The retirement annuity apple nobody wants to eat

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of 10X Investments.

You know how sometimes random events take on a life of their own, and end up mythologising themselves in extended metaphors related to financial life choices? No?

Ok, but let me tell you about Binky. Binky was (and probably still is) an apple that went from my ex's house to mine repeatedly. Every time I fetched the kiddo and opened her lunchbox to wash and repack it, there he was. Every time my ex opened the kiddo's lunchbox, there he was again.

Binky the mutant apple. So genetically modified his fellow apples accused him of wanting to become a watermelon.

And so it is with Regulation 28 investment funds. Sort of. Stay with me.

The lunchbox wasn't the problem. It did exactly what it was supposed to do. It kept the food together, was the vessel for the one-fruit-a-day concept and made sure Binky got from one house to the other.

Binky, however, was a problem because he kept taking up a space for something the kiddo might actually eat. Literally any other fruit. We had mentally ticked the "fruit" box without asking whether it was the right fruit, and had obviously ignored our kiddos justified fear of the never-ending apple.

What's in your retirement lunchbox?

Retirement annuities work much the same way. Too many people think they've ticked the retirement box because they've opened an RA. But an RA is simply the lunchbox – a tax-efficient wrapper. What really matters is what you put inside it.

For example, just like parents can decide what fruit to put in the long-gone luminous green lunch box (she’s old enough to vote now), investors can determine what to put in their RAs – to an extent.

This limited freedom of choice is provided for under regulation 28, which is the part of the Pension Funds Act that tells retirement funds what they're allowed to invest in and how much. The key part is it doesn’t dictate which investments (fruit) to choose.

A fixed deposit? No thanks!

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The limits, however, do provide a large scope for choosing what you want to do within them: a fruit that takes up 45% (anything outside of South Africa), a sandwich that takes up 75% (equities), a limit on the amount of vanilla yoghurt you can put in (property, commodities and other asset classes) and diversification requirements so you can’t fill the entire lunch box with chocolate. Essentially this is supposed to stop you taking on concentration risk: putting too much of your money in one place.

Two parents can both follow the school's lunch rules, yet one packs sushi, fruit and yoghurt while the other packs a stale cheese sandwich, cucumber sticks (yuck) and an undead apple. Both comply. One is simply a much better lunch.

Likewise, two Regulation 28 funds can both comply with the law, but one can be positioned for strong long-term growth (high equity, well diversified, low fees) while another may be far more conservative and pricey and produce much lower long-term returns.

Y

While we’re on the topic of fees, it’s rather important to not waste money on them. If all you are getting for your extra percentage point in fees is a happy birthday phone call, then you should consider shopping around. To make sure you’re not being overcharged by your provider, check your Effective Annual Cost.

When I was ‘forever’ away from retirement and not yet Binky's mum's mum, I used to put my bucks into a Multi-Asset High Equity fund because it has the biggest allowable equity exposure under Regulation 28, which gives it the greatest potential for long-term growth.

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Now that I’m rather more middle-aged, I split my investments. A third needs to go into that slightly more risky investment with two-thirds going into a more Moderate vehicle whose driver sits within the speed limit with their hands at 10 and 2. But that’s just me. I’m not telling you what to do.

But if you do one thing, just make sure your retirement annuity isn’t mostly invested in a money market-type fund, getting inflation-type growth while costing you arm-type and leg-type appendages. You’ve got a long way to go to retirement. Use that time well.

Eating right, and sleeping well

Built in diversification means I’m not on the edge of my seat watching stocks go up and down every day. For me, it’s all about long-term growth at acceptable risk levels. I could go for maximum growth, but at what cost? No thanks, I’d rather sleep well tonight, while also knowing that I’m probably still going to be sleeping well in 20 years.

Speaking of risk… lately there has been a lot of noise about bubbles and corrections. Yes, things will probably change for the worse at some stage. But isn’t this true of any cycle? If that happens, then I’ll need to wait it out. COVID-19 gave investors a serious shiner, but the JSE bounced back. Last April, the FTSE/JSE All Share Index hit a record high of more than 91,300 points, it set another personal best in July 2025, and then in January – before Trump pushed oil past $120 – it broke 120,000 points, setting another record.

The trick isn't picking the next whizz-kid stock (I’m looking at you, dollar trillionaire). It's making sure your portfolio has enough exposure to growth assets over the long term, and that you haven’t paid an unacceptably high price for that growth in either unnecessary risk or unnecessary fees.

Ok, onto future, much older me. The me that will be here all too soon. That me will want to have a decent lifestyle – I wrote about that here and you can work out how much you will need for your own best retirement lifestyle here – but also leave the kid-who-wouldn’t-eat-Binky something as well. And so picking my fruit correctly and not overpaying for it now is the most important thing.

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