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Tuesday, 12 February 2013 - 20:00
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Retirement Annuities are useless?
“Retirement Annuity season” is upon us and many of you would have had calls from your financial advisor reminding you to top up your R/A contributions to the present maximum allowed amount of 15% of your annual non retirement funding income. Retirement Annuities have a bad reputation with a lot of clients and one of the things I hear most often as a Financial Advisor is that policies in general, but Retirement Annuities especially, are useless. People will tell you stories of their own, a family member or a friend who had invested in Retirement Annuities for years, but now has insufficient capital with which to retire. This is especially the case with those who are either self employed or work for smaller companies that do not have retirement funds.
Without exception, in every case that I have analysed there is only one reason why a person’s Retirement Annuities are insufficient to provide for them in retirement. They simply did not contribute enough for long enough.
Firstly, some people can’t retire on their Retirement Annuities because the contributions were hopelessly too small. I have had people complaining that they have contributed to their Retirement Annuity fund for thirty years and now there is insufficient capital for them to retire on. Whilst they may have contributed for thirty years, they were only investing say R150pm. This may have been reasonable 30 years back, but today on a salary of R50 000 it’s not even close to the 15% generally contributed to company provided funds.
Another person was contributing R5 000pm of his R20 000 salary (way in excess of the usual 15%), but he had only been doing so in the last 5 years prior to retirement. Obviously he also has insufficient retirement capital.
The third category of complaint is probably the most common. This is where people cancel their Retirement Annuity contracts quite soon after starting them. Like any contract there are always penalties for early cancellation (try getting out of a 5 year rental agreement, 6months into the rental). The important thing here is to make sure that any new Retirement Annuity taken out is within your normal budget. Also in order to minimise the impact of these high initial fees, clients should rather use R/A’s which are costed on an as and when basis.
If you are aiming for an inflation protected income after retirement of 75% of your final salary, you need to save 15% of your monthly income from age 25 until age 60. Where the underlying portfolio of the Retirement Annuity achieves a return of inflation plus 4% then you will achieve your goal.
Looking at periods in excess of 10 years, most Retirement Annuities manage to achieve the desired return of inflation plus 4%.
Retirement Annuities definitely have their place and they should be part of everybody’s retirement planning. They should however be purchased within the framework of affordability on the one hand but with reasonable expectations on the other hand.
Kind regards
Barry Hugo
www.seedinvestments.co.za
info@seedinvestments.co.za
021 914 4966
Top News
![[IMAGE]](image.php@width=300&height=150&cropratio=2%253A1&image=%252Fnews_images_sn%252F1317717632.jpg "Man walks past the Johannesburg stock exchange offices in Sandton") South African stocks drifted lower on Tuesday, weighed down by retailers due to growing worries about the health of a credit-led consumer spending spree after a major bank reported a spike in written-off debts. Full story ![[IMAGE]](image.php@width=300&height=150&cropratio=2%253A1&image=%252Fnewsimages%252F2013-02-12T064751Z_1_AJOE91B0IVT00_RTROPTP_3_OZABS-KUMBAIRONORE-20130212.JPG "Iron ore core sample at one of Atlas Iron Limited's prospective iron ore mine near Port Hedland") South Africa's Kumba Iron Ore said on Tuesday its flag-ship Sishen mine was not back to full production months after an illegal strike ended, underscoring the long-term impact of last year's mine protests. Full story |
 North Korea conducted its third
nuclear test on Tuesday in defiance of U.N. resolutions, drawing
condemnation from around the world, including from its only
major ally, China, which summoned the North Korean ambassador to
protest. Full story  Syrian opposition fighters captured a military airport near the northern city of Aleppo on Tuesday in another military setback for President Bashar al-Assad's forces which have come under intensifying attack across the country. Full story  Cardinals around the world
began informal contacts to discuss who should next lead the
Church through a period of major crisis and the Vatican said it
planned a big send-off for Pope Benedict before he becomes the
first pontiff in centuries to resign. Full story |
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Markets |
The yen swung wildly on
Tuesday, reversing the previous day's late sell-off against the
dollar and euro after an official with the Group. . . Full story |
The yen leaped against the
dollar and euro on Tuesday, rebounding from recent multi-year
lows, after a Group of Seven countries official said. . . Full story |
A surge in Barclays' shares led
Britain's benchmark index past the psychologically important
6,300 level on Tuesday, as the blue chip bank's planned. . . Full story |
U.S. stocks were little changed
on Tuesday, with the S&P 500 holding near multi-year highs ahead
of President Barack Obama's State of the. . . Full story | |||
UK banks led European shares
higher on Tuesday after Britain's third biggest lender, Barclays
, unveiled swingeing cost cuts and a strategic overhaul
that. . . Full story |
Gold clawed back from its lowest
in over a month on Tuesday, as the dollar fell following a
statement from the Group of. . . Full story |
U.S. stocks were little changed
at the open on Tuesday, hovering near multi-year highs as
traders awaited President Barack Obama's State of the. . . Full story |
European shares traded modestly
higher on Tuesday, struggling for clear direction, as
strategists weighed in on whether the recent rally still has
further to. . . Full story | ||||
SA Business |
For pharmaceutical companies, Africa is changing.. . . Full story |
South Africa's DRDGold, reported a 25 percent increase in second-quarter profit on Tuesday, lifted by higher prices and production and declared. . . Full story |
South Africa's rand hit its lowest level in more than a week on Tuesday, in line with a fall in other. . . Full story |
Absa Group, the South African bank majority owned by British lender Barclays Plc, posted a worse-than- expected 9 percent drop in. . . Full story | |||
South Africa's AECI says its full year headline earnings per share are expected to be more than 20 percent lower due in part to strikes in the mining and transport sectors late last year.. . . Full story | Kumba Iron Ore's flagship Sishen mine is not back to full production after it was shut for two weeks in October following an illegal strike, the chief executive of the South African mining company said on Tuesday.. . . Full story |
Company News |
Due to her acceptance of an appointment with a significant shareholder of the company, Fundiswa Roji is no longer an independent. . . Full story |
Shareholders are advised that Santam expects its headline earnings per share (HEPS) for the year ended 31 December 2012 to be. . . Full story |
Shareholders are hereby advised that at the Annual General Meeting of Shareholders held on 12 February 2012, all resolutions contained in. . . Full story |
The following is the trading update that was tabled at the annual general meeting of shareholders that was held today.
The. . . Full story | |||
Spare shareholders ("shareholders") were advised that at the annual general meeting of shareholders ("meeting") held on Tuesday, 12 February 2013, all. . . Full story |
KAP acquired the Steinhoff Industrial Assets ("the Steinhoff Industrial Assets") from Steinhoff Africa Holdings (Pty) Ltd. ("Steinhoff") and issued 1 912.8. . . Full story |
Anglo drew attention to Kumba Iron Ore Ltd's announcement of its results for the year ended 31 December 2012. Kumba Iron. . . Full story |
Shareholders are advised that SPAR experienced a challenging trading period for the 17 weeks ended 26 January 2013, with turnover at. . . Full story | ||||
Company Results | Revenue rose by 52% to R140.1 million (R92.3 million) whilst profit from operations increased 61% to R11.7 million (R7.2 million) representing. . . Full story | Revenue for the year ended 31 December 2012 was slightly lower at R45.4 billion (2011: R48.6 billion). Operating profit fell to. . . Full story | Revenue increased to R5.4 billion (R4.7 billion). Trading profit improved to R519.4 million (R410.4 million) and operating profit rose to R517.4. . . Full story | Net interest income decreased by 1% to R24.1 billion (R24.4 billion) and net insurance premium income went up by 8% to. . . Full story |
World Markets (Spot Prices)
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The JSE Today
| Date | Adv. | Decl. | Unch. | Actives | Volume | Value | Trades | Orders |
|---|---|---|---|---|---|---|---|---|
| 12/02/2013 | 148 | 195 | 70 | 413 | 218,924,438 | R10,834,808,893 | 115465 | 1527072 |
| 11/02/2013 | 173 | 168 | 89 | 430 | 172,464,333 | R9,113,562,803 | 114609 | 1268847 |
| 08/02/2013 | 236 | 125 | 79 | 440 | 187,092,286 | R10,819,397,056 | 127085 | 1580245 |
| 07/02/2013 | 223 | 131 | 64 | 418 | 183,164,142 | R11,104,464,388 | 123772 | 918333 |
| 06/02/2013 | 196 | 173 | 72 | 441 | 198,561,860 | R12,737,576,375 | 154100 | 1858253 |
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Stock Exchange News Service
| Date | Time | Headline |
| 12/02/2013 | 17:54 | K LIMITED - Unbundling - GFINNG |
| 12/02/2013 | 17:50 | NEDBANK LIMITED - Unbundling - GFINII |
| 12/02/2013 | 17:50 | RESILIENT PROPERTY INCOME FUND LTD - Interest Rate Reset - RES15 |
| 12/02/2013 | 17:46 | PALABORA MINING COMPANY LIMITED - Reviewed Preliminary Results and Renewal of Ca... |
| 12/02/2013 | 17:14 | THE SPAR GROUP LIMITED - Dealings in securities by the Spar group limited employ... |
| 12/02/2013 | 17:13 | THE SPAR GROUP LIMITED - CANCELLATION OF S328348 Dealings in securities by the S... |
| 12/02/2013 | 17:00 | ARGENT INDUSTRIAL LIMITED - Small related party transaction |
| 12/02/2013 | 16:55 | ELLIES HOLDINGS LIMITED - Dealing in securities by an associate of a director |
| 12/02/2013 | 16:37 | THE SPAR GROUP LIMITED - Dealings in securities by the Spar Group Limited employ... |
| 12/02/2013 | 16:32 | ELEMATICS LIMITED - Change in the Function of a Director and Resignation from th... |
| 12/02/2013 | 16:02 | SANTAM LIMITED - Trading Statement |
| 12/02/2013 | 15:53 | REUNERT LIMITED - Report On Proceedings At Class Meeting, Combined Meeting And A... |
| 12/02/2013 | 15:42 | TIGER BRANDS LIMITED - Results of annual general meeting of shareholders |
| 12/02/2013 | 15:32 | TIGER BRANDS LIMITED - Trading update |
| 12/02/2013 | 15:02 | CONVERGENET HOLDINGS LIMITED - Waiver of mandatory offer, posting of circular an... |
| 12/02/2013 | 15:00 | THE SPAR GROUP LIMITED - Results of the annual general meeting |
| 12/02/2013 | 14:15 | SABVEST LIMITED - Trading Statement |
| 12/02/2013 | 14:07 | GE MAIN REEF LIMITED - Fatal accident at Buffelsfontein Gold Mine |
| 12/02/2013 | 13:00 | NDUSTRIAL HOLDINGS LIMITED - Trading Statement |
| 12/02/2013 | 12:15 | EDCON (PTY) LIMITED - Final pricing and allocation for Edcon bond |
| 12/02/2013 | 12:09 | ABSA BANK LIMITED - ACL200 - Partial Capital Redemtion |
| 12/02/2013 | 12:00 | R LIMITED - Unaudited Interim Results and interim cash dividend declaration |
| 12/02/2013 | 12:00 | DATATEC LIMITED - Dealing In Securities By A Director |
| 12/02/2013 | 12:00 | Santova Limited - Dealing In Securities By Director Of Major Subsidiary |
| 12/02/2013 | 11:40 | REAL PEOPLE INV HOLD (PTY) LTD - New Instrument Listing - RP018 |
| 12/02/2013 | 11:00 | INVICTA HOLDINGS LIMITED - Director's dealing in securities |
| 12/02/2013 | 11:00 | TREMATON CAPITAL INVESTMENTS LTD - Director's dealing announcement |
| 12/02/2013 | 10:33 | IVUZI INVESTMENTS LIMITED - Interest Rate Reset - IVF004 |
| 12/02/2013 | 10:03 | SECUREDATA HOLDINGS LIMITED - Notification in terms of Section 122(3) of the Com... |
| 12/02/2013 | 09:09 | THE SPAR GROUP LIMITED - Trading Statement |
| 12/02/2013 | 09:00 | ANGLO AMERICAN PLC - AngloAmerican notification: Kumba Iron Ore Limited year end... |
| 12/02/2013 | 09:00 | Mondi Limited - Mondi Group: Trading Statement |
| 12/02/2013 | 09:00 | ESORFRANKI LIMITED - Further cautionary announcement relating to the introductio... |
| 12/02/2013 | 08:45 | STANDARD BANK OF SOUTH AFRICA LD - SCIB: Adjustments to the terms and conditions... |
| 12/02/2013 | 08:30 | CURRO HOLDINGS LIMITED - Cautionary announcement |
| 12/02/2013 | 08:30 | A E C I LIMITED - Further Trading Statement |
| 12/02/2013 | 08:30 | STANDARD BANK OF SOUTH AFRICA LD - SCIB: Adjustments to the terms and conditions... |
| 12/02/2013 | 08:15 | M & S HOLDINGS LIMITED - Revised Trading Statement |
| 12/02/2013 | 08:00 | LD LIMITED - Report to shareholders for the second quarter and six months ended ... |
| 12/02/2013 | 08:00 | HUDACO INDUSTRIES LIMITED - Business Update |
| 12/02/2013 | 08:00 | KUMBA IRON ORE LIMITED - Audited Condensed Consolidated Results for the Year End... |
| 12/02/2013 | 07:33 | Absa Group Limited - Updated Pro-forma Financial Information As At 31 December 2... |
| 12/02/2013 | 07:32 | ABSA BANK LIMITED - ABSP/ ABMN - Audited financial results - financial year ende... |
| 12/02/2013 | 07:31 | Absa Bank Limited - Absa Bank: Profit And Dividend Announcement; Audited Conden... |
| 12/02/2013 | 07:30 | Absa Group Limited - Absa Group: Profit And Dividend Announcement; Audited Conde... |
| 12/02/2013 | 07:05 | WILSON BAYLY HOLMES-OVCON LIMITED - Trading Statement |
| 12/02/2013 | 07:05 | SUPER GROUP LIMITED - Unaudited interim results for the six months ended 31 Dece... |
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