Ok, so almost everyone accepts that a unit trust RA is currently the best retirement annuity available in SA…(for reasons of cost, transparency and most importantly, flexibility). And while government is (apparently) intent on encouraging retirement savings, it seems that they really are only paying lip service to the issue because you can only access a unit trust RA if you are well-heeled. The very people who so desperately need to be encouraged to save cant access the best product.
The current tax limit on RA contributions is R1750 per annum (there are a few provisos to this amount) but for all intents and purposes, the average man in the street who belongs to a pension fund and who wants to supplement his retirement savings via an RA is limited to this amount (by way outdated tax limits).
But here is the problem – you cant get into a unit trust RA with this amount. You need at least R250 and in most cases at least R500. When you ask the Manco’s why they all say it has to do with bank fees and the cost of debit orders, blah, blah, blah…
Somehow the Life insurance companies manage to do it – so either their systems are more efficient or they are making an absolute killing on the products (or both).
But the bottom line is that if you dont have R500 per month to put into an RA you cant use a unit trust RA and if you want to get any tax relief and only qualify for the R1750 then you are being forced into an inferior product. Not only is the life insurance RA significantly more expensive, but it also carries significant penalties if you alter the contract at any stage.
So if you are faced with the choice of a life insurance RA or no RA then I would stay far away from any retirement annuities…
My quesiton is so where are the legislators and where is the Miniser of Finance when it matters? Seems that unlike unit trust RA’s, talk is cheap!
