Billy
Expert Member
Because if you are disciplined and invest the saving monthly you get the benefit of the interest or growth. If you let SARS have the money, they get the benefit.
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RA's for dummies...
- Thread starter shadow_man
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Because if you are disciplined and invest the saving monthly you get the benefit of the interest or growth. If you let SARS have the money, they get the benefit.
The first R500 000 you can withdraw when your retire is indeed tax free... but only if your retirement fund (RAs and pension funds, provident fund money invested before 1 March 2016 you can withdraw all) has R1.5 million or more in it, since one can only take out a 3rd, the rest must go into a pension annuity.
If you only have R1.2 million in RA or pension fund, you can thus take out up to R400 000, and it won't be taxed.
If you onlyhave R12 million in RA or pension fund, you can take out up to R4 million, the 1st R500 000 will be tax free and then the rest of that R4 million will be taxed as per the tax tables.
Just wondering is the one third limit on your total amount or per RA/provident fund?
For example at 55/65 or whatever the case may be, I cash in my work and personal RA, is both seen as one total? Or separate totals?
And does SARS then also see it as two separate investments or one total investment?
Billy
Expert Member
I need some advice from someone in the know re: retirement annuities.
Can you complain to the Pension Fund Adjuducator re: a retirement annuity?
My scenario : In 2012 I was unemployed for around 8 months so I was unable to pay the monthly premiums for my RA. Old Mutual then made my RA paid up so I did not have to continue the monthly premiums but I could not access the funds.
Its now 4 years later and the interest earned in this period seems very minimal. There has been very very little growth in the capital amount since 2012.
Is it possible for me to move my money to another fund which performs better?
Can you complain to the Pension Fund Adjuducator re: a retirement annuity?
My scenario : In 2012 I was unemployed for around 8 months so I was unable to pay the monthly premiums for my RA. Old Mutual then made my RA paid up so I did not have to continue the monthly premiums but I could not access the funds.
Its now 4 years later and the interest earned in this period seems very minimal. There has been very very little growth in the capital amount since 2012.
Is it possible for me to move my money to another fund which performs better?
I can't comment on the complaint but you can definitely move it somewhere else.
It's called a Section 14 transfer and it is a fair amount of paperwork but the new company you moving it to will guide you and help you through he process.
You can move it anywhere else that provides RA's. The low cost index funds like Sygnia, 10x, or the big unit trust companies like Allan Gray, Coronation, etc.
IIRC, mine took about a month from Liberty to new provider.
Thanks. So if I want to move it to Alan Gray I should approach Allan Gray to assist me with this?
Napalm2880
Expert Member
I'm busy with a section 14 transfer at the moment. Never, Never, Never get an RA through Liberty. Their platform is archaic and there is ZERO visibility of fees. It's taken me almost 3 months to find out the answers to simple questions such as "what are the penalties involved with a section 14 transfer" and other simple questions regarding fees - and unauthorised fee changes.
That said, do your homework on other RA providers fees. If you start doing the calculations, it's scary how something like a 1% advisor fee will nail your investment.
zerocool2009
Honorary Master
If you do lump sums, ask the question who will that cost you in fees by adding that.
Liberty was so bright (or wait, rather the ex broker)... I did a lump sum of R65 000 ....
Since adding that ... the ex broker got a nice %, the fees since 2010 was R16500 (just for that lump sum).
So be very careful please ! Ask questions before the time !
zerocool2009
Honorary Master
Sorry to hear that you are also a victim from "Liberty". Its bloody sad. I am now at a stage where I go online (via liberty), and look month for month what they charge in fees. I am committed till Aug 2017 before I move, I pray that month comes quicker !
You have an old style insurance RA. It is a bad product, which should not be confused with modern unit trust based RA's.
With unit trust RA's you can cancel your monthly contributions without making it paid up, and you can contribute lump sums as and when you like or increase/ decrease contributions as you please. There are no penalties payable if you want to move to another provider. You can also fire your adviser at any time and discontinue their commission payments.
You can do a sec. 14 transfer to a unit trust RA, but as it is an insurance RA there may be a penalty payable. It is however likely that the penalty was already deducted when you made it paid up - hence the poor returns.
You can Google "Section 14 transfer process" if you want to try do it yourself without paying more commissions to brokers.
I would recommend using Sygnia and transferring to one of their Sygnia Skeleton Funds on their Boutique option as this is the lowest fee RA available. You have to assess your risk tolerance - the 70 option is appropriate for younger investors, and the 40 option for risk averse, close to retirement age people.
Nedgroup investments Core range is also a good option.
If you want an active manager, I can recommend Allan Gray and Coronation. Their service is exceptional, but you pay for it.
Napalm2880
Expert Member
Does the following sound reasonable or should I keep negotiating - and shopping around?
No initial fees
1% Advisor Fee on recurring monthly contributions
0.75% Annual Advisor Fee
0.23% Annnual Administration Fee
1.27% Annual Fund Manager Fee
1% Advisor Fee on Lump sums (but this is negotiable)
Can increase / decrease premiums as required
Can pause contributions as required without penalties
*I'm assuming this is a unit trust RA?
No initial fees
1% Advisor Fee on recurring monthly contributions
0.75% Annual Advisor Fee
0.23% Annnual Administration Fee
1.27% Annual Fund Manager Fee
1% Advisor Fee on Lump sums (but this is negotiable)
Can increase / decrease premiums as required
Can pause contributions as required without penalties
*I'm assuming this is a unit trust RA?
Compare it to Sygnia RA using Skeleton fund range (DIY) where total cost is 0.4% pa, and you avoid active manager and adviser risk.
Sounds like a unit trust RA since the premiums are flexible. I'd say you should get that 0.75 advisor fee brought down. While it is reasonable for the adviser to take ongoing fee for ongoing servicing and management of the RA, 0.75% in the long run is steep, especially on an investment such as an RA which is likely to have very little servicing required until you're closer to retirement.
Napalm2880
Expert Member
I've seen a few posts about Sygnia RAs. I'll take a closer look. It's not like RA advisors actually do anything for their fee, right?
Napalm2880
Expert Member
Lol. I've already negotiated that advisor fee down from 1%.
If you're set on going the advisor route and you know he's worth his salt then I think you should draw the limit at 0.5%, even if it means increasing the fee on recurring contributions to 1.5%. At least that fee is only levied on the premium while the ongoing fee is levied on your entire investment, so it really has a profound effect in the long run. On the other hand the upfront fee on the monthly premium becomes increasingly less noticeable as your funds accumulate.
Secondy, even 0.5% is likely to be quite a sum of money down the line if you accumulate millions in there, so make sure the ongoing fee is negotiable down the line too.
Secondy, even 0.5% is likely to be quite a sum of money down the line if you accumulate millions in there, so make sure the ongoing fee is negotiable down the line too.
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Did you ask if the fees include VAT. It will reveal a lot about your advisers ethics if they quote fees before VAT - they should quote VAT incl.
Napalm2880
Expert Member
I'm seriously leaning towards doing this myself. I honestly see zero value in my current advisor and the two others I've been getting competitive quotes from. It's not like they're actively managing funds. I welcome financial advisors on myBB to comment but as far as I can tell, they typical advisor will sit down with their clients one a year, possibly move your contributions to a slightly better performing fund, and ask you to increase your contributions. It really seems like they're just middlemen taking a LARGE cut.
All fees mentioned above were ex.VAT. At least that was stated in the fine print.
zerocool2009
Honorary Master
I have read somewhere that if you have an RA, and over the period pay more than 3% in TOTAL, then you are on the right way to save, otherwise you are enriching the companies who are managing it !
itareanlnotani
Executive Member
Heaven forbid you actually ask our accountant Carl a question like this Mr Sheed.
I mean, that would be totally crazy, right?
I mean, that would be totally crazy, right?