Retirement Annuity

[Rkootknir]

I agree, I have also seen excellent growth on my share portfolio. Shares or Satrix is the way to go.

I chose a conservative RA because I have a more risky share strategy that I'm following. But 2.1% per 4 years is not conservative, that is a money sink. If I had put the money into the bank I would have had more over 4 years.

You can invest in a JSE Top 40 index tracker in almost all RAs (up to 75% of your portfolio as per Reg 28 of the Pension Funds Act). So you get the benefit of the equity index's performance as well as the marginal tax (e.g. 40% if you're in the top bracket) saving from the RA structure. Granted, the 75% limit on total equity investment might be a problem for people with high risk appetites, but the tax benefit can compensate for this.

Always get the provider to give you a full breakdown of the fees (brokerage, commision, administration, investment, etc). Most of the times (especially with the big insurers) it's the fees that nail your investment performance (and they almost never disclose investment fees explicitly). I've seen some fee schedules that imply "effective" fees of up to 4% p.a. which is just pure gouging on the part of the provider.

 

[supersunbird]

A recent article on RAs:

http://business.iafrica.com/personal-finance/804793.html?p=1

 

[Wyzak]

But who chose those multiple conservatve funds in that RA? Blame that person. Not the RA. Or put it into the bank if you think if will be better (but highly unlikely to beat inflation just as the that RA)

Those aren't the funds that my RA was always invested in. They changed the law last year sometime and we had to move to different ones. Those are the ones who had the best returns over the last few years - in the region of 20-30% is always thrown around, but real performance is never that.

At least in the bank I would have gotten more than 2.1% in 4 years.

The problem is that you can never judge a book by it's cover. You won't know how an RA will perform until you have one, and then if you are disappointed you are stuck and can never get out.

 

[Fuma]

You are probably revering to old style life RAs and not unit trust RAs in that experiencial regard, the latter are MUCH better and flexible.

And your advice is correct.

How long have the new generation RAs been introduced in SA? Been with Sanlam since '05.

 

[supersunbird]

How long have the new generation RAs been introduced in SA? Been with Sanlam since '05.

Cant seem to find at exact date and I didn't follow the industry before 2010 (I'm in IT, my interest in finance stuff is purely so I can retire comfortably because I've seen bad stuff with friend parents who are retiring/retired). But from what I can figure out seems around 2008 to 2009 date but I might be wrong. Someone in the industry needs to tell us.

 

[Rkootknir]

Cant seem to find at exact date and I didn't follow the industry before 2010 (I'm in IT, my interest in finance stuff is purely so I can retire comfortably because I've seen bad stuff with friend parents who are retiring/retired). But from what I can figure out seems around 2008 to 2009 date but I might be wrong. Someone in the industry needs to tell us.

It started at different dates with different companies, but as far as I remember it was mostly driven by the publication of the "Statement of Intent" in December 2005.