Discovery annuities offers two methods for contributing to their retirement savings account. Individuals can start investing with as little as R600.00 per month.
The minimum amount that lump sum investors can invest is R5,000.00 if they are under 30 years old; however, those over 30 years old can contribute from R75,000.00 or more.
Not only does Discovery help you plan for the future, the company helps its annuity users to achieve tax benefits. Before investing in a Discovery annuity, you first need to choose a type of fund that you want to invest in. Discovery has 63 running funds that you can choose from, which have different targets and risks.
These funds are managed by Discovery Invest, however, should you wish to invest in external funds through Discovery, you can do so by choosing a fund from 170 external funds. External funds include that from Alexander Forbes, Allan Gray and many more investment companies.
Discovery Retirement Annuity investment is mainly subject to your risk appetite. Good thing is that investments are generally for the long term, therefore, yielding favourable results is likely over time.
For your investment in Discovery retirement annuity, you can only withdraw your investment by the age of 55 years. This is in terms of the Pension Fund Act No 24 of 1956.
There are special conditions for withdrawal before the age of 55, that is if you suffer a disability or if you formally emigrate from South Africa. Death is also another exception for withdrawal of an annuity investment but comes with a special condition.
From the notice of death, Discovery Invest switches your investment to an interest-bearing investment option and distributes your investment value equitable to your dependents and/or nominated beneficiaries within 12 months of your death.
Contributions to your retirement annuity come in two options. First is the lump sum contribution and the second is recurring contributions. In this section, we will discuss the two types of contributions that you need to choose from including fees attributable to each.
Like any other lump sum contribution, Discovery allows a once-off contribution to an investment annuity. If you make a single lump-sum contribution, Discovery will allow you to phase in your lump-sum contributions. Discovery Invest allows investors to split their investment over a period of 3, 6, 9, 12, 15, 18, 21 or 24 months. When your money is phased in, your contributions will be recalculated after each month based on the proportion of your investment.
As a lump sum contributor, you have two fund choices that you can invest in. You either choose your money to be invested in the Discovery Money Market Fund or the Discovery Diversity Income Fund.
The initial fee is the amount of money that you need to pay your financial adviser plus VAT. The initial fee can be negotiated between you and your adviser which can be quoted in percentage.
You can choose to pay your adviser once-off when posting your lump sum. For example, if you agree on a 1% financial advice fee from an R100,000.00 investment you will pay your adviser R1000.00 fee, thereafter, remaining with R99,000.00 to invest into your underlying fund choice.
One other choice to pay an initial fee is by opting for a 100% allocation. This is when you choose to pay the initial fee over time with all your initial investment amount being 100% invested into a fund of your choice. The 100% allocation has a maximum of 60 months allowable for an investor to pay the initial fee. From the agreed-upon rate, you will be charged with a further interest of 1.262%.
Annual fee charged for administering your lump-sum retirement annuity investment depends on the size of your investment. The table below shows the percentage of charges according to your investment size.
The annual fee is divided by 12 and is deducted monthly and includes VAT.
Your financial adviser may require you to pay an annual fee as a percentage for managing your investment. This fee will come as an annual advice fee and will be levied by Discovery Invest.
Investment managers of your underlying investment choice will require an annual management fee. Investment manager annual fee is divided by 365 and deducted daily.
A recurring contribution is a type of contribution whereby as a contributor you contribute to your investment until your retirement age. Before investing in any Discovery fund you need to choose a retirement age, which should not be less than the age of 55. You can change your retirement age at any time except in the last 5 years before your latest selected retirement age.
Fees connected with recurring contributions
Under recurring contributions, you are only limited to a 100% allocation option. However, you are charged 3.5% administration fee of the value of your investment fund. The fee is divided by 12 and deducted monthly. The administration fee is used to cover the costs of administration as well as your adviser’s fees.
Discovery Retirement Annuity funds may not guarantee investment growth, however, they have proven to yield positive results over time. When investing for retirement don’t look for short-term returns but rather for secure long term returns and that’s what Discovery offers.