Retirement benefit counselling
Getting close to retirement? It's important that you make informed decisions about the financial options available to you, as the choices you make are usually irreversible and affect your income for the rest of your life.
- Know exactly what options are available to you at retirement.
- Create a retirement income plan for your needs.
- Make sure you understand your annuity choices.
What options are available at retirement?
The type of retirement fund(s) that you are a member of and whether the two-pot retirement rules apply to your retirement savings determine your options when you retire.
Provident fund and provident preservation fund options
- If you were under 55 years old on 1 March 2021, your contract or policy is automatically included in the two-pot retirement system.
All savings up to 31 August 2024 go into the vested component, which could be split between:- A vested benefit: Value on 1 March 2021 plus growth.
- A non-vested benefit: Contributions and growth after 1 March 2021 up to 1 September 2024.
What can you take at retirement?
Your full vested benefit and up to one-third of your non-vested benefit as a lump sum (taxed according to the retirement fund lump sum tax table). You must use the rest of the non-vested benefit to buy an annuity and the annuity income is taxed as normal income. - If you were 55 years or older on 1 March 2021 and a provident fund member who stayed in the fund until retirement, the two-pot retirement system and its rules won’t automatically apply to you.
Key factors to consider when choosing an annuity
Choosing an annuity is an important decision as it locks in a retirement income stream for life, using your retirement savings. When thinking about the right annuity for your needs, it helps to start with how much flexibility and income certainty you’re looking for. Your overall financial picture, including your health, risk tolerance and other income sources, will also play an important role. Speak to a financial adviser to help you consider your own, special circumstances.
Annuities generally fall into two categories and each has its own key features:
- A living annuity offers you flexibility to decide how you want to invest your retirement savings and how much income you receive, within certain limits.
- A living annuity guarantees you an income for the rest of your life and you don’t make any investment decisions.
Living annuity and Guaranteed life annuity comparison
Is your income guaranteed for the rest of your life?
Living annuity
Guaranteed life annuity
Living annuity
No, you will get an income for as long as your money lasts.
Guaranteed life annuity
Yes.
Can you choose your monthly income amount?
Living annuity
Guaranteed life annuity
Living annuity
Yes, every year you can choose an income of between 2.5% and 17.5% of your investment value.
Guaranteed life annuity
No, you receive a starting income amount based on various factors and your requirements.
Can you decide how you would like to invest your savings?
Living annuity
Guaranteed life annuity
Living annuity
Yes.
Guaranteed life annuity
No, the life insurer will decide how to invest your savings to give you a predetermined income for as long as you are alive.
Can you adjust your income every year?
Living annuity
Guaranteed life annuity
Living annuity
Yes, within the legislated limits as mentioned above.
Guaranteed life annuity
No, the life insurer offers a range of yearly income increase options, which you must choose from upfront.
Can you change your annuity at a later stage?
Living annuity
Guaranteed life annuity
Living annuity
Yes, you can convert your living annuity to a guaranteed life annuity later.
Guaranteed life annuity
No.
What will your beneficiaries receive when you pass away?
Living annuity
Guaranteed life annuity
Living annuity
Your nominated beneficiaries will receive the value of your living annuity.
Guaranteed life annuity
- If you chose a life annuity with a guarantee term and the last surviving annuitant passes away before the end of the guarantee term, your nominated beneficiaries can choose to receive income until the end of this term, or the equivalent of this income as a lump sum amount.
- If you did not choose to have a guarantee term on your life annuity or if the guarantee term has ended and the last surviving annuitant passes away, your beneficiaries will not receive any amount.
- If you chose a life annuity with a Capital Protector, your nominated beneficiaries will receive the life cover amount when the last surviving annuitant passes away.
What is a 'guarantee term'?
Living annuity
Guaranteed life annuity
Living annuity
Not applicable to living annuities.
Guaranteed life annuity
A term that you can select upfront during which the income is guaranteed. Should you pass away during this term, the remainder of your income payments will still be paid to your beneficiaries.
Blended annuity option
You also have an option of enjoying the benefits of a living annuity and a life annuity in one solution. The Guaranteed Annuity Portfolio is a life annuity, which is available within the Retirement Income Option as an optional investment component.
Annuity option if you’re unsure what to choose
We offer a trustee-approved guaranteed life annuity, you can choose.
This option provides the following:
- A guaranteed life annuity, so you will receive an income for as long as you (or the second annuitant for joint life) are alive.
- The starting income will depend on the lump sum used to purchase the annuity, your age at that time and other factors.
- The income amount before tax will increase by 5% every year.
- It includes a 10-year guarantee term. Your beneficiaries will continue to receive the remaining income payments for the remainder of the 10 years if you pass away before the end of the 10-year guarantee term.
What are the risks of the trustee-approved annuity?
- Inflation is unpredictable. In future, inflation may increase faster than the stipulated yearly increase in your income.
- You can’t make changes to the product in future.
- After the guarantee term, your beneficiaries will receive no benefit when you pass away.
What will it cost you?
All costs linked to your guaranteed life annuity are already accounted for when the income payments are calculated and won’t affect the income you will receive. If you use a financial adviser and choose this option, you may have to pay commission to the adviser upfront. You can negotiate the commission with your financial adviser.
Get advice
Partner with a trusted financial adviser to plan a secure financial future that ensures income throughout your later years. You can also contact our service specialists at Momentum for more information..