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A Fin24 user wants to know whether it is wise to take out a second retirement plan on top of his existing one. He writes:
Is it a wise idea to take another retirement plan? I have a retirement plan with one of the big insurance companies.
Marius Fenwick, chief operating officer of Mazars Financial Services, responds:
First of all, let me state that you can never have too much retirement funding.
Funds within a retirement fund (pension fund, provident fund or retirement annuity) have numerous advantages.
For instance, the returns on the investment within your fund are tax free, funds within your fund are protected from creditors, the funds within your fund are exempt from estate duty and in most cases the contributions towards your fund are tax deductible.
Your decision to add to your existing retirement annuity (RA) must mainly be based on two issues.
Firstly, how much will it cost to add to your current RA and secondly, how flexible is your RA in terms of investment choice?
If your current RA only offers typical life assurance portfolios and fees are pre-funded (accumulated and taken off upfront), then rather take out a new RA that is unit trust based and where fees are paid as and when transactions occur and no penalties apply should you change your portfolio in the future.
Be careful if you change your contributions on a life assurance based RA where costs were historically pre-funded, as you may incur penalties.
There are no real advantages to having more than one RA, providing it offers you sufficient investment choices in a cost efficient manner.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer
Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
Is it a wise idea to take another retirement plan? I have a retirement plan with one of the big insurance companies.
Marius Fenwick, chief operating officer of Mazars Financial Services, responds:
First of all, let me state that you can never have too much retirement funding.
Funds within a retirement fund (pension fund, provident fund or retirement annuity) have numerous advantages.
For instance, the returns on the investment within your fund are tax free, funds within your fund are protected from creditors, the funds within your fund are exempt from estate duty and in most cases the contributions towards your fund are tax deductible.
Your decision to add to your existing retirement annuity (RA) must mainly be based on two issues.
Firstly, how much will it cost to add to your current RA and secondly, how flexible is your RA in terms of investment choice?
If your current RA only offers typical life assurance portfolios and fees are pre-funded (accumulated and taken off upfront), then rather take out a new RA that is unit trust based and where fees are paid as and when transactions occur and no penalties apply should you change your portfolio in the future.
Be careful if you change your contributions on a life assurance based RA where costs were historically pre-funded, as you may incur penalties.
There are no real advantages to having more than one RA, providing it offers you sufficient investment choices in a cost efficient manner.
- Fin24
Do you have a pressing financial question? Post it on our Money Clinic section and we will get an expert to answer your query.
Disclaimer
Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers.
Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.
