A Fin24 user has a living annuity which is not really growing much. She writes:
I have a living annuity with the Absa Aims section which is not really growing much in the options I have chosen to invest in.
I discussed this with a broker and he suggested that I move to Liberty options which had better growth.
Are there other options within the AIMS section where my bit of money can grow without losing its value - options of which the costs are not too high, but which show a better growth than I currently have?
Is it advisable to do this?
What would the costs be?
Will it be better or worse for me?
I cannot lose the bit of money I have, because it happens due to market growth.
I hope you can help me. I don't know what to do.
An Absa spokesperson responds:
A living annuity is an investment vehicle for a compulsory annuity purchase. That is the investor uses only funds from their retirement annuity, pension fund or preservation fund to purchase the living annuity product.
The investor, with the assistance of their financial adviser, will select the underlying investment funds to their living annuity from a range of unit trusts and exchange traded funds that AIMS offers on their platform.
AIMS has a range of funds on the platform, which vary from high equity to money market funds from which the client can choose from and it is free to switch between funds at no cost.
Annually the investor will also select the level of income draw down (within the prescribed limits of 2.5% to 17.5% of the value of assets in the living annuity).
The income is not guaranteed, but is dependent on the performance of the chosen funds. The living annuity consists of three cost components. That is: adviser fees (negotiated and agreed between client and adviser); platform administration fees; and fees related to the funds selected within the product.
From the above you can see that the investment performance of the living annuity is driven mainly by the underlying funds chosen, product related fees, fees payable to the adviser and the level of income drawdown.
Before making a decision to move your living annuity you might need to consider either changing your investment portfolio (based on a range of funds available on the AIMS platform), renegotiating fees, reviewing your income drawdown or even a combination of the above.
Should you consider moving your investment portfolio, please request your financial adviser for a detailed cost comparison of either moving the product to another platform or keeping it with AIMS so that you can make an informed decision.
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