Should I kill my RA?

Cius said:
RA's in SA are evil. I am locked in one too and if I try stop it I will lose a large chunk of it. The growth has been so far below my pension which is also in SA markets mostly it is pathetic. RA's were created to enrich all the individuals taking fees on the side out of it. Stay away from them and rather put money in a decent pension fund.
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Pension funds aren’t much better. They are often seen as easy access piggy banks by company directors and politicians.

Unfortunately any large pot of cash is gonna attract imaginative ways of accessing them.

You can invest it yourself, but the risk is high you make mistakes and be worse off.
 
zippy said:
Pension funds aren’t much better. They are often seen as easy access piggy banks by company directors and politicians.

Unfortunately any large pot of cash is gonna attract imaginative ways of accessing them.

You can invest it yourself, but the risk is high you make mistakes and be worse off.
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Also if you in invest yourself you lose out on the biggest aspect of pension savings, the tax benefit. Personally I think decent low cost diversified pension funds are fine. Alan Grey, Coronation, Investec, and a host of other great companies are out there with very competitive and low cost options. The new batch of super low cost ones like 10X are also worth looking at although they are somewhat unproven due to how short a time they have been around. Still, I think the only pension funds in danger of major looting are those run by state entities or unions.
 
zippy said:
You can invest it yourself, but the risk is high you make mistakes and be worse off.
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I don't think people grasp the impact of the tax benefit especially if you get it immediately like with a pension fund or RA arrangement instead of waiting for filing season.

On a salary of R30k per month:

+ R30,000 basic
- R5,500 income tax
---
R24,500 take home
R0 saved
= R24,500 for the month

With a 15% pension contribution:

+ R30,000 basic
- R4,500 pension
- R4,100 income tax
---
R21,400 take home
R4,500 saved
= R25,900 for the month


You can take the R24,500 without pension and save the R4,500 yourself but then your effective take home will be R20,000. That's a 7% loss.

Like anybody would do that anyway. The moment the latest Tom Raider is released or the Weber gives in and needs to be replaced (or worse, a new fat exhaust on the Opel) the first thing that'll stop is that R4500 for "just this one month".
 
Indeed, that R1400pm benefit government gives you is just ignored by most.

The difference is even bigger the higher your tax bracket (up to a limit of R350 000 retirement contributions for the year),
 
supersunbird said:
Indeed, that R1400pm benefit government gives you is just ignored by most.

The difference is even bigger the higher your tax bracket (up to a limit of R350 000 retirement contributions for the year),
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The gap gets bigger if you also put it in a home loan using a your pension contribution as an extra payment, for a house you renting out. You will be foregoing the interest expense as a deduction.
 
beefymoocow said:
The gap gets bigger if you also put it in a home loan using a your pension contribution as an extra payment, for a house you renting out. You will be foregoing the interest expense as a deduction.
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Are you trying to say a rental property will be even better? Something limited to 1 geographic location and which performance all rests on the tenant paying and whose capital growth will be low or stagnant or even negative (except if maybe in Cape Town, and only till who knows when).
 
supersunbird said:
Are you trying to say a rental property will be even better? Something limited to 1 geographic location and which performance all rests on the tenant paying and whose capital growth will be low or stagnant or even negative (except if maybe in Cape Town, and only till who knows when).
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Im saying it will probably be worst in most areas because if you make extra payments into your investment property you will lose out on the interest deduction from renting out your place.
 
The tax saving which my current RA affords me is something which I never took into account in my calculation which I used for my original post here. While not tons of money, it's still a rough R4k per annum which I need to consider in the whole scheme of things. Allowing the government to take more of my money because I want to save differently for my retirement is a bitter pill to swallow
 
In my case the RA is still toxic. I would get the same benefit putting that R1000 per month in my pension, but my pension has about 1/3 the costs and grows better to boot so overall the RA is just toxic. Anyways, I did the math and with the 30% penalty clause it just does not pay to change or move my RA in any way as it then triggers the clause. For now I am just going to ride it out for the next 15 years until I can access the money and then I will see if I can't add it into my pension somehow over time.
 
Cius said:
In my case the RA is still toxic. I would get the same benefit putting that R1000 per month in my pension, but my pension has about 1/3 the costs and grows better to boot so overall the RA is just toxic. Anyways, I did the math and with the 30% penalty clause it just does not pay to change or move my RA in any way as it then triggers the clause. For now I am just going to ride it out for the next 15 years until I can access the money and then I will see if I can't add it into my pension somehow over time.
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Bite the bullet, you would make the 30% up quick quick ! Firms are trying to keep clients with "bonus's" and "penalties", and only firms benefit !

1) Get a quote to do a section 14
2) Read up your contract getting the facts
 
Cius said:
In my case the RA is still toxic. I would get the same benefit putting that R1000 per month in my pension, but my pension has about 1/3 the costs and grows better to boot so overall the RA is just toxic. Anyways, I did the math and with the 30% penalty clause it just does not pay to change or move my RA in any way as it then triggers the clause. For now I am just going to ride it out for the next 15 years until I can access the money and then I will see if I can't add it into my pension somehow over time.
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Condolences for being in a old school RA that was opened before 1 January 2009 (if taken out after that date the max penalty is 15%) :(
 
Most old school RA's have a nice clause that indicates from month 1 to 60 (how much they will penalize you if you DARE to move). After 5 years, they have milked you dry with fees and will let go.
 
zerocool2009 said:
Bite the bullet, you would make the 30% up quick quick ! Firms are trying to keep clients with "bonus's" and "penalties", and only firms benefit !
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No. 30% is huge. Imagine his RA has a value of R200,000...

Even 10x will advise you that it is potentially better to leave it there and just start a new one.
 
Hamster said:
No. 30% is huge. Imagine his RA has a value of R200,000...

Even 10x will advise you that it is potentially better to leave it there and just start a new one.
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I would honestly move ! Give the money to professionals ! Even making it paid up is a big mistake (but that is me)
 
I am in a similar situation. have an RA and unit trusts with Old Mutual.
I want to move the RA, and the unit trusts I'm not sure if I should move the money to some other type of investment, move it to another unit trust, or move it to my RA.

I was eyeing 10x. They seem to be simplistic and all about low fees which makes sense. Then I checked them out on Hello Peter and I got a very different view. I'm unsure how founded and true those complaints are...
 
Cius said:
Also if you in invest yourself you lose out on the biggest aspect of pension savings, the tax benefit. Personally I think decent low cost diversified pension funds are fine. Alan Grey, Coronation, Investec, and a host of other great companies are out there with very competitive and low cost options. The new batch of super low cost ones like 10X are also worth looking at although they are somewhat unproven due to how short a time they have been around. Still, I think the only pension funds in danger of major looting are those run by state entities or unions.
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Strangely, in the U.K., it seems it’s the other way around. The company I work for we have recently had increases to pension contributions while the benefits have been reduced because there is a shortfall. At the same time directors get massive bonus payments. Pension funds have been looted by directors(Carrilian, BHS.) It’s the state pensions which are the most secure. Well for now :)
 
zippy said:
Strangely, in the U.K., it seems it’s the other way around. The company I work for we have recently had increases to pension contributions while the benefits have been reduced because there is a shortfall. At the same time directors get massive bonus payments. Pension funds have been looted by directors(Carrilian, BHS.) It’s the state pensions which are the most secure. Well for now :)
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Well, the system around pension funds and their accessibility are very different between SA and the UK.
 
Scooby_Doo said:
I have mentioned before, due to the requirement to keep 70% of the money in your RA in SA equity it is far more effective to just pay the tax now and move what you can save internationally or invest in international ETFs. The growth on the JSE is dead and its not going to change any time soon.

Edit,

Here is an example: 2 investments I made on the 1st October 2015 and as of this morning the return is as follows.

Satrix Indi - 11.59% Growth
DBXUS (now called SYGUS) - 51.51% Growth.
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Following up on this quote, just because it is starting to become ridiculous.

Satrix Indi - 3.58% Gowth
DBXUS (now called SYGUS) - 61.62% Growth
 
Scooby_Doo said:
Following up on this quote, just because it is starting to become ridiculous.

Satrix Indi - 3.58% Gowth
DBXUS (now called SYGUS) - 61.62% Growth
Click to expand...

And there were some times when the international growth was poor and the JSE and Rand did well, that's the time one invest your money in overseas funds (whether feeder or direct), not AFTER the rand has weakened.
 
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