Dear Old Mutual
If you are going to send me spam emails about your products then I have no issue reviewing and rating them! Please stop sending me unsolicited emails about your products! I don’t rate them and will not use or recommend them.
The Financial Coach
The most recent series of spam is a repeated email from savemoney.co.za, an Old Mutual sponsored site that is offering a flexible savings plan for “only R350 per month”.
It took a bit of digging on their site to find the pertinent information. On the face of it, R350 per month seems like a reasonable and accessible offer, until you dig deeper into the fees section. The following paragraph is taken directly from their site.
What are the fees and charges applicable to my Flexible Plan?
An administration charge of 0.86% per year of your fund value will be charged. This will be deducted at the end of every month. If you do not have a regular investment set up on any of your Old Mutual Invest Plans (i.e. Tax Free or Flexible Plan/s), or if your regular investment is cancelled, the administration charge will be a minimum of R22.80 per month. The administration charge can be reduced or refunded with our Investment Maximisers.
Let’s look at a typical investor who takes out this flexible investment at R350pm and pays for 2 years (24 months) before life takes over and they need to stop the debit order. Ignoring escalations and growth etc, they would have invested R8400 over the 24 months and would have paid a reasonable annual admin fee of 0.86% pa. But then it all goes pear-shaped because once they stop the debit order, this fee will increase to R22.80 per month, or R273.60 per year or 3.36% per annum (that’s before the underlying fund fees)!
Yes, the longer you save the lower the admin fee will be but even if you stop the debit order after 5 years you will be paying an admin fee of around 1.3% per year.
No, there are better ways to do this…consider a unit trust tracker fund with someone like Gryphon where for R200 pm you can invest and pay nothing other than the fund fee of 0.23% per annum!