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Buying more than one living annuity

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For more information on this innovative new solution from Max Investments, visit (<a href="www.xtramax.co.za">XtraMAX</a>).
For more information on this innovative new solution from Max Investments, visit (<a href="www.xtramax.co.za">XtraMAX</a>).

A Fin24 user has a preservation fund and wants to know if he can split the withdrawal to buy more than one annuity. He writes:

I have R5m in a preservation fund. I want to get a living annuity now.

I know only one withdrawal is allowed. Can I split the withdrawal and get two annuities, for instance one with Allan Gray and one with Alexander Forbes?

Gustav Potgieter, a Certified Financial Planner® at Aurum Trust, responds:

Yes, it is possible to buy two living annuities from your preservation fund, but subject to:

- The rules of the preservation fund allowing it;

- The conditions as published in GN19 (a schedule referring to retirement benefit schemes).

Retirement funds that wish to purchase, insure or pay more than one annuity in respect of a retiring member, must comply with the following additional requirements:
 
- One of the annuities so purchased or insured must at all times during its existence produce income in excess of the annual equivalent of R150 000;
 
- For purposes of avoiding small annuities from being commuted in full, none of the annuities so purchased, insured or paid may have a capital value of less than R25 000;
 
- For purposes of efficient tax administration and as an anti-avoidance measure, not more than four annuities may be purchased, insured or paid by a retirement fund in respect of a member;
 
- The retirement fund must inform the Receiver of Revenue (where the member is resident or registered) that more than one annuity has been purchased, insured or are being paid in respect of a retiring member, and must provide the Receiver of Revenue with the annuitant's full names, income tax number, ID number, physical address, postal address, the date of retirement, the minimum annual income of each annuity, the capital value of each annuity referred to above and the name and postal address of the insurance companies from or at which the annuities were purchased or insured;
 
- If the trustees of a retirement fund wish to permit the purchase, insurance or payment by the fund of more than one annuity in respect of a retiring member, the rules of the fund must allow for it;
 
- Should a retirement fund for any reason not be able to provide all the required information in respect of a member to the Receiver of Revenue, the fund may not purchase, insure or pay more than one annuity.
 
- This arrangement and the contents of this note is reviewed as the site limit is raised annually.

I hope this will help you in making your decision.

- Fin24

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.

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