Getting started

Retirement is the beginning of a new chapter, not the end of your investing journey. When we talk about retirement, we mean that point in your life when you start receiving an income from the money you have saved in your retirement funds. The decisions you make at retirement will determine how much income you receive from your retirement savings and how long your money will last.

The benefits of independent financial advice

As you approach retirement, understanding your needs and making informed decisions can be overwhelming. An independent financial adviser can offer you holistic and personalised advice for your specific situation, which is especially important at retirement.

  • If you already have an adviser, we encourage you to speak to them.
  • If you don't have an adviser, but feel that you may benefit from financial advice, we can help you find an independent financial adviser.

Cash lump sums and tax

Choosing to take a cash lump sum has tax implications

Some retirement funds allow you to take up to one-third of the value of your investment as a cash lump sum when you retire, while others allow you to take the full amount in cash. You will need to invest the balance in a product that pays you an income, or ‘pension’, in your retirement, which is called an annuity. 

See how much you are allowed to take as a cash lump sum when you retire:

If you are invested in more than one retirement fund, you have the option of taking a cash lump sum from each. Remember that any amount taken in cash and spent at retirement decreases the savings you have left to draw an income from.

You can take a maximum of one third as a cash lump sum.

If your balance in the Fund is less than R247 500 you may take the full amount as a cash lump sum.

You can take a maximum of one third as a cash lump sum.

If your balance in the Fund is less than R247 500 you may take the full amount as a cash lump sum.

You can take the full amount as a cash lump sum, regardless of the size of your investment.

How much tax will I pay if I take a cash lump sum?

The amount of tax payable is determined according to a sliding scale. The first R500 000 is taxed at 0%, but this tax-free portion applies over your lifetime and across all your retirement funds. This means that the tax-free amount available to you when you retire may be lower if you have previously withdrawn from any of your retirement savings, for example, when you changed jobs.

Retirement tax table:
Taxable portion of cash lump sumRate of tax
R0 - R500 000 0%
R500 001 - R700 000 18% of taxable amount above R500 000
R700 001 - R1 050 000 R36 000 + 27% of taxable amount above R700 000
R1 050 001 and above R130 500 + 36% of taxable amount above R1 050 000

Use your cash lump sum to your advantage

If you withdraw a cash lump sum, use it wisely. Below are a few options you might want to consider.

Pay off outstanding debt

Pay off your debts so that they will not need to be covered by your annuity income.

Save for emergencies

Build up a safety net for unexpected expenses. You can do this by investing a portion of your lump sum in a flexible investment product that allows you to access your money if you need to, such as a basic unit trust investment.

Supplement your income

Invest your lump sum in a flexible investment product that allows you to make regular withdrawals to supplement the income you are receiving from your retirement savings.

Compare your annuity options

You will need to invest any retirement savings you do not take in cash in an annuity, which will pay you an income in retirement. You can choose to invest in one or more annuities, or a combination of annuities. Annuities can be broadly grouped into two categories: Living annuities and guaranteed annuities, sometimes referred to as life annuities.

  • A living annuity is a financial product that pays you a regular income in retirement. You get to choose your level of income (within the legal limits), as well as your underlying investment(s), typically unit trusts. Your money can continue to grow, depending on the performance of your underlying investment(s).
  • A guaranteed annuity is a financial product that pays you a guaranteed income for the rest of your life, regardless of how long you live or what happens to investment markets. Guaranteed annuities are not all the same - they offer different levels of starting income, income increases and income protection features.

A living annuity may be suitable when

  • You want to have flexibility and control of your money.
  • You want any money left over to go to your beneficiaries when you die.
  • You are willing to take on the responsibility of making sure your money lasts.

A guaranteed annuity may be suitable when

  • You want to get an income that is guaranteed to last for the rest of your life.
  • You are comfortable not being able to leave money to your beneficiaries.
  • You are comfortable not having the flexibility to transfer to another service provider or annuity type oto change your income over time.

Compare the benefits of your annuity options

Benefits of a living annuity

  • Your savings and income can grow over time, depending on the performance of the unit trust(s) you choose to invest in.
  • You decide how much income to receive from your investment, within the legal limits, which you can review once a year.
  • Your beneficiaries will receive any money left over when you die.
  • You can transfer your investment to another service provider or to a guaranteed annuity at a later stage.

Benefits of a guaranteed annuity

  • You are guaranteed to receive your income for life, regardless of how long you live.
  • Your income will be higher than the income expected to be sustainable in a living annuity. 
  • You can choose whether you would like your partner or spouse to receive an income for the rest of their life, upon your death. 
  • You do not have to take on the responsibility of making investment decisions that could impact your income over time.

Key considerations for your annuity options

Key considerations of a living annuity

  • The performance of your underlying unit trust(s) can reduce the overall balance of your investment, which puts you at risk of outliving your money.
  • Your underlying investments need to earn a return higher than inflation in order for you to maintain the buying power of your retirement income over time without excessively reducing the value of your investment.
  • The more income you draw, the less sustainable your investment becomes and the greater your chances of running out of money.

Key considerations of a guaranteed annuity

  • You will not have the flexibility to adjust your income.
  • Your beneficiaries may not receive any money left over when you die, unless you purchase income protection features, and die within the number of years that your capital is protected. Your starting income will be lower as a result.
  • You cannot transfer your investment to a living annuity or to another service provider at a later stage.

Our Trustees’ annuity strategy

There are many annuities available for you to choose from. The trustees of our retirement funds, whose main role is to protect your interests as a member, have identified two annuities for you to consider - one from each of the categories previously explained. Understanding your personal needs and circumstances will help you decide if either of them, or perhaps a combination of the two, is appropriate for you.

Allan Gray does not offer a guaranteed annuity, but our trustees have identified an annuity offered by Just Retirement Life (“Just”) for you to consider. Just is a long-term insurer and a subsidiary of the UK listed global financial services group, Just Group plc. It is not affiliated with Allan Gray.

It is important to understand the fees you will pay, depending on the annuity you select. Click here to see a comparison of the fees in the below two annuities.

Allan Gray Living Annuity

Your retirement income
  • How much of your retirement savings you take as income each year is important as it determines how long your savings will last. By drawing a sustainable income, your savings are expected to last for life.
  • You can review your income once a year, on the anniversary date of your investment. It is prudent to increase your income by no more than inflation each year.
Your underlying unit trust(s)
  • The trustees consider the Allan Gray Balanced Fund to be a suitable unit trust for many annuity investors, given the diversity of its underlying investments, both locally and offshore; its expected long-term return; and the extent to which the value of your investment may go up and down over time.
  • There are many other unit trusts available, each with their own objectives, offered by various investment managers. Click here for more options.

Just Lifetime Income Annuity

Your retirement income
  • Your income is guaranteed for life and is expected, but not guaranteed, to increase with inflation, depending on the performance of the Allan Gray Balanced Fund. 
  • You have the option of securing an income which is guaranteed for your partner or spouse’s life, in addition to your own as the primary member. If you select this option, your partner or spouse will continue to receive 75% of your income for the rest of their life, if you die before them.
Your underlying unit trust(s)
  • The trustees consider the Allan Gray Balanced Fund to be a suitable unit trust given that the Fund’s objectives align with the return objectives required by Just to increase your income by inflation each year.
  • Should the Allan Gray Balanced Fund not be suitable for you, you can choose from a range of investment options, managed by various investment managers.
Fees and chargesAllan Gray Living AnnuityJust Lifetime Income Annuity

Guarantee charge

Not applicable

Annual:
1.1%

Investment management fee

Please refer to the Allan Gray Balanced Fund Factsheet

Please refer to the Just Lifetime Income Annuity Factsheet

Administration fee

Annual:
0.23%
Initial:
1.0% (capped at R25 000)
Annual:
R476.10

Advice fee agreed between you and your financial adviser

Initial:
Up to 1.73%
Ongoing:
Up to 1.15%
Initial:
Up to 1.73%
*The fees shown include VAT where applicable.

Get an idea of your income in retirement

Enter your details below to get an idea of your starting, sustainable income in retirement.

R
R

Your income in the Allan Gray Living Annuity

Your sustainable drawdown is  % of your capital per year, giving you an after tax starting monthly income of (  before tax)

  • Your savings and income can grow over time, depending on the performance of the unit trust(s) you invest in.
  • Any money left over when you die will go to your beneficiaries.
  • Drawing more than the sustainable rate puts you at greater risk of outliving your savings.

Important information about these numbers

Your income in the Just Lifetime Income Annuity

You annual income rate is  % giving you a starting monthly income of (  before tax)

  • Your income is guaranteed for life in nominal terms.
  • Your beneficiaries will not receive any money left over when you die.
  • You cannot transfer to another service provider or annuity type at a later stage.

Important information about these numbers

Important information about these numbers

  1. The drawdown rates do not guarantee that your money will last for the rest of your life. They have been calculated based on probabilities using historical market data. Your individual circumstances, such as your health and any other sources of income, are important factors to consider when choosing how much income to draw from your investment.
  2. A sustainable income, determined by your age and gender, is defined as the highest drawdown rate that aims but does not guarantee to provide an income that increases with inflation for as long as an investor is alive.
  3. Drawdowns are grouped in 5 year age buckets from ages 55 to 85 meaning that members aged 55-59 will be quoted the same rate.
  4. Where the option to provide for your partner is selected, the rate given is the lower of you and your partner’s individual rate, reduced by 0.5%.
  5. Drawdown rates are based on the latest Financial Sector Conduct Authority (FSCA) draft conduct standard. At the time of creating the calculator this conduct standard on sustainable income levels was not yet finalised and is therefore subject to change; the rates may be replaced once finalised.
  6. Estimated income assumes the investment is in Multi-Asset High Equity unit trusts with a minimum of 60% growth assets like equity and property exposure, for example, the Allan Gray Balanced Fund.
  7. The net of tax amount estimated is based only on the retirement lump sum indicated. The actual amount may differ based on your individual tax circumstances.
  8. Estimated income does not include the cost of financial advice, if applicable.

Important information about these numbers

  1. Just has provided income rates as at January 2019 to serve as an estimation of the income that you can expect to receive if you invest in their guaranteed annuity.
  2. The Just rates are based on your income targeting an inflationary increase each year. These increases are based on the performance of the Allan Gray Balanced Fund and are not guaranteed to match inflation each year. While the increases are not guaranteed, your income will never decrease in nominal terms.
  3. Where the option to provide for your partner is selected, the rate provided assumes that upon your death, your partner will receive 75% of your total monthly income for the rest of their life.
  4. As the rates given are estimates, they are grouped in 5 year age buckets from ages 55 to 85 meaning members aged 55-59 will be quoted the same rate.
  5. The quoted rates will be updated on a quarterly basis.

Information and content notice

The information and content of this publication/presentation is provided by Allan Gray as general information about the company and its products and services. Allan Gray does not guarantee the suitability or potential value of any information or particular investment source. The information provided is not intended to nor does it constitute financial, tax, legal, investment, or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified financial adviser. Nothing contained in this publication/presentation constitutes a solicitation, recommendation, endorsement or offer by Allan Gray, but is merely an invitation to do business.

Allan Gray has taken and will continue to take care that all information provided, in so far as this is under its control, is true and correct. However, Allan Gray shall not be responsible for and therefore disclaims any liability for any loss, liability, damage (whether direct or consequential) or expense of any nature whatsoever, which may be suffered as a result of or which may be attributable, directly or indirectly, to the use of or reliance upon any information provided.

The financial services, products or investments referred to on this website are not available to persons resident in jurisdictions where their availability or distribution would contravene local laws or regulations and the information on this website is not intended for use by these persons. This website is for information only and does not in any way constitute a solicitation or offer by Allan Gray Proprietary Limited or any of its associates or subsidiaries (collectively “Allan Gray”) to buy or sell any financial instruments or to provide any investment advice or service.

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