Given that life expectancy in South Africa is increasing, a retirement annuity is one investment that can benefit many people. Coronation’s retirement annuity is one of the best in the country due to its ability to provide favourable financial returns.
The retirement annuity has strict conditions that must be met in order to provide income after retirement. The Coronation retirement annuity is a personal retirement plan that also offers tax advantages.
Investors of the Coronation Retirement Annuity fund can be enjoy tax savings both now and in retirement. Deductions for contributions to a retirement annuity are available immediately for income tax purposes.
Money that is saved into the Coronation retirement annuity can be invested to earn interest and dividends. This is through investment in a number of Coronation-administered unit trusts. These unit trusts invest both locally and abroad, and they have won local and international awards with regard to their investment strategy and returns.
Investment in the Coronation unit trusts comes with some limitations. Most of the limitations are due to the provisions of regulation 28 of the pension funds act. This regulation tries to balance the investor’s risk by stating the number of internal stocks, and property investments.
Before opening the Coronation retirement annuity, read further to learn more about how the product works and what limitations it has. The product is discussed in greater detail below.
Coronation retirement annuity summary
The Coronation retirement annuity is a retirement investment plan that is available to anyone over the age of 18. Money invested and interest earned from the investment is accessible at 55 years or when older.
The product requires a minimum contribution of R500.00 per month. However, an additional contribution of R5,000.00 can be made into the account. For those that want to make a lump-sum contribution to the account, the minimum requirement for a lump sum is set at R10,000.00.
The money contributed to the Coronation retirement annuity is invested in one or more of the Coronation unit trusts. Coronation has a list of unit trusts that best fit a retirement annuity. The list of unit trusts includes:
- Coronation strategic income fund,
- Coronation balanced defensive fund,
- Coronation capital plus fund, and
- Coronation balanced plus fund.
Contributions into the unit trusts will have to follow the rules set in Regulation 28 of the Pension Funds Act 24 of 1956. The regulation states that equity exposure in investment must not be more than 75%, the international exposure of an investment must be 45% or less, and property exposure must be 25% or less.
The Coronation retirement annuity can be accessed only at the age of 55. At the age of 55 years, one-third of the total investment (capital and interest accumulated) can be withdrawn as a lump sum. One-third of the retirement annuity withdrawal can be used to make any investments, cover expenses, or form part of savings.
Two-thirds of the investment will have to be used to purchase retirement income. Money can be invested in a living annuity or any investment vehicle that is able to yield a retirement income.
How the Coronation retirement annuity works
The Coronation retirement annuity can be bought online or through a phone call. The product is available to those that are over the age of 18. To get started with the Coronation retirement annuity, an application to open the account has to be successful. A contribution will have to be made after successfully opening the account.
Contributions to the account can be made in three ways.
- Through a lump sum deposit of R10,000.00 or more,
- By a monthly debit order of R500.00 or more, or
- By making ad-hoc payments to the account of not less than R5,000.00.
The contributions made into the Coronation retirement annuity fund are tax-deductible. For income tax purposes, the contributions will be deducted due to a specific annual tax-free limit. Tax-free contributions that can be made are 27.50% of taxable income. However, the limit is set at R350,000.00. Therefore, should the contributions exceed the limit, the excess contribution will be carried forward to the next tax year.
Contributions made to the account will have to be invested in one of the Coronation unit trusts. The investor will have to choose which unit trust to invest money in, and if monthly contributions are made, then an amount to be contributed to a unit trust must be established.
The investment into the Coronation retirement annuity fund will be available when an investor turns 55. One-third of the contributions and earnings will be paid as a lump sum, and the remaining two-thirds will be invested in a post-retirement annuity. However, if the total investment (capital + earnings) is less than R247,000.00, then the whole amount can be withdrawn in full as a lump sum payment.
Advantages of the Coronation retirement annuity
- There are immediate income tax benefits when making contributions.
- Some of the investment is reinvested into a post-retirement annuity so that the investor can earn a living income at retirement.
- Contributions to the retirement annuity are modest.
- Regulation 28 provides a safety net for capital exposure.
- There are different unit trusts to invest in.
- The fund cannot be attached as collateral.
- The earnings and capital in the Coronation retirement annuity are paid to the beneficiaries should the investor die.
- There are no initiation fees or administration fees attached to the investment.
- Money can be moved from one unit trust to another.
Disadvantages of the Coronation retirement annuity
- The capital invested does not come with any guarantees, so it can be lost.
- Investment can only be accessed at the age of 55.
Coronation Retirement Annuity Application
- Must have a valid South African ID at the time of application.
- Be able to provide personal details.
- Have your personal banking details.
- Be 18 years or older at the time of application.
Conclusion
The Coronation retirement annuity helps individuals set up their retirement goals with ease. The product also helps in building an investment that has the potential to grow by suggesting an investment into funds that are known to outperform the market. Money contributions and earnings in the investment are only accessible at the age of 55. Therefore, additional savings accounts should be opened to cover emergencies before reaching the age of 55.
