I am due for retirement in a year's time and have a few pensions/retirements annuities/ preservation funds.
Do I have to go through a broker to invest in an annuity? It seems brokers charge up to 3% of the capital.
I am quite good at understanding figures and think I can do this myself. It seems places like Old Mutual do not allow this?
Sinenhlanhla Nzama, Investment Actuary at Old Mutual, responds:
Going directly
Old Mutual does have the option for direct investment for a range of retirement income products.
The importance of sound advice
However, due to the myriad of solutions offered by financial providers, we encourage all customers to use an accredited financial adviser to assist in making the most optimal decision.
Remember that going into retirement requires you to make one of the most important investment decisions of where and how to invest your years of savings so that they last you for a lifetime.
An adviser will ensure you have a sound financial plan in place, navigate various solutions with you and regularly review progress in your plan to ensure you will continue to have a sustainable income in retirement.
You must also remember you can negotiate the commission that you are willing to pay for the advice you receive.
The appropriate solution
Selecting an inappropriate product is risky, as it may threaten your income in retirement.
For example, with a living annuity product you can outlive your retirement savings if you live longer and/or take a large income early on.
With guaranteed annuities you have a guarantee on the income you get and how it increases going forward, but there is generally less flexibility to change from year to year.
Both living annuities and guaranteed annuities have their pros and cons. Understand these very well before you make your decision.
Due to increasingly sophisticated products, the role of the adviser has never been more crucial.
- Fin24
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