Retirement Annuity Funds

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krepunk

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I need to get a retirement annuity fund, but I've never done it before as I've always just gone with my employers fund.
So what options do I have? Are they all basically the same or do some have features that others don't?

Any help would be awesome :)
 
They all pretty much function in the same manner. You contribute monthly, your contributions get invested in the fund of your choice, the contributions are tax deductible to certain limits. At retirement you can take one third of the fund value as a lump sum (favourable tax rates are applied to this withdrawal), the remaining two thirds is used to purchase an annuity that pays you a monthly pension. Funds in an RA are not accessible until age 55.

They are all much of a muchness in terms of legislation and what they do. The only thing to consider is the costs. Get quotes from various companies and then compare the reduction in yield (RIY) reflected on each quotation. The lower the RIY the better as it means the costs have less effect on your investment. Fund choice should be done in consultation with an adviser. Be careful of those who chase yesterday's flyer. Stick with funds that have a good long term track record.

Those are the basics. If you need more help feel free to ask away.
 
Thanks for that :)

So any recommendations of good advisers?
 
Great advice from Lancelot, but you can draw on your RA before 55. This is not advisable as you will then get slapped with a hefty tax bill (as it will be seen as income) at your current marginal tax rate.

+1 for Allan Gray. I ahve one of the products listed on the website where I contribute a monthly sum which gives me a better return than any savings account (Capitec best) or my bond (which is also an investment if you can get a better return somewhere else).
 
Saffa said:
Great advice from Lancelot, but you can draw on your RA before 55. This is not advisable as you will then get slapped with a hefty tax bill (as it will be seen as income) at your current marginal tax rate.
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No you can't.

The only time you can is if you were to become disabled (regarded as early retirement), you stopped contributing and the fund value was under R7000, or you emigrate (emigration rule seems to differ between companies)!

I can only assume you are thinking about a provident fund.
 
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LancelotSA said:
No you can't.

The only time you can is if you were to become disabled (regarded as early retirement), you stopped contributing and the fund value was under R7000, or you emigrate (emigration rule seems to differ between companies)!

I can only assume you are thinking about a provident fund.
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Well there are ways to get the cash out if necessary - you can transfer the RA to a preservation fund and then you can make one withdrawal from it at your marginal tax rate...
 
Can one add to a RA from time to time (in addition to the monthly cntibution)... i.e. it is not "closed" like a pension preservation fund ?
 
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blunomore said:
Can one add to a RA from time to time (in addition to the monthly cntibution)... i.e. it is not "closed" like a pension preservation fund ?
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Why would you want to? There are no tax benefits for additional contribution (usually) so you're better off imho investing spare cash into a more flexible asset class if you've already reached your maximum tax deductible contribution threshold...
 
DJ... said:
Why would you want to? There are no tax benefits for additional contribution (usually) so you're better off imho investing spare cash into a more flexible asset class if you've already reached your maximum tax deductible contribution threshold...
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How does it differ from a "retirement fund" into which you can contribute before the end of the financial year to enjoy the tax benefit ?
 
HavocXphere said:
Care to....elaborate?
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Well, not all RA's have decent returns.

I have two with Momentum that will just about pay out the value of the contributions (ie zero growth), and one with Liberty with negative growth (ie it will pay out less than the contributions).

Personally I believe that I can usually outperform RA's, but I have invested in a few mainly because of the tax benefits, as the costs associated with RA's are high, and the companies are not always very ethical.
 
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blunomore said:
How does it differ from a "retirement fund" into which you can contribute before the end of the financial year to enjoy the tax benefit ?
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It doesn't differ from that perspective unless you've already reached your contribution tax threshold. In which case there are better performing assets to be investing your money. RAs are great from a tax perspective but from my own experience you'll realise a far greater return in other assets/asset classes once the threshold is reached. Your threshold (iirc you're self employed) is 15% of your taxable income...
 
Jola said:
Well, not all RA's have decent returns.

I have two with Momentum that will just about pay out the value of the contributions (ie zero growth), and one with Liberty with negative growth (ie it will pay out less than the contributions).
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The portfolio of assets in an RA are not intended to be short-term realisations of income growth, but rather long term capital growth so this is to be expected, especially considering recent global financial pressures. You've already realised a large tax saving by investing in them which I think you're not taking into account...
 
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