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Making retirement decisions as easy as possible for SARAF members
Different people have different needs and we’re committed to being your trusted partner, offering your access to the support and solutions you need to secure the retirement you deserve.
You may retire from SARAF from age 55. There are only two instances where you can retire earlier:
- When you are permanently disabled and are unable to work on a full-time basis.
- If you haven’t been a South African tax resident for three years on or after March 2021, or left South Africa on the expiry of a work/visit visa.
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How the Two-Pot Retirement System affects your retirement annuity
Under previous legislation, you could only access your retirement savings when you retire (on or after age 55).
The new Two-Pot Retirement System enables policyholders, other than those with legacy retirement annuities, to access a portion of their retirement savings before retirement for non-retirement purposes, whilst still preserving a larger portion for retirement. Legacy retirement annuities (all Flexi-, Conventional and Growplan retirement annuity policies qualifies as exempted policies) are exempt from the Two-Pot Retirement System, which means that the regulations before 1 September 2024 continue to apply to these annuities.
From 1 September 2024, your retirement annuity consists of a savings component and a retirement component. A third of your contributions will be allocated to the savings component and two thirds to the retirement component. In case of an emergency, you may withdraw from the savings component once a tax year (subject to fees, tax and product rules). The money in the retirement component will be preserved until you retire.
If you contributed to a retirement annuity before 1 September 2024, you may also have a vested component, which will be preserved until you retire. You can only access your savings in this component when you retire (at earliest age 55). You may take up to a third as a cash lump sum, and have to use the rest to buy an income annuity that pays you a regular income.
Withdrawing from the savings component before retirement will significantly impact your retirement outcome. Please speak to your financial adviser to review your financial situation before you make any decisions that will impact your retirement savings.
You can also visit the Two-Pot Retirement System page for more information.
Option 1
Receive all your retirement savings
If the amount in the vested component (if applicable) that must be annuitised (two thirds) plus the amount in the retirement component (full amount) is less than R165 000, the full amount can be taken as a cash lump sum (subject to tax). This needs to be aggregated across all your investments in SARAF, including amounts previously commuted.
For assistance, please call 0860 60 60 70.
Option 2
Invest all your retirement savings in an income annuity
You can use the full amounts in the savings, retirement and vested components (if applicable) to buy an income annuity to provide you with a regular income during retirement. Old Mutual offers income annuities to pay you a regular income when you retire.
If you need more information on SARAF annuity options please contact us on 0860 722 222 to speak to a Retirement Benefit Counsellor.
Option 3
Withdraw a portion of your retirement savings as cash and invest the balance in an income annuity
You can take a portion or the full amount in the savings component as a cash lump sum (subject to tax). You can also take up to a third of the vested component (if applicable) as a cash lump sum, but have to use the rest to buy an income annuity.
The full amount in the retirement component must be used to buy an income annuity. Old Mutual offers income annuities to pay you a regular income when you retire.
If you need more information on SARAF annuity options, please contact us on 0860 722 222 to speak to a Retirement Benefit Counsellor.
It is crucial to understand the terms and features of an income annuity before making a decision. Best is to speak to a financial adviser to choose the best income solution for your financial situation and circumstances. If you’re not in contact with a financial adviser, call 0860 947 3666 or email advice@oldmutual.com and we will put you in contact with an accredited financial adviser to help you guide your income choices.
A Living Annuity is a retirement income option that allows you to decide what percentage of your retirement capital you would like to receive. You can withdraw an income between 2.5% and 17.5% a year, and you can adjust this percentage once a year. You have to carefully manage your drawdown rate, as you risk running out of money by living longer than expected or because of poor market performances.
Key benefits:
- You can decide which investment funds to invest in and how much you want to withdraw
- You can leave any remaining retirement savings to your beneficiaries when you die
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With a Guaranteed Annuity, you will have a constant, predetermined income for as long as you live. Your initial income will be determined by how much you invest, your age and gender, and whether you choose a guaranteed term. The guaranteed term is effective from your date of retirement, for which your retirement income will continue to be paid for the remainder of the guaranteed term, even if you die.
You can also choose an escalation option that determine how the purchasing power of your income will increase or decrease over time. There are four escalation options:
Key benefits:
- There is no risk of outliving your retirement capital, and your income is guaranteed regardless of market performance
- You can choose a joint life annuity where income is paid until both you and your partner die
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A Composite Annuity combines the features of a Living Annuity and a Guaranteed Annuity. It ensures that you receive a selected level of income for life, protecting you from outliving your capital and let you keep a portion of your capital invested in the markets. You may also preserve funds to leave to your dependents when you die.
Key benefits:
- You receive a regular income for as long as you live
- You can select an income that increases over time
- You choose how much income you withdraw (within the limits) with the option to change this once a year
- Choose your investment funds on the portion invested in the Living Annuity, which could potentially boost your retirement income by delivering above-inflation returns
If you are still unsure which annuity option is best for you, or you choose not to speak to a financial adviser, you can make use of a dedicated Retirement Benefits Counsellor (RBC) who will assist you in explaining SARAF’s annuitisation strategy and the two default annuity options that were approved by the trustees. You will also not pay any commission if you purchase one of the default annuities made available through the RBC.
How? Call 0860 722 222 to speak to a Retirement Benefit Counsellor.
Default annuity options
At retirement, you’ll have the option to invest some, or all of your retirement savings into an annuity. If the total value of all your SARAF investments equates to R247 500 or less, you can take the full amount as a cash lump sum. There are two default options available:Max Income Guaranteed Bonus Escalation Annuity
This option is also known as a guaranteed or life annuity. It pays a guaranteed income for the rest of your life. This means that the initial starting income is determined upfront, and you’re guaranteed to receive an income for the rest of your life.
Your income will increase every year with annually declared bonuses. Bonuses can’t be removed but can be zero in a given year. This option also gives you the best of both worlds i.e. a reasonable starting income and an increasing future income.
The yearly increase you may receive is dependent on how the investment markets perform. Once an increase is given it is guaranteed or ‘locked in’, so your income will never decrease - even if markets perform badly.
Suitable for you if:
- You want absolute certainty of an income for as long as you live.
- You want a reasonable starting income with future increases.
May not be suitable for you if:
- You want a flexible income where you can change the level of income.
- You want to choose and manage the underlying investment funds yourself.
- You want a wider range of underlying portfolios or selection of funds.
Max Income Living Annuity (Investment Funded Income)
This annuity allows you to decide how much income you would like to receive each year. Your chosen yearly income is converted to a percentage of your retirement savings and is known as your drawdown rate.
When you invest in the Max Income Living Annuity, you can choose how much your income payments over the year will be as a percentage of your fund value. There is no guarantee on your income. To ensure the sustainability of your income, the trustees determine a minimum and maximum drawdown rate from which you can choose. There is no guarantee on your income.
You’re able to change the annual income you receive once per year. As with the initial income decision, if you make the annual increases bigger than the growth of your investment, you could deplete your investment capital and lose your income.
Suitable for you if:
- You want investment freedom and market-based performance.
- You are prepared to take the risk of running out of capital due to:
- drawing too much income over time
- markets not performing to expectations
- living longer than expected.
- You want to leave the balance of your retirement savings to your beneficiaries when you die.
May not be suitable for you if:
- You want to draw more income than the restricted range.
- You want a guaranteed income for life.
- You are not prepared for market volatility.