By Lisa Paulse of Corewealth Advisory Services
Wondering whether you should implement a retirement fund for your employees? Well hopefully by the end of this article your mind should be made up. Group Retirement Annuities or RA’s are one of the most if not the most flexible and efficient form of Retirement Savings solutions for you and your employees.
Group RA’s are different to Pension funds or Provident Funds in that is designed so that each and every member of the Group RA can individually select or be advised on unit trust fund suited to their unique risk appetite but within the prescribed legal investment limits for retirement funds which restrict equity and offshore exposure. Younger employees can enjoy a selection of more aggressive, long-term outlook funds where-as your older employees might need to invest their funds more conservatively as retirement age draws near. Alternatively, in light of projections of an older mortality age in the years to come, people have already begun working over the age of 70, although retirement annuities have a minimum retirement age of 55, it has no maximum retirement age and employees can continue contributing until they decide they want to retire.
With a click of a button, you can add or remove members, download statements and change contribution amounts at your employee’s request. This allows minimal administration and payroll hassles for you as an employer and employees get to have all the benefits as if they had their own retirement annuity. As previously mentioned, group RA’s are flexible, employees have the choice of selecting how much they want to invest each month and pause and continue contributions when necessary without any fees, penalties or notice requirements. Employee contributions to retirement annuities are tax deductible which means that either they are taxed at a lower rate each month or they could receive money back from SARS when filing their tax returns. Group RA’s are also transferable as they are individually owned and remain property of the employee and even if they change employers, they can continue contributing in their personal capacity.
Much like pension funds, with group RA’s, employees cannot take their full benefit in cash when they retire, they are restricted to taking one third in cash and are forced to take out an annuity with the rest. This is contrary to some other retirement solutions allowing members access to the full benefit in cash which is often detrimental to the member because when they reach retirement age they have the risk of using all their money in one go. Employees are also not entitled to a once-off full or partial withdrawal when they leave your company. This is an advantage as many people in other traditional solutions often decide to take the once off withdrawal without receiving any prior financial advice and without realising the shortfall repercussions at retirement age.
Furthermore, it is a great solution to retirement savings in a company and most service providers require a minimum of 5 people joining to start a Group RA with a minimum contribution of R500 each.
In 2017, Lisa was selected by Core Wealth Advisory Services to complete the ASISA Academy IFA internship as a para-planner. On completion of the internship she was made permanent and now acts as an Associate Financial Advisor. Lisa takes great pride in dealing with clients and has a profound interest in assisting with their retirement, risk and estate planning. She is currently studying towards her Post Graduate Diploma in Financial Planning and plans to attain the CFP® Proffesional designation in 2020. Lisa is also a Finance Columnist for 2 local magazines; Khayelitsha Views and Atlantic Seaboard Views where she shares some of her finance related thoughts, experiences and knowledge each quarter.