Retirement Annuity questions

TofuMofu

TofuMofu

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Hi peeps

I need some advice as I'm not sure if I'm being lied to by my broker or not.

When I went to college and had to take out a student loan, I was forced to take out a retirement annuity for some reason.

I was young and probably a bit daft at that stage so got it from Sanlam so that I can get my student loan.

Now after 10 years of working and the company paying for (CTC) my Provident Fund, I feel I don't want to pay for the Sanlam one to keep things simple and I can then add the monthly contributions into my Liberty fund rather.

I am being told I cannot cancel my Sanlam retirement annuity because it will only be available when I'm 55, all I can do is pay my contributions up front then there won't be any deductions???

Can they do this or I am being taken for a ride here?

Just to add, I received an email stating cancellation fees and such just last week from Sanlam...thus I'm thinking my broker is a sneaky fscker...am I right?

Here's the info from the email...it's in bloody Afikaans and I don't even fully understand it :p

Ons kan ‘n beeindigingsheffing verhaal indien u ‘n vervroegde aftreevoordeel neem of indien u die plan voor die aftreedatum beeindig. Hierdie heffings word op die omsettingsdatum bepaal en verminder met verloop van tyd na nul. Die beeindigingsheffingsbedrag op verskillende datums word in die onderstaande tabel aangetoon. Die laaste beeindigingsdatum in die tabel hieronder is gelykstaande aan die wysigingsheffingsdatum.

Ons kan ook ‘n betalingverminderingsheffing verhaal indien u herhalende betalings verminder of gestaak word. Hierdie heffing sal gegrond wees op ‘n persentasie van die beeindigingsheffing op daardie datum. Die betalingverminderingsheffing geld slegs vir die herhalende betaling op die omsettingsdatum. Enige verhoging in die herhalende betaling na die omsettingsdatum sal nie onderhewig wees aan ‘n betalingverminderingsheffing as die verhoogde gedeelte van die herhalende betaling daarna verminder word nie.
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Retirement annuities are only available for payout from 55.

Get your broker to give your current value of the annuity and then decide if you want to cancel or not. AFAIK cancelling the annuity freezes the value till you are 55 but I could be mistaken and you can end up losing what you have paid in so far.

Does not appear as if you are being taken for a ride.

I also took out retirement annuities when I was in my twenties and now I am able to retire next year at 55 with a couple of million.

If you can afford it, keep the monthly payments to the annuity going. It will eventually pay off.
 
You can't cancel it. You can make it paid up (that doesn't mean you have to pay the future contributions now as well). They will charge a cancelation penalty for that (up to a certain % of the value of the RA, based on the date this RA was created).

If you had lowered the contribution rate they would also charge such a penalty.

Old school RAs are the devils work, the newer Unit Trust based RAs are much better.
 
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I am being told I cannot cancel my Sanlam retirement annuity because it will only be available when I'm 55, all I can do is pay my contributions up front then there won't be any deductions???
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This is partly correct. The correct part being that you cannot cancel it; the incorrect part being you still having to pay contributions. Here's a very simple solution. If it has a value, which it should have by now, make it paid-up; you wouldn't have to pay any further contributions then and you can still get growth on the value that is in there.
 
You are one of millions that got conned in to getting a retirement annuity for some BS or kick back scheme .
The first 3 years that you paid normally goes straight to the broker that sold you the policy .
Have they told you what the surrender value is of this policy ?
You can make the policy paid up or surrender the policy .
Either way you are going to loose a shyt load of what you paid .
A few years ago these things were traded after surrender and a lot of people made money from these policies if the were 10 years and old because they got them so cheap .
 
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You should also be able to make your Sanlam retirement annuity paid-up (with a penalty payable) and then transfer the fund value to your company provident fund.

Get the following info from Sanlam:
- current value of RA
- penalty if RA is made paid-up or reduction/cap on premiums
- cost to transfer to another provider / company provident fund
 
FNfal said:
You are one of millions that got conned in to getting a retirement annuity for some BS or kick back scheme .
The first 3 years that you paid normally goes straight to the broker that sold you the policy .
Have they told you what the surrender value is of this policy ?
You can make the policy paid up or surrender the policy .
Either way you are going to loose a shyt load of what you paid .
Click to expand...

You cannot surrender a RA because the funds in it only available at age 55 attained. Making it paid-up is the only option.
 
FNfal said:
You are one of millions that got conned in to getting a retirement annuity for some BS or kick back scheme .
The first 3 years that you paid normally goes straight to the broker that sold you the policy .
Have they told you what the surrender value is of this policy ?
You can make the policy paid up or surrender the policy .
Either way you are going to loose a shyt load of what you paid .
Click to expand...

I have a value, which isn't high and I got cancellation penalty or fee per date (1 Dec 2015/2016/2017/etc).

Fsck, I can't believe I'm stuck with something like this?
 
Method said:
Thanks all!

Schitty as crap I signed up for >.<
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Youj're not alone, I have one of just over a 100k which I can only access 22 years from now. Just make it paid up and forget about it like I did :o
 
Supersunbird is correct. Those old generation RA's are the pits. The admin fees basically suck the investment dry.
Rather cancel and pay the penalty, then re-invest in a new generation product that has much better admin rates.
Within three years you will have made up the loss on the cancellation fee and after 10 years your money will be worth three times as much as the old annuity.
Go to a different broker if you have to, I can refer you if needs be.
 
The Statement of Intent (http://www.treasury.gov.za/comm_media/press/2005/Statementintent.pdf) places a limitation of 30% on charges imposed on policies in respect of which early premium cessation took place after 1 December 2006. Therefore your surrender value of the RA should be at least 70% of the current RA policy value.

I would suggest that you make the RA policy paid-up and transfer it to another retirement fund/arrangement. Take the bullet now, but the growth in e.g. your current company provident fund should be better than what the RA promises.
 
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this all sounds like legalized theft to me... sorry to hear op...
 
http://www.etfsara.co.za/news/latest/retirement_annuity_funds_in_sa.pdf

The older generation RA Funds, underwritten by insurance companies, often levy penalties if investors
need to do a Section 14 transfer under the Pension Fund Act, to another RA Fund. This is because the
insurance underwritten RAs carry upfront costs, upfront broker commissions and smoothing reserve
funds, which may still not yet be fully recovered. In which case, the RA company will claim back
these costs through levying a penalty for any investor that wishes to breach their contract. In 2009,
agreement was reached between the Life Industry and the Treasury that, for RA Funds sold before 1st
January 2009, penalties were limited to 30 percent, and for RA Funds sold after 1 January 2009, to 15
percent. However, numerous cases are being reported in the press that certain “old generation” RA
providers, levy such penalties over and over again for any occasion where an RA investor fails to make
contractual contributions.
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So if you make is paid up you may not be charged more than 30% of the value as a penalty (because it would be from before 2009).

Just don't reduce the contributions and then stop, because then you might be charged 2 penalties and some companies do not go by the spirit of the agreement that they made.
 
You will also have to pay income tax on the proceeds of the RA if you cancel now. That is because you had the advantage of a tax deduction while you paid the premiums.
 
LazyLion said:
Supersunbird is correct. Those old generation RA's are the pits. The admin fees basically suck the investment dry.
Rather cancel and pay the penalty, then re-invest in a new generation product that has much better admin rates.
Within three years you will have made up the loss on the cancellation fee and after 10 years your money will be worth three times as much as the old annuity.
Go to a different broker if you have to, I can refer you if needs be.
Click to expand...

So what are the new generation products?

I am looking into starting an RA soon and don't want to end up regretting it.

Also if anyone can recommend a broker in Durban, it will be appreciated.

Thanks
 
SoTrue said:
You will also have to pay income tax on the proceeds of the RA if you cancel now. That is because you had the advantage of a tax deduction while you paid the premiums.
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I didn't have to do that when I recently cancelled my old annuity.
 
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