The decision of whether to invest in retirement Annuities or Unit trusts is a debate which has gained new ground since the proposed change to regulation 28 of the Pension Funds Act and revolves around tax benefits and the possibility of restricting investment types to retirement funding instruments.
The new regulation proposes that a restriction similar to that imposed on Pension funds of only being able to invest up to 20% of their funds in overseas markets, be imposed on retirement annuities. Currently there are no restrictions on most RA’s.
When buying an annuity in the market today you are able to invest all of it in overseas markets through unit trusts or other investment vehicles. The possibility of being restricted in the investment options when investing a retirement annuity does not sit well with many investment advisors and it is extremely important to consult your retirement savings advisor on these matters. The investment market has got very complex with the number of available opportunities that it is almost impossible for the man in the street to have the required insight into the various options available. We just have to look at the Newspaper every day to see the incredible number of unit trusts and investment vehicles available to see the complexity and understand that each of these funds has a different risk attached to it.
The Government is particularly cautious when it comes to retirement funding in the wake of a South African Reality that puts less than 10% of people in a position to fund their own retirement. This is very worrying to Government that may have to foot the bill for Many millions of people who will rely on the Government for their pensions.
The Retirement investment market is changing and the available options are endless, consult an investment advisor whenever you change funds, move funds or are concerned about the growth of your retirement portfolio.