FNB Retirement Annuity review 2023

The FNB Retirement Annuity is a retirement option that allows individuals to save independently while benefiting from the 27.5% allowable tax deduction. Individuals aged 18 and up are eligible for the FNB Retirement Annuity, which requires a minimum monthly contribution of R300.00. Investors have an option to deposit a lump sum of R5,000.00 and make additional R2,000.00 minimum contributions.

The FNB retirement annuity invests the contributions made to unit trusts that are administered by FNB, which doesn’t come with any fee. Other unit trusts are also available that are managed by other firms but charge a fee. Savings into the FNB retirement annuity can be channelled to personal share portfolios either managed by FirstRand, Ashburton Investment Managers or other firms. 

An investment in unit trust and personal share portfolios must be Regulation 28 compliant. Regulation 28 of the Pension Funds Act 24 of 1956 restricts equity exposure (local and foreign) in retirement funds to 75%. The regulation further limits local and international exposure to 25% of the portfolio and further limits foreign investment exposure to 30%.

Investing in the FNB Retirement Annuity doesn’t only come with restrictions but also has benefits attached to it. An investment in the FNB retirement annuity comes with eBucks benefits. Members of the plan get to earn eBucks points whenever they contribute to the plan. eBucks points are earned based on an individual’s tier level. 

The contributions to the FNB retirement annuity come with tax benefits before retirement and at retirement. When making contributions into the FNB retirement annuity are tax deductible to a certain maximum. Contributions are permitted for a 27.50% deduction for income tax purposes. However, the deduction has an annual maximum deduction of R350,000.00. 

How the FNB Retirement Annuity works

The FNB retirement annuity can be purchased online by requesting a call back on the FNB website. One has to be over the age of 18 to apply for the product. The product is available to both FNB and non-FNB clients. The FNB retirement annuity can be managed and applied for on the FNB mobile app as well. 

When making an application, the applicant will have to provide his/her personal details. The instruments that the applicant wants to invest in will have to be listed, followed by the allocation of contributions to each fund. The funds chosen will have to adhere to Regulation 28 of the Pension Funds Act. 

Beneficiaries of the plan will have to be nominated since life is uncertain. Nomination of beneficiaries will require applicants to provide the personal details of the beneficiaries, including their ID or passport number. A share of the plan per nominated beneficiary will have to be disclosed on the application. 

After a successful application, the plan becomes active and contributions will have to be made. Money contributed to the plan will be allotted to investments as specified on the application. Contributions can then be made until the desired retirement age of not less than 55 years. 

At retirement, one third of the plan will be made available to the investor for withdrawal. However, those that do not want to withdraw may opt to not withdraw. A minimum of two-thirds of the retirement annuity will have to be invested in a living annuity to generate constant income at retirement. 

Benefits of the FNB Retirement Annuity

• You get to choose from award winning Unit Trusts to invest in.
• The money invested is managed by some of the best fund managers in South Africa.
• Investment in Unit Trusts is not only limited to FNB unit trusts but you can also invest in unit trusts offered by other fund managers.
• Investors get to enjoy 27.5% tax deduction when investing in the FNB Retirement Annuity.
• Investors pay no capital gains tax or dividends tax on returns earned through the FNB Retirement Annuity.
• A minimum monthly deposit of R300.00 is low and affordable to most of South African working class.
• Investors get to earn eBucks points depending on their level of investment.
• There is no administration fees that is payable.
• Transactional fees can be earned bucl through eBucks points depending on the investor’s reward level.
• Financial advisory is free for the first 18 months from registering the FNB Retirement Annuity.

Advantages of the FNB Retirement annuity

• There are many ways to make contributions to the plan, either ad hoc, monthly or once off.
• There are eBucks points that are earned for every premium made.
• At retirement, proceeds from investing are not charged tax.
• Minimum monthly contribution to the plan is low when compared to other minimum contributions to retirement annuities in South Africa.
• There are tax benefits for contributions made to the FNB retirement annuity.
• There are many funds available to choose from.
• The application is easy and can be done either through a call-back request or on the FNB mobile app.
• Regulation 28 of the Pension Funds Act minimizes capital exposure to highly volatile investments.

Disadvantages of the FNB Retirement annuity

• There is an initiation fee that is charged when taking out the product.
• Capital invested is not guaranteed and fluctuates from time to time.
• There are no withdrawals allowed before retirement.

Conclusion

The FNB retirement annuity is a very competitive retirement annuity product in South Africa that rewards members of the plan for making contributions. The plan also provides investors with easy access to the plan as it can be viewed on the FNB mobile app at no additional cost.