retirement-planning / general-investing

Retirement Annuities that work for you

24 May 2024

A retirement annuity can be the cornerstone of your retirement planning, setting you up for a secure and stable future after retirement by transforming accumulated savings into steady cash-flow. A retirement annuity (RA) offers a tax-deductible and creditor-protected retirement savings vehicle, and at 10X Investments we know we’ve got the RA you need to ensure a comfortable and stress-free retirement. In this brief read we will be delving into the details of retirement annuities and how these investment vehicles can work for you. We’ll also tell you why we think the 10X Investments Retirement Annuity stands out in a crowded, noisy, and often opaque industry. 

Understanding retirement annuities

When you contribute to a retirement annuity your money is invested into various financial instruments like stocks, bonds, cash, and other assets. These investments are managed by the annuity provider, a financial services business like 10X Investments. The objective is to keep contributing regularly to the investment over time, while the investment itself grows as its underlying assets grow in value. Contributions to a retirement annuity are eligible for tax-deductions – something that can subsequently lower your taxable income and tax bracket – and any investment growth within the annuity itself is tax exempt. In addition to tax benefits, investing in a retirement annuity means consistent savings that are protected from creditors, with your money having limited withdrawal options until you reach the minimum retirement age (55 in South Africa). 

Over the years leading up to your retirement, the investment growth within your retirement annuity should ensure that you have sufficient funds to convert into a steady income stream when you retire. On reaching retirement, at least two-thirds of the savings you have accumulated in your retirement annuity can be converted into income-generating annuity products, like a living or life (guaranteed) annuity. 10X Investments retirement annuities boast a track record of 100% market outperformance, alongside consistently low fees and a highly diversified portfolio that aims at mitigating investment risk. To gauge whether you could do better with 10X Investments, opt for a free comparison report and discover the potential impact of our low fees and strong returns on your retirement savings. 

retirement annuity calculator

Understanding compound growth

A key component in the growth of retirement annuities is compound interest. Compound interest refers to the fact that you are not earning interest in a fixed amount every month – your investment is growing as the market moves, and as previous interest payments are reinvested, the amount on which you are earning interest every year is growing, which means your interest payments are growing. The enormous effect compound interest can have over time is especially evident if contributions are made regularly over a long period of time. 

For example, let’s say you invested R10,000 at 5% interest per annum (we will ignore the effects of inflation, fees, and other forces that might affect the investment to illustrate the point more simply). You earn R500 interest in year one, so the lump sum amount you have in year two is R10,500. Your 5% interest in that in year two is R525, which means your lump sum in year three is R11,025. By year ten, your lump sum is worth approximately R15,500, and the interest you will earn on that is around R775, which is 55% more than the interest you were paid in year one. In short, starting early and contributing consistently is the key to making your annuity work for you and ensuring a substantial amount of money for yourself during retirement. 

comparison report living annuity retirement annuity

10X retirement annuities have a minimum contribution of R500 per month (or, alternatively, an initial lump sum investment of R5000). Although our fees are already significantly lower than industry norms, clients can also look forward to paying less the more they invest, with a sliding scale of fees according to the invested amount. By saving the right amount each month and keeping fees low thanks to our progressive fee structure – alongside investing in an appropriate portfolio – you can make your money work for you and set yourself up for a comfortable retirement and ultimate peace of mind as you head into your golden years.

Have a specific question about the rules governing retirement annuities? Check out our retirement annuities FAQ page.

Features And Benefits Of Retirement Annuities

Tax Benefits: One of the most noteworthy advantages of investing in a retirement annuity is the incredible tax-benefits it can offer, both tax-deferred growth and tax deductions. As long as the investment gains remain within your retirement annuity, they will not be taxed, allowing the investment to grow (which, as previously explained, will have a compounding effect over time). These tax benefits will continue until retirement – when you could be in a lower tax bracket. Additionally, your contributions to a retirement annuity are tax-deductible within legislated limits before your retirement. 

Contributions, Withdrawals, And Flexibility: Another major benefit of retirement annuities is investment flexibility and varied investment options. With more flexibility in terms of fund management, you can tailor your retirement annuity according to your individual risk tolerance and financial goals. 10X offers a diverse fund portfolio so you can do just that. To illustrate, here is a quick summary of some of the options available to you:

  • The 10X Your Future Fund – This flagship offering is a multi-asset high equity fund with a time horizon of five years or more, designed to deliver cost-effective exposure to a wide range of local and international classes, and maximise long-term capital growth. This fund is best suited to investors looking for long-term capital appreciation to build their wealth. 
  • The 10X Income Fund – This option is a cost-effective, multi-asset fund for those seeking a high level of income and long-term capital stability. This option has a time horizon of three years or more, and fulfils its purpose through cost-effective exposure to a diverse range of national and international interest-bearing assets. 
  • The 10X Moderate Fund – This fund is ideal for investors who want capital growth with a lower level of volatility over the medium/long term – this is achieved through cost-effective exposure to a wide range of local and international classes. This portfolio also has a higher allocation to growth assets over defensive assets.

Investment flexibility also comes in the form of adjustable contributions, something that can prove particularly useful for individuals whose income fluctuates from year to year. As mentioned, 10X Investments has a minimum contribution of only R500 per month with plenty of flexibility in how that is applied – if you’re in need of a break for a few months, that won’t be an issue for us. You could also opt for a lump sum contribution of R5000. If neither of these options work for you, let us know! Our consultants are happy to work on a plan that works for you. 

You can cancel your annuity and get your money back if your invested amount is less than R15,000 on the date it is paid. If your investment is larger than that, you can choose not to contribute further, but your investment must be held by a provider (it doesn't have to be us - you can transfer to another provider with no penalty fees) until you meet the minimum age of retirement (55 in South Africa).

Creditor Protection: Retirement annuities also offer protection against creditors that other investment accounts cannot. In a retirement annuity, your funds are shielded from claims by creditors, making it a safe place to store and grow your wealth in preparation for retirement. 

Addressing Misconceptions Around Retirement Annuities

High Fees: When it comes to retirement annuities, a potential issue for a lot of people is the belief that RAs come with exorbitantly high fees. 10X Investments takes pride in our transparent and consistently low fees – with a sliding scale fee structure starting from 1.04% (including VAT and trading costs), ensuring that your money has a chance to grow instead of being consumed by costs. 

Locked-In Funds And Inflexibility: Other common misconceptions surrounding retirement annuities are the locked-in nature of funds and limited flexibility in terms of fund management and contributions. While access to funds is limited by legislation until the legal minimum retirement age of 55, we try to give our clients as much flexibility as possible within those legal constraints because we know your financial situation is liable to change. The 10X Retirement Annuity fund charges no upfront, advice, or exit fees, and no penalties for changing your investment strategy. We are also happy to give you a break from your debit orders if you need one!

Poor Returns: Lastly, some people are wary of inconsistent fund performance, worrying that their investments may not grow as much as they would like over time. 10X Investments has a 100% record of market outperformance, with our market-leading asset allocation and valuation model generating consistently superior returns (for example, see this report). We are wholly transparent about performance, and aim to make it easy for you to see how well your investments are doing via regular updates to fund fact sheets and through the My 10X online portal

Choosing The Right Annuity Provider

Choosing the right annuity provider can have a significant impact on your retirement savings and future income stream. It’s a critical decision that calls for careful consideration of factors like fee structure, performance and transparency

Rather than choosing the first provider you stumble across, consider the following criteria:

Find The Fees That Work For You: Your chosen provider should offer clear, reasonable and incentivised structures. You want your fees to be as low as possible to begin with, and you should be incentivised with lower fees the more you invest. As mentioned earlier, high fees can erode your investment returns over time, and you don’t want to be hit with any unforeseen management or administrative fees, or withdrawal penalties should you choose to invest elsewhere one day.

Assess The Fund Performance: Take a look at the historical performance of the funds underlying your prospective provider’s annuity products. Keep in mind, past performance does not always guarantee future results, but a track record of consistent returns is definitely a good sign – consistent returns can often be a good indicator of the provider’s investment management capabilities. 

Transparency Is Key: You're looking for an annuity provider that is straightforward and transparent about their fees, fund performance, and overall operation. Your provider should be willing and able to offer easy-to-understand and in-depth information pertaining to fees, risks, and investment options, as well as a breakdown of the withdrawal and transfer process. 

10X Investments: The Best Choice For The Savvy Investor

We don’t want to brag, but we feel 10X’s competitive fee structure, superior fund performance, and complete transparency (and years of retirement expertise) stand us apart in the market. Our fee structure is cost-effective and simple, with no hidden costs, and client’s can expect to pay less the more they invest. Alongside our favourable fee structures, you can say goodbye to pesky administrative processes, and let the highly-experienced 10X team offer you a hassle-free experience. 

10X retirement annuities offer a selection of five Regulation 28 funds, with each one carefully curated to deliver optimal returns and mitigate risk. The consistent multi-asset benchmark outperformance of these funds, and subsequent confidence of clients regarding the growth potential of their nest eggs, puts 10X at the forefront of reliable annuity providers. You can also look forward to consultations with experts in the industry, performance reports, comprehensive resources at your fingertips, and all the support and experience you require to make informed decisions during your retirement planning. 

A Few More Considerations

How Much Should You Save? How much you need to save each month will ultimately depend on your income, your expected retirement lifestyle, and the age at which you plan to retire. For a general savings benchmark, it’s often recommended that, by age 30, you have at least one year’s salary saved. By age 50, you may want to have six to ten times your annual income put away. 

retirement annuity calculator

Investment vehicles like retirement annuities play a significant role in this process and, as mentioned, starting early can greatly boost your ability to take advantage of compound interest The practice of consistently maxing out your retirement annuity contributions can lead to substantial savings and wealth accumulation. 

What Is The 4% Rule? This is a widely referenced retirement strategy that involves withdrawing 4% of your retirement savings as income in the first year of retirement, with subsequent withdrawals adjusted for inflation. The goal of this strategy is to provide you with a steady income stream while preserving the principal balance over a 30-year retirement period. You can read more about this strategy here

Make Your Retirement Annuity Work For You With 10X Investments

Our retirement annuity products are founded on two core investment principles: long-term strategic asset allocation and diversification leading to consistent market outperformance, and famously-low fees. When you choose 10X to begin your retirement planning, you are also guaranteed personalised service from a team of retirement experts – so don’t hesitate to get in contact and set up your retirement annuity today!

10X Investments is an authorised Financial Services Provider (FSP number 28250). The content herein is provided as general information and is not intended as nor does it constitute tax, legal, investment, or financial advice as defined by the Financial Advisory and Intermediary Services Act, 2002.

The 10X Living Annuity is underwritten by Guardrisk Life Ltd.

10X Fund Managers (RF) (Pty) Ltd is an approved manager of collective investments schemes in securities in terms of Section 42 of the Collective Investments Schemes Control Act, 45 of 2002.

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