Insights categories - Retirement

Group retirement annuities bolstered by retirement reform

You should not let the current uncertainty around retirement reform inhibit your willingness to save for your retirement; it is very difficult to make up for lost time. With government's assurances that vested interests will be protected, it makes sense to find a product that meets your needs and to start, or continue, saving even while many questions remain unanswered. Gerhard Klinger and Debbie Ryan look at the suitability of retirement annuities (RAs) for employer-arranged retirement savings, with the Allan Gray Group Retirement Annuity System (Group RA) being a potential answer for small to medium-size businesses looking for a cost-effective way to solve the retirement savings question.

As discussed in Richard Carter's article, two key areas of focus in Treasury's recent retirement reform proposals are preservation and income at retirement. Modern unit trust-based RAs are already structured for income at retirement and to enforce preservation. There are several reasons why an RA works well for individuals who want to save for their retirement. Many of these also make them an appealing choice for small and medium-size business owners looking for a retirement savings solution for their staff.


In many ways RAs managed through a group system are a better choice for employers and their employees than other retirement funding options, such as umbrella funds, which have high set up costs and time-consuming administrative requirements. It is our experience that employers prefer to focus on running their businesses rather than burdening themselves with the administrative and legal responsibilities of a pension or provident fund. By selecting a group retirement annuity system, employers can focus on managing their businesses whilst not detracting from the importance of retirement saving for their employees. Group systems, like that offered by Allan Gray, allow employers to ensure that their employees get all the benefits of an individually managed RA. These include:

Retirement reform is an evolving process and it is unclear when all the issues will be resolved, but there has been repeated assurance from regulators and the Treasury that vested rights will be protected. Time is very important in long-term savings; each month you put off saving or helping employees to plan for their retirements either increases the amount that will have to be saved at a later stage, or pushes out your or their date of retirement.

The Allan Gray Group Retirement Annuity System is a group-based administration system that allows employers to deduct
monthly contributions from their employees’ salaries and pay them into the Allan Gray Retirement Annuity Fund on behalf of
their employees. Employees are members of the Allan Gray Retirement Annuity Fund in their individual capacity. Contributions
are flexible and may either form part of an employee’s cost to company or be deducted on a voluntary basis – depending on
the arrangement the employer sets up.

By using the Group Retirement Annuity System, employers are able to offer their staff the individual benefits of an Allan Gray
RA and encourage them to make provision for their future financial security.

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