‘Annuity’ is another word for the monthly pension you buy from an insurance company.
Money that is readily available is a temptation even to the most disciplined of us. If you buy an annuity, you can be sure that your money is kept safe for you. You also enjoy the returns of having your money invested in the market and you have the continuous support of a financial adviser.
There are many annuity options available and you will have different needs that might be catered for by taking out more than one annuity option. Speak to your financial adviser who will help you make the best choice suited to your needs.
Now that you have a better idea of which annuity might be best for you when you retire, have a look through the list below, find the annuity you chose and read about it in more detail:
Alexander Forbes has developed the Lifestage Annuity™ framework for members who may not be able to afford an inflation-linked annuity. This framework basically delays’ buying a fixed annuity until it becomes more affordable. The Alexander Forbes Lifestage Annuity™ combines the strengths of the two MAIN types of annuities:
*No Capital Gains Tax or Estate Duty is payable on the transfer of a living annuity or back-to-back annuity to the beneficiary on the death of the annuitant.
Inflation is a measure of the constant increase in prices over time. Inflation is best described as how you can buy more with R1 today than you will be able to in the future.
Escalations are pre-determined annual
increases in your monthly pension. They aim to try and make your
income’s purchasing power keep up with inflation.
Escalations are available on single-life or joint-life annuities and range between 0% – 20% depending on insurer.
You might find that you won’t be able to save the amount of money you will need to retire comfortably. One option is to look for other sources of income:
Interest-bearing investments are generally investments where money is lent and borrowed for less than 12 months and, in turn, you receive an income from the interest. Interest- bearing investments include:
Retirement means you are leaving the work environment. It does not mean that you are retiring from life. You now have more time to spend on doing the things that you really want to do. However, many retirees find themselves missing the work environment and choose to work part-time to keep themselves busy. More importantly, you can make extra money to supplement your income.
By the time you retire, you might not have to worry about your children as they will probably have moved out of home. It will probably be just you and your spouse at home and you might not need all the space you have available in your house. For most people, it is better to buy a smaller house. You could also rent out a few rooms in your house to receive an income.
A dividend is the interest you earn from shares that you own. Owning shares in a company means that you are a part-owner of a company that is listed on the JSE. With effect 1 April 20102 dividends from local companies and listed non-resident companies are subject to a dividend withholding tax of 15%. Investing in companies that pay large dividends can provide additional income.
If, when you retire, you purchase an annuity with your retirement fund benefit, you need to give your administrator or financial adviser an instruction and indemnity to assist you to buy an annuity in your own name. You should be aware that signing this instruction and indemnity has the following implications:
Make sure you understand all the terms and conditions of the instruction and indemnity form. If you are not sure about anything contained in the document, speak to your financial adviser because once you have signed the instruction and indemnity form, you are liable for the outcome of your decision.