What is Fund Select Annuity?The Old Mutual Fund Select Annuity investment option is also known as a life annuity or a guaranteed annuity. This means that the pension you start out earning will depend on the amount that you invest, and you are guaranteed to receive your pension for the rest of your life. The yearly pension increases you receive depend on how the investment markets perform.
When you retire, you invest some, or all of your retirement savings into Fund Select Annuity (the law requires that you invest at least 2/3 of your fund benefit in an annuity on retirement). Depending on how much you invest, you will get a monthly pension paid to you from your Fund Select Annuity for the rest of your life.
- A favourable annuity rate
- A life guarantee
- Protection against inflation through participation in the bonus of underlying investment portfolios (annual pension increase)
- The ability for members to specify a second life to be covered (e.g. spouse or partner) at 50%, 75% or 100%
- Members may select whether the annuity must be paid for a guaranteed term once it begins (e.g. 5, 10 years up to a maximum of 25 years)
- Members can select the portion of their retirement benefit that they wish to apply to the Fund Select Annuity, with the balance invested in an alternative annuity or, subject to Income Tax regulations, taken as cash
Investment management charge
Currently the annual charge is approximately 0.75% to 0.85% of assets (including VAT & asset manager costs). The percentage may vary slightly depending on the asset allocation and asset manager performance relative to benchmark. Annual increases declared are net of this charge.
A once-off initial fee of R2 114 (deducted from the capital invested). To prevent the deduction of monthly administrator fees from your pension, R95 per month (which is accrued for the anticipated term of your annuity policy) is deducted upfront from the capital value invested. Any quotes you receive already take these fee deductions into account and show the final estimated income you can expect to receive.
Currently set at 1% per year of the value of the underlying portfolio. This charge provides for the guarantee that your pension will be payable for your lifetime even if the capital amount you invested runs out. Annual increases declared are net of this charge.
Since your pension is guaranteed for life, there is not likely to be any of your invested capital left when you die. This means that your Fund Select Annuity investment does not go to your dependents or beneficiaries as part of their inheritance when you die.
If you have selected a guaranteed term and you pass away before the term has expired then the annuity will continue to be paid for the remaining balance of the term and if a second life was selected the annuity will only reduce to the selected level on the expiry of the guaranteed term.
The Effective Annual Cost (EAC) is a measure which allows you to compare the estimated impact of charges on different Financial Products. The EAC is made up of four cost components, namely investment management, advice, administration and other. The effect of some of the charges may vary, depending on your investment period.
Financial Products include all savings and investment products, but exclude pure risk-based products and memberships from pension and provident funds.
Bonus escalating (with-profit) annuities are not purely risk-based and some of the costs incurred on the product will impact future bonuses (increases to the income) declared.
The EAC measure is primarily focused on investment products that may be surrendered, but please note that individual bonus escalating annuities may not be surrendered unless the purchase amount was below the regulated minimums.
Prior to purchase if your retirement interests are below the regulated minima you are able to elect to take your retirement interest as cash.
If you would like to request a summary of the EAC for your annuity, email us at SuperFundAnnuity@oldmutual.com or call 0860 388 873.