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Unit trust retirement annuities

Suzette van NiekerkSuzette van Niekerk

No initial product fees and a simple flat annual administration fee make the new unit trust retirement annuities (RA) one of the most cost-efficient ways to save for retirement. In addition, most of the unit trust funds on LISP platforms have undertaken to refund part or all of the annual administration fees as in investment incentive.

By saving as little as R500 a month or by making a lump sum contribution of R50 000, investors can grow their retirement nest egg. The new unit trust RA offers flexibility as it allows investors to change their retirement date, modify their contributions or switch between underlying funds at any time. Contributions for the 2008/2009 tax year should be made before the 20th of February.

RA transfers

Now is the time to review your existing retirement portfolio. Changes to the Pensions Funds Act have paved the way for investors to move from one service provider to another, should they wish to do so. In addition to the traditional life assurance RAs, there are a host of unit trust RAs, which offer a cost-efficient and flexible way to save for retirement. However, a transfer does not always make sense. We explore the issue of penalties, and a variety of other factors that investors need to consider when contemplating a move. Please contact us for advice.

Convenient investment

Unit trusts remain one of the most convenient and transparent ways to invest in your future. When saving for retirement some people consider investing in unit trusts rather than making use of RAs. They believe that this is a more cost efficient way to save for their future. The good news is that unit trust RAs can be just as cost efficient as investing in unit trusts without an RA wrapper. What’s more, unit trust RAs offer a host of tax advantages and other benefits. By saving on tax, investors can help to grow their nest egg faster.

New rules effective 1 March 2009

The Revenue Laws Amendment Act was gazetted and came into effect on 8 January 2009. It confirms that withdrawal from retirement funds (i.e. preservation funds etc.) will be taxed as follows:

Lump sum Tax liability
R0 – R22 500 0% (previously only R1 800 tax free)
R22 500–R600 000 18% above R22 500
R600 001–R900 000 R103 950 + 27% above R600 000
R900 001 and above R184 950 + 36% above R900 000

This is effective from 1 March 2009.

For more information and assistance with retirement planning and investing, call Suzette van Niekerk, Exceed Asset Management Pty (Ltd) on 021 8520382.