[:en]Financial planners love to recommend Retirement Annuities (RAs) as the Holy Grail for a secure and comfortable retirement.
And while they are quite correct regarding the positive aspects of RAs, I have found that they tend to embroider these positive traits and just lightly mention the possible negative aspects of RAs.
In this piece I am going to just do the opposite. We’ll have a quick look at the positive qualities of RAs, the role of the Receiver, but then spend a bit more time on those qualities that might come and bite you in the you know what . . .
(Illustrations in this article has personally been experienced by the writer.)
Positive:
When one is sequestrated, your RA is reasonable secure against creditors, to a certain extent even the mighty SARS. The law in this instance is quite complicated though and should be checked with your financial advisor.
And just a caveat here, do not think it won’t happen to you – it happens to the best of us.
Another big advantage is that annuities allow you to defer paying taxes, but as we’ll see later the keyword here is defer.
Your RA benefit is not subject to estate duty.
Specific “disadvantages”
Retrenchment:
Under the Income Tax Act, severance benefits (pension or provident fund and other benefits) are treated like lump sums paid to you on retirement - you get the first R500000 tax-free and the balance is taxed at rates of 18%, 27% and 36% depending on the amount.
That sounds like a who-ha – very nice of Mr Tax Man – but remember he always works wih a plan.
You get your money and use it wisely: take an amount of what is left after deductions to live on, pay off some debt, invest a large amount, and after a year or two you realise you will have to go and work again. You are fortunate enough to find a position and work merrily (not to the tune of I owe, I owe, its off to work I go).
AND THEN . . .
At the age of 55 ( the minimum age) you decide to monetise your RA, which stands at R300 000. You decide to take your allowed amount of R100 000 in cash (one third) and let the RA pay you the remaining R200 000 over a certain period (your choice, 10 years, 11 years 15 years . . .)
Not bad seeing that your salary is enough to live on. But, the R100 000 lump sum that you decide on, shrinks to a shocking amount of R63 000 after tax. Remember, you had your once off tax break of R500 000 when you were retrenched, and now SARS has no mercy. It sees the R100 000 that you decided to take as an additional income, and you are severely taxed on it.
You have also decided to let the RA pay you R1500 per month over 11 years (your R200 000 that you are not to allowed to take). And boom, that is taxed as well, because it is seen as an additional income.
No interest, nada, none:
The insurance company or whomever you decided to invest with, does not pay you interest on the remaining R200 000! Where the interest goes to, nobody will tell me officially.
I am sure though, the insurance company invests your money and receives interest on it, but that is a story for another day. O, also remember the effect of inflation; after 11 years years your pitiful amount of R1500 per month is even more pitiful.
Another thing to remember; make sure to nominate the remainder of your money to a beneficiary in case of your death before the moeny runs out. A good friend of mine pointed out to me that your policy changes when you decide to monetise your money. You then have to make sure that you have nominated a beneficiary.
I thought that the beneficiary nominated on the RA stays the same, when you let the RA start paying out.
My friend was correct. When I phoned I was told that the new policy doesn’t provide for a beneficiary.
Being a bit of a bulldog I insisted on speaking to a senior consultant. He then speedily put things in order. The company’s written excuse was that it was an employee in traing. Mmmm.
And then . . . after six years you get retrenched again.
Your former employer pays you the compulsary minimum of six weeks pay, plus accumulated leave, and his contribution to your medical fund, and other benefits if any (this time no pension fund).
And the Receiver hits you with another 36% deduction!
The moral of the story?
If a financial advisor tells you that you will be able to retire comfortable on your RA without mentioning the caveats, fire him/her even before appointing them.
As with investment in shares, I believe the most efficient way to save for retirement is in speaking to an accredited financial advisor and diversify. It won’t hurt to speak to a registered share broker if you can afford a longer view either.
And get yourself training in something being an electrician, welder, plumber, or develop your hobby into something you can make a business of, when that second or third retrenchment happens.
There is also the UIF, but that is another story as well.
Author: Maarten Roos
Disclaimer: Maarten Roos is a freelance financial sub-editor, has written or edited news in the news media and has been meddling in shares for himself for more than 30 years. He may not give financial advice, but has been bitten before, and may share this with you.[:AF]Met die aanvang moet ek sê dat ek die onderstaande voorbeelde ter illustrasie, self ervaar het. Talle finansiële beplanners is baie lief daarvoor om Aftree-annuïteite (AA’s) as die Heilige Graal voor te hou vir ‘n sekere en gemaklike aftreedag.
En terwyl hulle natuurlik heeltemal korrek is oor die positiewe eienskappe van AA’s is dit my persoonlike ervaring dat hulle geneig is om te fokus op dié positiewe eienskappe en die negatiewe eienskappe net ligweg in die verbygaan te noem.
In dié skrywe doen ek presies die teenoorgestelde. Ons kyk vlugtig na die positiewe eienskappe van AA’s, maar bestee dan ‘n bietjie meer tyd aan daardie eienskappe wat jou later aan die agterstewe mag byt.
Positief:
Wanneer ‘n mens gesekwestreer word, word jou AA beskerm teen jou krediteure, en in ‘n groot mate selfs teen die magtige SAID. Neem egter in ag dat die wetgewing in dié verband nogal ingewikkeld is en mens dit met jou finansiële adviseur moet bespreek.
Moenie te lekker lag oor sekwestrasie en dink dit sal nooit met jou gebeur nie; dit kan met enigiemand gebeur.
Nóg ‘n groot voordeel is dat ‘n uittree-annuïteit jou toelaat om die betaling vabetaling uit te stel, maar soos ons later sal sien is die sleutelwoord hier, uitstel.
Jou AA-voordeel is nie onderhewig aan boedelbelasting nie.
Spesifieke “nadele”
Aflegging:
Volgens die Wet op Inkomstebelating, word skeidingspakkette (wat mens se pensioen- of voorsieningsfondsbedrag insluit) hanteer soos enkelbedragbetalings wat jy met aftrede ontvang. Jy kry die eerste R500 000 belastingvry en die oorblywende gedeelte word belas teen 18%, 27% en 36% afhangende van die bedrag.
Dit klink fantasties – baie vriendelik van Oom Jan Taks – maar onthou hy werk altyd met ‘n plan.
Jy ontvang jou geldjies en bestee dit wys; jy gebruik ‘n gedeelte van wat oorbly ná aftrekkings om van te leef, betaal van jou skuld af, belê ‘n groot gedeelte . . . en na ‘n jaar of twee besef jy jy sal weer moet gaan werk. Jy is gelukkig genoeg om weer werk te kry, en pak elke dag jou kosblikkie en ag jou self gelukkig dat jy weer aan die einde van die maand ‘n salaris ontvang.
EN DAN . . .
Wanneer jy 55 jaar oud word ( die minimum ouderdom) besluit jy om jou AA te gelde te maak. Dit is ‘n “allemintige” bedrag van R300 000. Jy besluit om die toegelate maksimum bedrag in kontant van R100 000 (‘n derde) te neem en die AA jou die oorblywende R200 000 oor ‘n sekere tydperk uit te laat betaal (jou keuse of dit 10 jaar, 11 jaar, 15 jaar . . . is).
Glad nie sleg synde dat jou salaris genoeg is om van te leef nie. Maar, die R100 000-enkelbedrag waarop jy besluit het, krimp skokkend tot ‘n bedrag van R63 000 ná belasting. Onthou, jy het jou eenmalige belastingverligting van R500 000 reeds benut toe jy afgelê is, en nou het die SAID geen genade nie. Hy beskou die R100 000 wat jy besluit het om te neem as ‘n bykomstige inkomste, en hy looi jou ongenadiglik.
Jy het ook besluit om die AA jou R1500 per maand oor 11 jaar te laat betaal (die oorblywende R200 000 of twee derdes wat jy nie toegelaat word om te neem nie). En boem, dit word ook belas, omdat dit ook as ‘n bykomende inkomste beskou word.
Geen opbrengs nie, geheel en al niks nie:
Onthou ook dat die versekeringsmaatskappy of finansiële instelling waar jy jou AA uitgeneem het, jou géén rente op die oorblywende R200 000 betaal nie. Dit moet tog op ‘n ander plek as in ‘n kaslaai belê word. Maar waar dié rente heengaan, kan ek nie amptelik vasstel nie.
Ek is tog redelik seker dat die finansiële instelling jou geld belê en rente daarop ontvang, maar dis ‘n storie vir ‘n ander dag. O ja, neem ook die effek van inflasie in ag; ná 11 jaar is die maandelikse bedrag van R1500 ‘n bitter klein bedraggie.
Nog iets om in gedagte te hou, is om seker te maak dat jy iemand as die begunstigde van die oorblywende bedrag geld aanwys in geval jy te sterwe kom, voordat die geld opdroog. ‘n Goeie vriend het my daarop gewys dat mens se polis verander as jy jou AA “te gelde maak”. Jy moet dan seker maak dat jy ‘n begunstigde aangewys het. Toe ek op sy wenk reageer en bel, is ek meegedeel dat dié nuwe “polis” nie vir ‘n begunstigde voorsiening maak nie.
Omdat ek ietwat van ‘n bulhond is, het ek volgehou en vir ‘n senior konsultant gevra. My vriend was natuurlik heeltemal korrek en die maatskappy se geskrewe verskoning was dat dit ‘n “werknemer in opleiding” was wat my gehelp het. Mmm.
En dan word jy ná ses jaar wéér afgelê.
Jou (voormalige) werkgewer betaal jou die verpligte minimum van ses weke se salaris, plus opgehoopte verlof, sy bydrae tot jou mediese fonds indien enige (in dié geval was daar nie pensioengeld ter sprake nie).
En dan lóói die Ontvanger jou wéér met ‘n belastingaftrekking van 36%!
Die les van dié verhaal?
.As ‘n finansiële adviseur jou vertel dat jy gemaklik sal kan aftree op die opbrengs van jou AA, sonder om jou in besonderhede van die slaggate te vertel, dank hom af voordat jy hom aanstel.
Soos met beleggings in aandele, glo ek dat die effektiefste manier om vir aftrede te spaar is om te diversifiseer en met ‘n geakkrediteerde finansiële raadgewer te gesels. Dit sal ook nie seer maak om met ‘n geregistreerde aandelemakelaar te gesels as jy ‘n langer beleggingshorison het nie.
En as jy al langer in die tand is en sien jou geld gaan jou nie oorleef nie, kry opleiding in ‘n beroep soos ‘n elektrisiën, sweiser, loodgieter, of nog beter ontwikkel jou stokperdjie in iets waauit jy geld kan verdien wanneer daardie tweede of derde aflegging gebeur.
Daar is natuurlik ook die WVF (beter in die volksmond bekend as die UIF), maar dit is ook ‘n ander storie.
Skrywer: Maarten Roos
Vrywaring: Maarten Roos is ‘n vryskut- finansiële subredakteur, het nuus geskryf of geredigeer, en het self met aandele vir meer as 30 jaar lank gepeuter. Hy mag nie finansiële raad gee nie, maar het al in pynlike finansiële strikke getrap.
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