TRANSITIONING TO RETIREMENT€¦ · your retirement options 3 Show you how to get help with your...
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TRANSITIONING TO RETIREMENT Welcome to our webinar
Transcript of TRANSITIONING TO RETIREMENT€¦ · your retirement options 3 Show you how to get help with your...
TRANSITIONING TO RETIREMENT
Welcome to our webinar
You can ask questions…
Disclaimer
The following businesses are licensed
financial services providers:
Alexander Forbes Financial Planning Consultants
(Pty) Ltd (FSP 31753 and registration number
1995/012764/07)
Alexander Forbes Financial Services (Pty) Ltd
(FSP 1177 and registration number
1969/018487/07)
Alexander Forbes Individual Client Administration
(Pty) Ltd (FSP 32494 and registration number
2007/015632/07)
This information is not advice.
The information in this presentation
belongs to Alexander Forbes.
Speakers
Michael PrinslooSpeaker
Managing Executive:
Research & Product
Development
Gary Fisher FacilitatorHead: Member
Education Services
Rita CoolSpeaker
Senior Financial
Planning Consultant
Speakers
Gary Fisher FacilitatorHead: Member
Education Services
Michael PrinslooSpeaker
Managing Executive:
Research & Product
Development
Rita CoolSpeaker
Senior Financial
Planning Consultant
Rita CoolSpeaker
Senior Financial
Planning Consultant
Speakers
Gary Fisher FacilitatorHead: Member
Education Services
Michael PrinslooSpeaker
Managing Executive:
Research & Product
Development
Preparing for the
best possible retirement
Main objectives
Retirement impact
of turbulent times
1
Describe the
retirement
process
2
Discuss
your
retirement
options
3
Show you how
to get help with
your decisions
4
Show you the
benefits of playing
an active role in
your retirement
journey
5
The turbulent times we’re in and their impact on retirement
This shows the value of having professional advice before making important decisions
Most of us will know
what has happened to
financial markets since
the start of the crisis
because it’s the kind of
news that makes
headlines
Some of us will know
that markets go up and
down over time and have
recovered from past
crises over time
Very few of us will
know that COVID-19
and other recent market
shocks have resulted in
the cost of buying a
pension going down
What can you do to prepare and take control of your
retirement ?
Take control by understanding your situation1STEP
Take control by asking what you can change2STEP
Take control by planning3STEP
Take control by being proactive4STEP
Take control by starting new habits5STEP
Are you
worried
about
having
enough?
Retiring soon
Your first important decision
Your options
Option A
DEFER
If you don’t need to start
getting an income
straight away e.g. if you
get other paid work
after retiring from your
employer
Option B
GET PENSION
Start getting an
income straight away
1. Guaranteed pension
2. Flexible pension
3. Combination of 1 and 2
Getting a pension
How it works
How to get a pension
Retirement
savingsYou use your
retirement savings
to buy a pension
from a pension
provider
These regular
payments are
called an “annuity”
How tax works when you buy a pension
Your pension (annuity)
is taxable (in the same way
your income is taxed)
The savings you pay from your
retirement fund - pension fund,
provident fund or retirement annuity
to a pension provider are not taxed
How tax works when you take some of your savings in cash
Pension fund
You can take one third in cash
If less than R247 500 you can
take all in cash
Provident fund
You can take all in cash
The first R500 000 you take in cash at
retirement is tax free unless you’ve
previously withdrawn cash
When you retire
How much you take Rate of tax
R0 to R500 000 0%
R500 001 to R700 000 18%
R700 001 to R1 050 000 27%
R1 050 000 and above 36%
It is seldom a good idea to take all
your retirement savings in cash
Getting a pension
Your second important decision
Your pension options
Guaranteed pension (life annuities)1
Flexible pension
(living annuities)2
Combination of a guaranteed pension and flexible pension3
Your pension options
Guaranteed pension (life annuities)
1 You will continue to get income for the rest of your life, no matter how longyou live
Your spouse or dependents can continue receiving a pension after you die
There are several types of guaranteed pension
Buying a guaranteed pension is a decision that can’t be changed
Flexible pension (living annuities)
Your pension options
2 Each year you can choose how much of your remaining savings to get asincome within limits
There is a risk that your income will reduce before you die
When you die, any savings you have left can go to your dependants
Your savings are invested so they can grow or shrink depending oninvestment values. You and your adviser can manage this risk by investingyour money in an appropriate portfolio.
A flexible pension can be converted into a guaranteed pension
Combination of a guaranteed pension and a flexible pension (hybrid annuities)
Your pension options
3 This option allows you to enjoy the benefits of both types of annuities.
It is more complex and financial advice is compulsory with this option
Most important risks facing retirees
You outlive your retirement savings
Your spouse or dependants are not taken
care of when you die
Your income does not increase as fast as
your expenses
Managing risk at retirement
Choosing the best type of annuity for your
needs
Managing your expenses within your
budget
Getting good advice
Some risks in retirement depend on the type
of annuity you choose.
Guaranteed pension
Options
What affects the
amount of
guaranteed
pension you can
expect?
The amount you have saved for retirement
that you pay to the pension provider
The cost of buying a pension. This changes over time and depends mostly on government
bond interest rates
How much income you want your spouse
to receive after your death
How much you decide to leave for your dependants
when you die
The type of guaranteed pension option you choose
The age and gender of your spouse also
affects the rates
The value of retirement savings
The cost of
buying a
guaranteed
pension
influences the
pension you
can expect*
R21
R846 32123 March 2020R7 269
Amount saved
for retirement
Monthly
retirement income
R1 000 0001 March 2020
R7 290
*This estimated income is based on the default with profit annuity that has been adopted by the Alexander Forbes Retirement Fund
Four main guaranteed pension options
Fixed-
Increase
A fixed increase pension
pays a lower starting
income, increases each
year at a fixed percentage
chosen
2
Inflation-
LinkedGuaranteed to
keep up with
inflation up to
certain limits3
Level
This option pays
the same income
for the rest of
your life
1
With-ProfitIncreases are
linked to
investment
performance in a
reference portfolio 4
YearLevel
(no increases)Buying power
Fixed increase
(5%)Buying power
1 R5 000 R5 000 R3 500 R3 500
5 R5 000 R4 114 R4 254 R3 500
10 R5 000 R3 223 R5 429 R3 500
15 R5 000 R2 525 R6 929 R3 500
20 R5 000 R1 979 R8 844 R3 500
25 R5 000 R1 550 R11 287 R3 500
30 R5 000 R1 215 R14 406 R3 500
The effects of inflation* (buying power of your money)
*Inflation rate of 5% assumed
Flexible pension
Options
What affects the amount of flexible pension you can expect?
The initial amount
you have saved
for retirement that
you pay to the
pension provider
The performance of
the investments in
your annuity
investment
portfolio(s) How much of
your savings you
decide to or need
to take as an
income each
year
How long your
money needs to last
(how long you live)
and how much you
want to leave to your
dependents
A flexible pension is not guaranteed to last for life
How long your money will last depends on: how much income you take the growth of your investments
A financial adviser can help you manage your investments and decide how much pension to take each month
Rules allow you to draw a pension of 2.5% to 17.5% of your money per year
Choosing the income level you want to draw
Your age at last
birthday
Income withdrawal as a
percentage of your money
held in a living annuity
Under 60 4%
60 – 64 4.5%
65 – 69 5%
70 – 74 5.5%
Over 75 5.75%
More complex
Pension options
Enhanced guaranteed pension (annuity): How it works
03You can receive up to 100% higher income than an
ordinary guaranteed pension
04
Added benefit of capital protection on death via a lump sum or income for a certain period, depending on the pension provider
05
Based on a guaranteed fixed pension or with-profit pension options but with individual rates
02Current income, occupation and smoker status can lead
to a higher income
01
Individually insured – based on lifestyle and medical factors
Pension conversion options
A flexible pension (living annuity) can be converted into a guaranteed pension
(life annuity) at a later stage.
Pension providers
Special options
How it works:
If the rules of your fund allow for it, the fund
can pay your pension directly from the fund
The trustees on your fund will still have
protection and oversight responsibilities in
terms of the Pension Funds Act and the
rules of the fund
Restrictions:
Comply with Regulation 28 of the Pension Funds
Act, which is not required when buying a living
annuity from an insurer
You cannot add any other savings you have into the
fund
Your money stays invested in the portfolios offered
by your fund and you remain a member of the fund
Benefit:
Lower fees relative to other options available to individuals
In-fund flexible pension (living annuity)
How it works:
Trustee approved solution as part of thefund’s annuity strategy
Ensures your retirement income lastslonger, due to lower investment fees
Other advantages:
Combine other retirement savings into AFRIS andwill get the benefit of lower investment andadministration charges on all savings
AFRIS is not governed by Regulation 28 of thePension Funds Act, which means a higher offshoreinvestment allocation is allowed
AFRIS includes option to use a with-profit life annuityin the living annuity – hybrid: best of both worlds
Benefit:
Lower fees relative to other options available to individuals
Alexander Forbes Retirement Income Solution (AFRIS)
flexible pension
Alexander Forbes Retirement Income Solution (AFRIS) flexible pensionAFRIS Living annuity – what’s the benefit to you?
Investment portfolio
mattersAs you approach retirement
0 10 20 30 40 50 60 70 80 90 100
<1
1 to 2
2 to 3
3 to 4
4 to 5
5 to 6
Are you in a lifestage model?
Riskier
Safer
Speakers
Michael PrinslooSpeaker
Managing Executive:
Research & Product
Development
Gary Fisher FacilitatorHead: Member
Education Services
Rita CoolSpeaker
Senior Financial
Planning Consultant
Speakers
Gary Fisher Facilitator
Head: Member
Education Services
Michael PrinslooSpeaker
Managing Executive:
Research & Product
Development
Rita CoolSpeaker
Senior Financial
Planning Consultant
The value of advice
As you approach retirement
Choosing between guaranteed pension options
Selecting the
best option for
you can be
challenging a
financial
adviser can
help you:
1To make a detailed list of your
needs and personal circumstances
such as your health
2To accurately estimate the
income you can expect from
each option
3 To choose the most suitable
option for you
The
value of
advice
Help you decide
which goals and
needs to prioritise
Help you understand
your options and
the costs and
benefits of each
Help you choose the
option that best meets
your needs
Help you make your
decisions in time to receive
your pension when you
need it
Help you with your ongoing
decisions if you choose a
flexible pension or more
complex pension option
Our advisers
Are fully accredited financial advisers
Assist you with the important choices you
need to make for your retirement
Partner with you to achieve
your best retirement
Questions
Gary Fisher FacilitatorHead: Member
Education Services
THANK YOU
Your feedback is important
to us, please answer the
following questions to help
us improve our
engagement with fund
members in the future.
1. Do you have an Alexander Forbes financial advisor that you’ve been
communicating with?
(Yes/No)
Poll
2. Would you like a financial adviser to contact you for a discussion on how
to choose the retirement income options that are right for you?
(Yes/No)
Poll
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a) Content not relevant
b) Useful content and insightful presenters
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TRANSITIONING TO RETIREMENT
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