Know your options when you retire from the GEPF

Owen S Nkomo For Your Money
People need to explore sound investment options during their younger years and work towards building wealth for a better life, more so for retirement years.
People need to explore sound investment options during their younger years and work towards building wealth for a better life, more so for retirement years.

You have total freedom to take money from your pension after the age of 60, but what is the best option for you personally?

When you retire from the Government Employees Pension Fund (GEPF), you are allowed to take one-third of your retirement capital in cash.

With the rest of the money, you must buy an annuity either within the government or other financial service providers.

The GEPF is a popular retirement choice. An annuity guarantees to pay an income for the rest of your life.

This is a very attractive option, but you cannot pass any remaining fund on to your family when you die. Death benefits are paid when a member dies within five years of becoming a pensioner.

It also pays annuities to the surviving spouse(s) or orphan(s) of members who die after retiring.

Remain with the GEPF if:

● You want a steady income for life.

● You prefer the relative security of the guaranteed product.

● You do not want to make investment decisions.

● You do not want to risk your retirement fund.

What other options exist for you

A living annuity is designed to provide you with income during retirement. You can purchase the annuity with the benefits from your pension fund.

It is a flexible way to grow your retirement capital and to draw income from your capital during your retirement.

What is a living annuity?

A living annuity is suitable for individuals who retire from a pension, provident, preservation or retirement annuity fund.

A living annuity gives you more control over how your retirement fund is managed.

It is an investment plan with the intention of growing your money during your retirement years based on a carefully selected investment strategy.

How often will I receive my income?

You can choose your level and frequency of income, and both can be reviewed annually on the anniversary date of your investment. You can receive your income payment monthly (in arrears), quarterly, biannually or annually (in advance). Please note that legislation requires that you receive at least one payment annually. No withdrawals other than the regular income withdrawals are allowed.

How much income can I receive from the product?

Legislation allows you to select a level of income between 2.5% and 17.5% of your portfolio value.

This is an advantage if you want a high income over a shorter period or if you want to lower your taxable income.

However, it is important to note that if your income level is higher than the annual growth of your portfolio it will impact and erode your retirement capital, and therefore your future income.

What are the risks of investing in a living annuity?

In a living annuity you are taking on the risk of using up all your money before you die. It is important to remain disciplined about the level of income you withdraw.

You need to be aware of the factors that influence your level of income in order to be able to manage this after you retire.

What happens if I die?

The death benefit from a living annuity is paid out to your nominated beneficiary(ies) and can be taken as a lump sum payment, transferred to another living annuity or a combination of both.

You can choose a living annuity if:

What are the risks of investing in a living annuity? In a living annuity you are taking on the risk of using up all your money before you die. It is important to remain disciplined about the level of income you withdraw. You need to be aware of the factors that influence your level of income in order to be able to manage this after you retire

What happens if I die?

The death benefit from a living annuity is paid out to your nominated beneficiary(ies) and can be taken as a lump sum payment, transferred to another living annuity or a combination of both.

You can choose a living annuity if:

● You want a retirement fund to have the potential to continue to grow.

● You want to pass on the balance of your fund after your death.

● You want more control over how your fund is invested.

● You want flexibility in the level of income you receive.

■ Nkomo is chief executive of the Inkunzi Wealth Group

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