This is the most difficult part of retirement planning and the reality is that it all depends on your expenses and required standard of living at and after retirement.
Below is an indication of the potential capital required when considering retirement at different ages. Should you, for example, wish to retire at age 55 you will require approximately 20 times your current annual income.

For many people it comes as a major shock once they realize what a large capital sum will be required and just how little time and money they have to implement their retirement plan.
Time can be your greatest ally or your greatest enemy when it comes to retirement planning. It all depends on when you start. Below we indicate how many paydays you potentially still have, considering your current age.

As an example, at age 45, you only have another 240 salary payments to fund the required capital that you need at age 65.
You need to determine your capital shortfall and immediately start saving. You can not afford to wait for the next increase, the next bonus or the next lotto winnings – it might just be too late!

Choose Time as your ally right now and he will remain your ally.

The majority of fund members do not truly know and understand the benefits offered by their employee benefit schemes. This is one of the main contributory factors of members not having sufficient capital at retirement. They are under an illusion that their pension or provident fund benefit will be sufficient when they retire.

You need to understand the benefits you have before you can start planning for your retirement. Establish if you are a member of a Defined Contribution (DC) Pension, Defined Benefit (DB) Pension, Defined Benefit Provident fund or a Retirement Annuity.
Get the answers to the following questions from your HR or employee benefits administrator:
• What is my current fund credit?
• What is my monthly contribution amount?
• Does my employer pay a contribution to the scheme and how much?
• Of the contribution paid, what percentage is paid toward risk benefits and expenses – what is my net after expenses contribution towards my retirement?
• What risk benefits (insurance) are provided?
• When I retire, will I be paid a pension from the employer scheme or do I need to purchase a pension from a registered insurer?
  Most of your answers will be reflected on your benefit statement, but it’s imperative that you fully understand your benefits under your scheme.

Different rules apply to the availability of capital on retirement from a pension fund, provident fund or retirement annuity. These are explained in the diagram below. The tax implication of the cash lump sum withdrawal will however be the same.

It is critical to bear in mind that once the lump sum tax has been deducted (as per the table below) your income tax liability has not been expended. You will remain liable for income tax on the pension/annuity which flows from the portion which is not withdrawn. The pension/annuity will be taxed according the legislated tax tables which also apply to your salary pre-retirement. Although the pension/annuity is taxable it may not ultimately be taxed based on excemptions and rebates granted as per the Income Tax Act.

You will need professional guidance on the most appropriate solution at your retirement and we strongly suggest that you approach a certified financial planner to assist

There are two basic choices of annuities, both have advantages and disadvantages.

Guaranteed Life Annuities

There are numerous underlying choices available within a life annuity structure (also known as traditional annuities). The key features of a guaranteed life annuity are:

• You receive a predetermined fixed pension with or without future escalations until you and/or your spouse die.
• The annuity rate is determined and fixed at inception of the contract and is dependent on prevailing economic conditions. These may work for or against you.
• The capital invested does not pass to your heirs upon your death unless life assurance was built into the contract at inception.

Investment-Linked living annuities

These products are effectively flexible investment products rather than an annuity, even though the purpose of the product is to produce income. The key features are summarized as follows:

• You can draw between a minimum of 2.5% and a maximum of 17.5% per annum of the capital value as an income / annuity
• Your heirs will inherit the investment upon your death
• You take the investment risk of your living annuity not producing sufficient capital growth and therefore not a growing income.
• You will need professional investment advice after investing in this product

When considering the Guaranteed Life Annuity the biggest single factor that determines the annuity rate is the prevailing interest rate. If long-term interest rates are low (as experienced 2009 & 2010) when you buy an annuity, you can expect a lower annuity than if you bought an annuity when interest rates were high. During 2010 you would have thus locked into rates at the bottom of the interest rate cycle should you have invested in a Guaranteed Life Annuity.

With the Living Annuity you have the flexibility to determine any required income level as long as you adhere to the legislated minimum and maximum withdrawal rates of 2.5% and 17.5% respectively.

Below are guidelines on the appropriate level of income that could be drawn during your retirement lifecycle.

Our service, experience and knowledge extend across the entire spectrum of today’s retirement plans. Whether you are starting a new plan, reviewing the old plan or have a large established retirement program, we can support your needs.

Our services include the following:

• Retirement and Financial Planning
• Employee Benefit Management
• One on One Employee Benefit Plan Design
• Comprehensive Investment Services
• Cash Management Services
• Estate, Trust and Tax Services
• Insured Risk Benefits and
• Private Client Asset Management