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Old Mutual retirement annuity fund review 2023

Old Mutual retirement annuity fund

Individuals can save money and/or invest in various unit trusts through the Old Mutual retirement annuity fund. The Old Mutual unit trusts are well-known for their high performance and capacity to outperform inflation over time. However, unit trust investments are not without danger, and the amount of risk will vary depending on the unit trusts chosen.

Those who are presently employed can purchase an Old Mutual retirement annuity. Old Mutual allows contributions to the Old Mutual retirement annuity in a variety of ways, including one-time payments, ad hoc contributions, monthly contributions, or a combination of two or all of these options.

Contributions to the fund are tax-deductible right away. SARS permits you to deduct contributions to a retirement annuity as an expense. As a result, the amount that is taxed will be reduced. Additionally, interest collected throughout the investment period is not taxed.

Money invested, as well as interest collected, can be accessed when you reach retirement age. However, there is a unique withdrawal condition that is taxed and can be done before reaching retirement age.

So, if you want to learn more about how the Old Mutual retirement annuity works, read the discussion below, which covers the product’s components and explains how it operates.

Old Mutual retirement annuity summary

An Old Mutual retirement annuity is a retirement product available to people aged 18 and over. Individuals over the age of 55, however, are not eligible to participate in the Old Mutual retirement annuity plan.

Members of the fund can also make a lump-sum contribution of not less than R10,000.00, ad hoc contributions of R500.00, or any combination of the two options. Contributions will thereafter be invested in unit trusts according to the investor’s preferences.

Investments in Old Mutual unit trusts are subject to tight guidelines that must be followed.

These rules are put forth by the Pension Fund Act as per Regulation 28 of the Act. The regulation indicates that investment in unit trusts must be as follows:

  • Investment into listed property 25%,
  • Investments in Africa 10%,
  • Offshore investment exposure of 30% or less, and 
  • Total equity investment of 75% or less.

One can access the Old Mutual digital platforms when they buy an Old Mutual retirement annuity. Members of the Old Mutual retirement annuity have access to their investment portfolio 24 hours a day, 7 days a week via the Old Mutual mobile app or website.

The Old Mutual retirement annuity will be accessible at retirement. At the age of 55, however, just one-third of the total funds will be accessible for withdrawal. To obtain a constant income, two-thirds of the investment must be placed in a living annuity.

How the Old Mutual retirement annuity works

The Old Mutual retirement annuity can be applied for completely online or on in person at an Old Mutual branch. Personal information about the applicant, including the source of funding, will be requested in order to apply. Making debit order payments to the Old Mutual retirement annuity fund will required as well, therefore, a debit check or banking details will be required.

The amount to be invested as well as the frequency of fund installments must be specified. The funds that have been contributed to the fund must be distributed. As a result, the funds will be distributed amongst unit trusts.

The investor will decide in which unit trust to invest in. As a result, the investor must create a list of the unit trusts in which he or she wishes to invest, as well as the distribution ratio that must be made s.

To capitalise on market inefficiencies, the investor may switch between funds. Regulation 28 of the Pension Funds Act must be followed when transferring funds from one unit trust to another. Gains on investments will not be taxed, and the investor may keep all the gains.

Withdrawals are not permitted before the age of 55. Income tax is due on the amount withdrawn when taking a lump sum withdrawal at retirement age. Only one-third of a retirement annuity can be used for personal purposes; the rest must be used to purchase a living annuity.

Money invested in unit trusts can be lost, and Old Mutual does not guarantee capital, and interest is only paid on the unit trusts in which it is invested.

Advantages of the Old Mutual retirement annuity fund

  • There are a variety of unit trusts from which to select.
  • Unit trusts have a tendency to outpace inflation over time, increasing the value of an investment over time.
  • Investing in a retirement annuity has tax advantages, such as tax exemptions on the interest generated on the investment when withdrawn at retirement.
  • When compared to other retirement annuities offered in South Africa, the minimum contribution of R500.00 each month is low.
  • It is possible to contribute to the fund in a variety of ways, with no penalties if you change your mind.
  • Regulation 28 of the Pension Funds Act protects money from being exposed to markets outside of South Africa.
  • During the lifespan of the retirement annuity fund, investors have just one chance to make a withdrawal.
  • The product comes with access to the Old Mutual digital platforms. 
  • Members have the ability to move money from 1 unit trust to another. 

Disadvantages of the Old Mutual retirement annuity fund

  • When making an investment, capital is not guaranteed.
  • Unit trusts may not provide the required returns on investment after retirement.
  • Early withdrawals from a retirement annuity have tax consequences.

Conclusion 

The Old Mutual retirement annuity offers several reasons to invest in it and delivers acceptable long-term value for money. Before investing in an Old Mutual retirement annuity, do some research on the unit trusts that are available. This will help you invest in unit trusts that will provide you with the retirement income you desire.

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