Retirement Annuity Options

[mintydroid]

Anyone have a link to something that explains the tax benefits? I've also just started looking into RA's and haven't dug that deep yet.

Example:-

Non-retirement funding income x 15%
=R 100 000 x 15%
=R 15 000 contribution to RA

RA contribution x tax rate as per tax tables
=R 15 000 x 18%
=R 2 700 returned to you when filing tax return (and not going to Nkandla)

Therefore your actual contribution is only R 12 300 to the RA.

I didn't realize what I'm missing out on at first until I crunched the numbers.

 

[Stevi]

Have look at this. Very happy with performance over past year.

http://www.sanlam.co.za/personal/re...s/sanlam-cumulus-echo-retirement-annuity.aspx

So happy to see that started mine this month

 

[mintydroid]

Allan Gray has a minimum of R500pm on debit orders and you can choose funds for an RA to make up the compliance requirement.

I've had my RA with Allan Gray for around ten years now and feel that they (as well as other active managers) aren't completely transparent on the fees they charge, and whether their funds truly outperform the index. I'm thinking of moving over to Sygnia, which in effect offers passively managed funds that track the index (like 10x), and as a result, is able to offer performance fees of only 0.4% : http://www.sygnia.co.za/ Allan Gray's fees on their Balanced Fund, by comparison, is 1.69%

Remember most aggressive doesn't necessarily mean best performing. And I doubt you'll find an aggressive balanced fund.

If doing R2000 per month or lumpsums into the RA, you should easily be able to chose the underlying unit trusts in the RA. If its under R2000pm but more than R1000pm its doable too, but you might not be able to get exposure directly to say a property fund, and will have to do an internal switch in from one of the other funds (the bond fund for example) that contributes every months. If you want a longer example/description of this, just ask and I'll post about it later.

With a platform (LISP) like Allan Gray, you can choose from a few underlying funds from other companies as well (there is a small cost to it). Coronation just does Coronation funds on their platform.

You can even get Satrix ALSI Index Fund and Satrix MSCI World Equity Index Feeder Fund on Allan Gray now.
http://www.allangray.co.za/factsheets/# > under other local funds

I've found the calculator page where you can choose the underlying funds and it will tell you if it's Reg 28 compliant. Looks interesting.

 

[mintydroid]

Have look at this. Very happy with performance over past year.

http://www.sanlam.co.za/personal/re...s/sanlam-cumulus-echo-retirement-annuity.aspx

1k monthly contribution, increased every year by 6% for 25 years and a growth rate of 6+2% gets you around about the same amount as this.

 

[Verde]

Yes, an RA is a great retirement savings vehicle, but avoid Sanlam, Old Mutual and Stanlib at all costs (pun intended).

Over the years I have calculated the long term performance for countless RA's from these providers. As a result of high costs, they all failed to provide any meaningful return above inflation, some did not even keep up with inflation.
You have to keep total costs down to less than 1.5% per year at most.

That is:
-upfront costs
-adviser fees
-platform fees
-admin fees
-debit order fees
-guarantee costs
-fund management fees(including management fees charged by underlying funds in a fund of funds setup)
-underlying costs absorbed directly by the funds (trade costs, audit fees etc)
-buy sell spread
-marketing fees.

If you use a broker get them to put in writing what all these costs I listed amounts to, and ask for a calculation of the annual reduction in yield caused by costs.

I recently had an interaction with a Stanlib broker who claimed that there were no fund management fees charged by the Allan Gray Orbis Global Equity fund on the Stanlib Lisp platform. (The fee is actually in the region of 2% pa performance based).
The official Stanlib quote showed a zero fee for this fund. He was quite adamant, and the truth only came out after I requested that Stanlib put it in writing on their letterhead. He never admitted to the lie though.

The loophole Stanlib used to hide this fee, was the Asisa TER definition, which does not include management fees charged by underlying funds. In the case of the above fund, it invests 100% in an offshore fund (Orbis global equity fund) and the fee is charged in this fund, so not directly in the Allan Gray fund.

Be careful with costs - The industry is trying its best to hide the truth from investors.