Need some RA/Preservation fund direction: Broker or no broker?

[biff]

Hi Guys,

Just a quick background, I am moving to a company next month that dont do RA/Pension/any thing else.

I've been through quite a few of the other posts here but I have no idea what I am doing. Basically going what I have read here. (From what I see supersunbird is quite clued up in this area.)

The idea in my head is to send it all to a Preservation Fund. After a month or 2, I would leave about half or quarter in this fund and move the rest into a RA where I will contribute monthly.

I need to do something fairly quickly and with the little knowlegde I have with regards to this topic, I would like to know who uses a broker and who doesnt? Are there any real perks? Thanks

 

[Verde]

Why do you want to move a part to an RA? You will have to pay tax on the funds withdrawn out of the preservation fund.

 

[biff]

The guy I spoke made no mention of that. I was under the impression that as long as the finds never gets to my bank account I would not be taxed.

 

[bumblebee]

Why move some to an RA? The funds in the preservation find can be I invested in the same unit trusts as the RA, usually. You just can't continue to contribute into the preservation fund. Or am I missing something here?

 

[Arthur]

I concur with bumblebee. As I understand it, you can't carry on contributing to a preservation fund - it's a sequestered pot. You can invest and manage it using a range of instruments and platforms.

 

[Verde]

The guy I spoke made no mention of that. I was under the impression that as long as the finds never gets to my bank account I would not be taxed.

The 1st R25000 can be taken out tax free, provided you have not previously withdrawn from a retirement fund. The next R635000 will be taxed at 18%. You can transfer the taxable amount from the pension fund (make sure its not a provident fund) to a preservation fund or an RA tax free. If you use a preservation fund you can make one full or partial withdrawal prior to retirement subject to tax. If you use an RA you cannot withdraw anything prior to retirement and the earliest retirement age is 55.
So if you first transfer into a preservation fund, and then 2 months later transfer to an RA, the withdrawal at that time will be taxable.
You can put everything (over R25000) into a preservation fund and open a separate new RA with the same company for future contributions. I can't understand why you want to put some of your pension into an RA - it is more restrictive.

For active managers Allan Gray and Coronation are good. I am more inclined towards passive investments for retirement savings and I highly recommend Sygnia. Satrix will launch their retirement options soon according to their website - I have high hopes for this offering.

 

[RustyPrincess]

When I resigned from my last job with a pension fund, I moved my pension to a preservation fund with Allan Gray. I already had a RA with them, and just upped my contributions every month because my current company doesn't have a retirement scheme. They are both using the same fund (Allan Gray Balanced fund) so its like they are part of the same scheme, they just have different withdrawal conditions as mentioned above.

 

[biff]

Thanks for the responses guys. @bumblebee, I was looking at both as I am OK with the preservation fund just sitting there. I also wanted something to contribute to though as I think if I didn't I would blow on stuff I probly dont need! Opted to go with just the RA for as I am need to stay away from the taxation.