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A Fin24 user says he is ready to invest R2m to try and get a good pension. He writes:
Where can one invest R2m and get a good pension? The money must be available when I die to someone else as a lump sum.
I'm now 59 years old.
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Dante Sinibaldi responded on behalf of the Institute of Retirement Funds Africa (IRFA):
Option 1
- A living annuity that one can draw an income from;
- A beneficiary will continue to receive income on the death of the annuitant;
- Funds must be managed prudently to maintain an income stream that is sustainable;
- The income will climb if the portfolio and costs are managed;
- No capital pay out to beneficiaries on death;
- Continued income from tax free growth portfolios;
- Income is taxable.
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Option 2
- Purchase a life annuity from a life insurer;
- The annuitant receives an income that is determined by an insurer based on morbidity tables and annuity rates (sadly both are demographically skewed in RSA);
- The insurer can offer the annuitant life cover for the amount of the funds invested in the life annuity;
- No underwriting is required and the premiums must be funded from the annuity (a part of the annuity is allocated to the life plan premium);
- Upon the death of the annuitant, the annuity stream stops and the life insurance pays out the original annuity capital invested to the estate or beneficiaries;
- Income is taxable.
My preferred option is the first one. This is a general answer. Specific details for your particular case would be required.
Retirement and beneficiary legacies should be about continued income streams and not capital pay outs.
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