Retirement Annuities Explained

Money invested in a retirement annuity is specifically intended for one's retirement and should be utilized accordingly. A retirement annuity is an attractive investment vehicle for the build up of retirement savings, mainly because of its versatility and tax efficiency. RA's were introduced to provide the self-employed with the same tax incentives that members of retirement funds enjoy. However, RA's may also be used by people who are members of provident or pension funds.

Useful Retirement Annuity tips

• The earlier you start the better.
• Opt only for unit trust linked retirement annuities. These retirement annuities are costed as and when you make your contributions. Unlike most other retirement annuities, contributions to these type of RA's can be made on an as and when basis. There are no penalties for reducing debit orders, varying the rates of contribution or stopping contributions. Contributions may also be resumed without incurring any penalties. There are no penalties on late retirement or for maintaining the investments in the fund after the age of 55 because no commissions are paid upfront.
• As an investor in the Silke Retirement Annuity Fund you are able to invest in a selection of unit trusts that have passed our own quality assessment and that meet the requirements of prudential compliance regulations.
• Use an investment only product. Many RA's on offer include insurance components that make them more complex, with term tie-ins and penalties, and greater costs. We believe in simplicity and clarity. This means that there is no linked insurance, either life insurance or disability insurance.
• Review your RA regularly.

Basically a unit trust linked RA allows you to purchase shares, property, bonds and cash with before tax money using top South African and international fund managers. Assuming you are taxed somewhere between 20% - 40% per annum, every rand you contribute is tax deductible up to 15% of your non-pensionable taxable salary.

What better way to save and buy shares or property than with pre-tax money?

Silke Financial Services has the experience, skill & knowledge to guide your investment-making decisions in the most appropriate manner.