assumed. He has a R 11.7k/mo threshold after the interest deduction.
 
supersunbird said:
A persons health level would also be a factor in the decision.
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Yes if he's feeling strong that's another reason to let the actuaries take the risk on his longevity.

If he's not then maybe he'd like to put it all on black.
 
Tomtomtom said:
Good to know. Makes sense since it's still a bond after all.

In any case if the tax treatment is an issue for your friend he can't be as hard up as I assumed. He has a R 11.7k/mo threshold after the interest deduction.
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Yeah not really an issue for my friend, just wanted to point out in case someone with more significant capital was looking into inflation linked bonds.
 
Fedgroup offer over 10% p.a. for investments over R1m. In 2020 I got a 12.1% investment with them. They pay 90% of the interest monthly and reinvest the remaining 10%

This is fixed for 5 years. My broker organised it for me
 
Anybody tried this. Min investment is 100K Euros:

What is the interest rate of AIX bond?


AIX BOND - Trust & Transparency - AIX Investment Group


4.5%

AIX BOND is structured to payout 4.5% Coupon rate every quarter.
 
deweyzeph said:
From what I understand, you can earn more from a life annuity than from interest on the same amount because in the case of a life annuity you essentially give the capital to the insurer and they benefit from it long after you die. The downside is that you then have nothing to pass down to your dependents.
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You can get a guarantee of 10 or 20 years which means if you die your beneficiaries will get your payments from the day you die for 10/20 years, minus the time you took out the annuity.
So if you take out life annuity on 1 Jan 2024 with a guarantee for 10 years, and you die on 1 Jan 2029, the beneficiaries will still get paid out for 5 more years.
And yes, you get in less for that benefit, it's what you have to weigh up.
 
To me the best option would be a guaranteed annuity with a 5%/6% increase guaranteed per year.
Yes your family loses the capital but you have a high percentage of inflation risk covered.
Most families greatest risk is when the pesioner cant cover living expenses due to inflation and the burden falls on them. Leaving a legacy justs sounds great in theory but is for the few who are rich
Retail bonds sounds great right now however when interest rates lower you would receive less income.
According the the following calculator used as a guide ( https://uctrf.co.za/uctrf/life-annuity-calculator ) they
Would receive R8032 per month with a 5% escalation guaranteed per annum for life, this would reduce if you guarantee a spouse income.
Anyway get a trustworthy broker (lucky if you find one) to shop around for you and get the best rate. Try a broker without an affiliation to a particular life insurance company.
Guaranteed annuity Example given at moneyweb conference this year
2mil capital - best option was 13500 p/m with a guaranteed 6% increase, fixed was 20000 p/m After 7 years the 13500 would equal the fixed option and continue increasing.
Voluntary purchase annuity would be the option if this is after tax savings and you tax bill would be lower as well
NB: Lots of brokers want to sell people living annuities just to pocket ongoing commision. This is an industry full of skelms -which does not police itself. Unfortunately legislation is the only way to protect the public!
 
badshaac said:
To me the best option would be a guaranteed annuity with a 5%/6% increase guaranteed per year.
Yes your family loses the capital but you have a high percentage of inflation risk covered.
Most families greatest risk is when the pesioner cant cover living expenses due to inflation and the burden falls on them. Leaving a legacy justs sounds great in theory but is for the few who are rich
Retail bonds sounds great right now however when interest rates lower you would receive less income.
According the the following calculator used as a guide ( https://uctrf.co.za/uctrf/life-annuity-calculator ) they
Would receive R8032 per month with a 5% escalation guaranteed per annum for life, this would reduce if you guarantee a spouse income.
Anyway get a trustworthy broker (lucky if you find one) to shop around for you and get the best rate. Try a broker without an affiliation to a particular life insurance company.
Guaranteed annuity Example given at moneyweb conference this year
2mil capital - best option was 13500 p/m with a guaranteed 6% increase, fixed was 20000 p/m After 7 years the 13500 would equal the fixed option and continue increasing.
Voluntary purchase annuity would be the option if this is after tax savings and you tax bill would be lower as well
NB: Lots of brokers want to sell people living annuities just to pocket ongoing commision. This is an industry full of skelms -which does not police itself. Unfortunately legislation is the only way to protect the public!
Click to expand...

Great first post
 
deweyzeph said:
From what I understand, you can earn more from a life annuity than from interest on the same amount because in the case of a life annuity you essentially give the capital to the insurer and they benefit from it long after you die. The downside is that you then have nothing to pass down to your dependents.
Click to expand...
Correct.
 
T
badshaac said:
To me the best option would be a guaranteed annuity with a 5%/6% increase guaranteed per year.
Yes your family loses the capital but you have a high percentage of inflation risk covered.
Most families greatest risk is when the pesioner cant cover living expenses due to inflation and the burden falls on them. Leaving a legacy justs sounds great in theory but is for the few who are rich
Retail bonds sounds great right now however when interest rates lower you would receive less income.
According the the following calculator used as a guide ( https://uctrf.co.za/uctrf/life-annuity-calculator ) they
Would receive R8032 per month with a 5% escalation guaranteed per annum for life, this would reduce if you guarantee a spouse income.
Anyway get a trustworthy broker (lucky if you find one) to shop around for you and get the best rate. Try a broker without an affiliation to a particular life insurance company.
Guaranteed annuity Example given at moneyweb conference this year
2mil capital - best option was 13500 p/m with a guaranteed 6% increase, fixed was 20000 p/m After 7 years the 13500 would equal the fixed option and continue increasing.
Voluntary purchase annuity would be the option if this is after tax savings and you tax bill would be lower as well
NB: Lots of brokers want to sell people living annuities just to pocket ongoing commision. This is an industry full of skelms -which does not police itself. Unfortunately legislation is the only way to protect the public!
Click to expand...
This pretty much sums up what my Grandmother did. At 86 yo she got a pretty decent interest rate guaranteed for 10 years through standardbank/stanlib. Not exactly sure how it all works.Her life though is insured for the total amount of the annuity through liberty.
 
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