Why put your money in retirement plans?

A retirement annuity is a long term investment that aims to help you provide for your retirement years. This investment takes the form of a policy with a product supplier (company) like Old Mutual. Typical retirement annuities require a monthly investment amount but there are a few that accept lump sums only, or both. 

The monthly amount is calculated based on your retirement goals which include: 

• How much you would like to have when you retire
• How much you can afford to invest
• How many years until you retire

The figure can be calculated with the help of your financial adviser or by using our retirement calculator.

Unlike a company pension fund you are the only one contributing to the retirement annuity. Changing jobs will make no difference to your retirement annuity, as it’s independent of your employer.

Benefits of a retirement annuity include:

• Your contributions are tax-deductible (up to a certain limit) 
• With most retirement annuities you can choose which funds you would like to invest in 
• If you die, your benefits will not be tied up in your estate but allocated to your dependants as determined by the trustees of the retirement fund 
• You don’t pay any tax on the growth of the retirement savings

You can have any number of retirement annuities but the tax benefit is only up to a certain limit.

A financial adviser is the person best positioned to help you calculate this amount. They look at your whole financial portfolio and assist with calculating how much you need when you retire which helps you assess how much you should be saving. If you would like an estimate, then try our retirement savings calculator. Remember to be realistic about how much you'll need when you retire. Some expenses might decrease (your home may be fully paid up so no mortgage repayments) while other expenses, such as healthcare, are likely to increase due to failing health the older we get. 

Need advice? Why not connect with one of our friendly and professional financial advisers?

A pension fund is a retirement fund that receives frequent contributions (usually monthly) from you and your employer. A pension fund is chosen by your employer.

You have to stay "in" the pension fund while working at the company. If you leave the company before retirement age then you exit the pension fund too. The company will pay out the money you have accrued. You can reinvest the money from your pension fund into your new employer's pension or provident fund, your own RA or a preservation fund (where it will grow until you retire). If you cash out your pension fund, you will be taxed.

A retirement annuity is a long-term investment designed to help you save for your retirement. Only you contribute to a retirement annuity, not your employer. Your contributions are tax-deductible within certain limits. Changing jobs will make no difference to your retirement annuity, as it’s independent of your employer.

When you retire, at age 55 or older, you’re allowed to take a maximum of one third as a cash lump sum (the cash lump sum is taxable) from your retirement annuity. The balance must be used to purchase an income annuity (the income annuity is taxable).

If the total amount in the fund is less than R247 500 you’re not limited to taking only 1/3 of your savings as a lump sum. You can take the full amount as a cash lump sum, subject to tax.

A retirement annuity is the investment vehicle you use to save for your retirement. The retirement savings accumulated at retirement are then used to buy a life or living annuity (or a combination of the two) that pays you a regular income.