30 April 2021
RETIREMENT
Retirement planning in a pandemic
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lmost half of the South Africans surveyed (49%) in the recent 10X Retirement Reality Report 2020 (RRR20) admitted they didn’t have a retirement plan. Only 6% said they had a plan they were sticking to. These numbers explain why 10X talked of a ‘retirement crisis’ when they started their research in 2018. South Africans are, however, not blind to the consequences of having inadequate retirement plans and savings in place. In fact, 76% of those with a household income (HHI) between R20 000 and R50 000 expressed concern about it, as did nearly three quarters (72%) of those whose HHI was more than R50 000 per month. “This indicates that a broad range of people are feeling anxious about their retirement and it highlights the important role advisers can play in
Jaco van der Merwe, Executive General Manager: Personal Finance, Old Mutual
“What should advisers/planners be saying to their clients?”
building more positive futures. Apart from helping customers to understand their options and draw up a solid financial plan, qualified advisers can recommend solutions that support the plan and are appropriate for their life stage,” says Jaco van der Merwe, Executive General Manager for Personal Finance at Old Mutual. Nobody could have predicted the COVID-19 pandemic and its economic fallout, which has worsened the problem, preventing many people from earning an income and pushing them into debt unless they had access to an emergency fund. The lessons learnt were painful, but may mean that many more South Africans will now take steps to strengthen their long-term finances, reassess what’s important, scale back and plan properly for the future. What should advisers/planners be saying to their customers? 1. Take advantage of tax breaks South African taxpayers are allowed an annual tax deduction of up to 27.5% of the higher of their taxable income or remuneration, but limited to a maximum amount of R350 000, in respect of contributions to retirement funds.
Make use of this concession to reduce your tax bill by increasing your contributions to your current employersponsored retirement fund or a retirement annuity fund. You can also take advantage of a tax-free savings account, which allows you to save up to R36 000 a year (or R500 000 in total over your lifetime) without paying tax on the income or growth of your investment. 2. Consider all the available retirement options Look into all options for investing capital for an income at retirement, such as living annuities and the various types of guaranteed annuities. Remind customers of the wisdom of a sufficiently diversified portfolio, which spreads risks while seeking optimal returns. At Personal Financial Advice (PFA), our advice model makes it easier for advisers to make the right recommendations for appropriate action backed by Old Mutual, a 175-year-old leader in the financial services industry. Our market-leading solution recommendation tools and propositions, together with the integrated wealthplanning platform and the practice management support, give advisers a competitive edge in the market. For more information on the adviser value proposition offered by PFA, email Vusi Zingitwa, Provincial General Manager, Personal Finance at Old Mutual at VZingitwa@oldmutual.com
Eight reasons why a retirement annuity is a good idea
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or many years retirement annuities (RAs) have formed part of investors’ retirement savings plans. In these times of profound economic uncertainty, Roenica Tyson, Investment Product Manager at Glacier by Sanlam, says it’s never too early (or too late) to start saving and adding an RA to a retirement savings plan.
We’re just not saving enough for retirement The reality is that most people who have a retirement benefit at work, opt to make the minimum contributions that the retirement fund allows for – and it may not be sufficient. People who invest in an RA, as well as their employer retirement fund, create a larger pot of retirement savings, which means they have more to invest to secure a better income during their retirement. Why investing in a retirement annuity makes good investment sense It provides a kickstart to a retirement savings plan. Whether fulltime employees, or self-employed, RAs can propel people on their retirement savings journey – as a standalone solution, or as part of a retirement savings plan.
1 Roenica Tyson, Investment Product Manager, Glacier by Sanlam
32 www.moneymarketing.co.za
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It’s affordable. A small monthly investment can make a big difference to retirement savings outcomes years from now.
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It offers flexibility. RA contributions can be paused or reduced should the need arise.
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Tax benefits. A portion of contributions is tax deductible, and no tax is paid on interest or capital gains within an RA.
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It ticks many retirement savings boxes. An RA potentially offers the opportunity for investment in a wide range of funds, risk-profiled solutions and share portfolios, customised to suit particular needs and risk profiles.
Savings are protected from creditors. A retirement annuity investment is protected from creditors.
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You can’t touch it. Well, not until you’re at least 55. Once invested in an RA, it’s for the long haul.
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The underlying investment options of an RA are selected based on one’s particular risk profile. Every investor has different needs, lifestyle and risk appetite that can change over time. Establishing a risk profile, based on life stage and financial needs, is a critical first step on the retirement savings journey. Glacier Financial Solutions (Pty) Ltd and Sanlam Life Insurance Ltd are licensed financial services providers.
