10X Exposes Retirement Industry Myths

Industry Myth: Costs don't matter

10X Fact: Costs matter the most

High fees ruin your retirement

Costs have a dramatic impact on your long-term savings outcome.  But this only becomes obvious once fees are seen in their proper context.  The proper context is the real (after-inflation) long term investment return.  A prudent return expectation for a balanced portfolio is 5%. Every 1% in fees therefore reduces your real return by 20%.  More importantly, this compounds over a 40-year savings period so every 1% in fees you save increases your real retirement income by 30%!

Even government acknowledges there is a problem:

“High costs in savings products undermine the national objective of getting our people to save more.”

Pravin Gordhan, Finance Minister, 2012 Budget speech

Increase your retirement investment by 60% with 10X:

AssumptionsA 5% real (after inflation) return before fees and a R1000 monthly contribution (in todays money). Fees are expressed as an annual % of the investement value.

Assumptions
A 5% real (after inflation) return before fees and a R1000 monthly contribution (in todays money). Fees are expressed as an annual % of the investement value.

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55 Comments

  1. January 19, 2017 at 1:00 pm, Nomaswazi said:

    My father he was a chubb security member he passed away 2010 someone who is claimed the money under my name what can I do to get it back please help me i need it for my studies Reply
    • January 19, 2017 at 2:08 pm, 10X Investments said:

      Nomaswazi, That's fraud, isn't it? You would have to report this to the police. Reply
  2. December 08, 2016 at 8:11 am, Vusi said:

    Good day My Name is Vusi Nkwanyana (8909016336087) I was employed with EOH from 2014 to 2016-05. I would like to know if my retirement was moved with the company that I joined up on leaving eoh. The company I moved to is Datacentrix. Thanks. Reply
    • January 03, 2017 at 11:53 am, 10X Investments said:

      Vusi, The money would only be moved if you filled out a withdrawal form. This does not appear to be the case, as the money still reflects in the EOH fund. Reply
      • January 03, 2017 at 11:59 am, Vusi said:

        Thank you, is it possible that I withdraw the money and not transfer it to the other scheme, of so How can I go about that. Reply
        • January 03, 2017 at 12:01 pm, 10X Investments said:

          Vusi, Yes, you also have the option to withdraw. Reply
          • January 03, 2017 at 12:03 pm, Vusi said:

            Can I have the steps to take to do that please , Is there a direct email or person I can talk to?
          • January 03, 2017 at 12:22 pm, 10X Investments said:

            Vusi, You need to contact the EOH HR department, for the relevant forms, and to get the process going.
  3. November 22, 2016 at 11:00 pm, Mphahlele Phasha said:

    I been retrenched at september this so i call and they said they did get my document from work but even now still waiting for money and the problem is that my children wil not having chrismas clothes can u help me about that pls Reply
    • November 23, 2016 at 10:58 am, 10X Investments said:

      Mphahlele, Please refer to our blog on how to claim. Please refer to the “What if my pay-out is delayed” section. Reply
  4. October 10, 2016 at 6:40 am, steve judge said:

    all the decisions as to where to invest my preservation fund was done by me,my advisor simply complied.1.5 years ago he talked me into switching into a different scheme in the same insurance company to save me costs.a few months later i received an email that a lump sum amount had been taken from my preservation fund.no amounts were ever disclosed.i don't trust my advisor.can i instruct the insurance company myself to move to 10x as i am now 67 & want to retire. regards sj Reply
    • October 10, 2016 at 10:46 am, 10X Investments said:

      Steve, Yes you may. I have requested someone from our office to contact you and assist with your query Reply
  5. July 04, 2016 at 10:53 am, kiekie said:

    Thank you for da response to my question bt m also greatfull tht you also sent me your newsletter of which I found to be very educational n informative on my part. I will carefully read it with understanding before committing to any regrettable decisions tht I might fall into. Regards, K.K Reply
  6. July 03, 2016 at 4:00 pm, kiekie said:

    Since my age is almost 52yrs and am no longer interested in reaching my retirement age in the GEPF, my debts stand at approximately r900 , 000 and my resignation package is estimated at r 3 ,200 ,000, plz take note, m not interested in unit trust taking my age into consideration, also doing tax deductions from the final payout, wht type of investments n hw much can I leave with on day 2day, all my children are now graduates but not yet employed.Hs got interest in property markets or transport bus services,(inexperienced in both my interests) . Wht would you advice? Reply
    • July 04, 2016 at 10:21 am, 10X Investments said:

      Kiekie, We cannot provide financial advice on this forum unfortunately, only information. However, we would recommend that you don't resign. You have no saved nearly enough to make this money last for the next 20 or 30 years, nor do you have the financial skills to manage your pay-out. Reply
  7. February 20, 2016 at 7:17 am, b said:

    why do financial advisers charge so much? is there not a formula or insurance standard? Reply
    • February 22, 2016 at 10:10 am, 10X Investments said:

      B, They charge so much because customers, and the investment and insurance companies, let them. Commissions were to some extent regulated by the Long term Insurance Act but the permitted rates are high and contribute to the problem. Today, this is a matter of negotiation between customer and advisers, but few customers are aware of the cost, or appreciate the long-term cost impact of paying an advisor 0,5%- 1% pa of their savings. There is a massive conflict of interest in this industry as the advisor is incentivised to sell you the most expensive products because that maximises their own income. The so-called Retail Distribution Review will ban commission-based advice, ie the new rules will ensure that advisers' income must be linked to the advice they provide not the products they sell. There are also numerous providers (mainly assert managers) who do not require the use of an advisor. Reply
  8. November 16, 2015 at 4:50 pm, David said:

    Hi is there any difference between GEPF and private companies tax Reply
    • November 17, 2015 at 9:54 am, 10X Investments said:

      David, There is a difference in the way lump sums are taxed between private sector funds and the GEPF. Per the GEPF formula, the benefit relating to pre 1 March 1998 is not taxed; the benefit relating to post 31 March 1998 service is taxed per the normal withdrawal lump sum tax table that also applies to private sector funds on the entire pay-out. The GEPF benefit is split on a straight-line basis (pre and post 1 March 1998 service). The withdrawal lump sum tax table is as follows: the first R25,000 is not taxed, the balance to R660,000 is taxed at 18%, the balance to R990,000 at 27% and the remainder at 36%. Reply
  9. July 31, 2015 at 12:38 pm, Xolani said:

    I am Xolani Toko, Today I visited your office to enquire about the policy number of my late brother Bongani Hactor Toko and I was told on the phone that the Administrators are buisy with this matter. What does this mean? When do i contact you or visit your offices again? Is there any document/s outstanding? If there is any information you wish to share with me regarding this policy please dont hessitate to e-mail me or write a letter to my residantial address. Hope to hear from you soon. Sincerely yours Xolani Toko Reply
    • August 04, 2015 at 2:43 pm, 10X Investments said:

      Xolani, We are 10X Investments, and we don’t sell polices. Please contact the responsible fund administrator. Reply
  10. March 24, 2015 at 1:15 pm, Norman said:

    Hi, i have resigned with my company which i had a retirement investment with Discovery invest, i asked to withdraw my funds but my investor told me i cant as the law permits that i can only withdraw this if the amount is less than 7K. i am really lost Reply
    • March 30, 2015 at 10:01 am, 10X Investments said:

      Norman, It sounds as though you were part of a Group retirement annuity scheme. This is, in effect simply a retirement annuity, that you have taken out in your name, except that the company deducts the contributions off your pay and forwards them to the administrator. With a retirement annuity you can only access your money from age 55 (unless the fund value is less than R7 000), unlike a group pension or provident fund scheme, where you can access your money on resignation. All this should have been explained to you by your employer. Hopefully, you will not, in addition, incur a termination charge by stopping your contributions on resignation from your employer. Reply
  11. February 13, 2015 at 12:09 pm, Mbali said:

    I am 31 years old, I am working in DOH started 2011 as a comserve. Currently I want to resign and go to private companies because the money does not meet my needs anymore and we are not allowed to do overtimes. I wanted to know how much will I get out of these 4 yrs I worked. Reply
    • February 17, 2015 at 8:58 am, 10X Investments said:

      Mbali, Contact the GEPF for a benefit estimate. We are not them, we are 10X Investments. Reply
  12. February 09, 2015 at 1:35 pm, Andre said:

    I'm working three years for langley flooring how can I find out how much is my profident fund now Reply
    • February 10, 2015 at 4:38 pm, 10X Investments said:

      Andre, You can ask to see your benefit statement from the fund administrator. Your HR department should help you with this (ie getting the benefit statement). Reply
  13. August 25, 2014 at 3:26 pm, Ettienne said:

    im doing my final year of LLB AT University of Limpopo.i want to do masters degree of retirements benefits next year 2015.after reading 10*investsments im more motivated to study about this feild and make a contribution to reformation and transformation to pension fund industry. The previous minister failed to come up with new pension fund act,cause the current one has been amended so many times that it has become redundant.i personnaly feel we need new act that will address our cuurent problems.what do you the guru's think? Reply
    • August 27, 2014 at 8:48 am, 10X Investments said:

      Ettienne, Good for you! But in our opinion, the problem is not so much with the Pension Funds Act, but with the retirement industry (administrators, consultants, investment managers, consultants etc) who are more interested in lining their own pockets rather than making sure that fund members get a sensible, low cost and efficient retirement solution. National Treasury is seeking to address the problem. The first reforms haver affected mainly the Income Tax Act and Reg 28. It is not yet clear how other proposals eg related to the default fund design or high fees will be implemented. Reply
  14. August 24, 2014 at 9:43 am, Veronica said:

    Should I take out another retirement annuity, or top up my current one? I have only one retirement annuity, am I disavantaging myself or do I have to take another one. Reply
    • August 27, 2014 at 8:30 am, 10X Investments said:

      Veronica, The critical question is not how many retirement annuities you have but who much you are saving. You should be saving at least 15% of your income every month, for 40 years, to secure your lifestyle in retirement. If you want to save more, top up on your retirement annuity rather than take out a new one. Please use our Retirement Calculator to help you with your planning. Reply
  15. August 01, 2014 at 1:31 pm, Unathi said:

    Is the rumour true that government won't pay out my lump sum when I retire? Good day i want to know about this rumour that government wont pay out my lump sum when I retire? Reply
  16. July 28, 2014 at 10:40 am, Mpho said:

    What is the tax estimation on my resignation benefit? Good day. my mother is currently employed by the department of education and she has been employed for 37 years and she is turning 62 years in August 2014. Her resignation amount is estimated at R3,900,000. Can she resign to access this funds and how much will be her estimated tax bill if she: a) take the full amount b) transfer a third into a presevation fund Reply
    • July 29, 2014 at 2:59 pm, 10X Investments said:

      Mpho, If she has not passed Normal Retirement Age per the fund rules, she can resign. She will then pay tax of around R470 000. If she transfers to an APPROVED preservation fund and then withdraws one-third on RETIREMENT (not as a withdrawal) she will pay tax of R220 000 on R1.3m. But she must then use the balance to buy a compulsory annuity. Reply
      • July 29, 2014 at 3:07 pm, Mpho said:

        Thanks for prompt response. she is an educator in gauteng and a her pension is with GEPF. what is Normal Retirement Age generally with educators, from previous experience? Reply
        • August 01, 2014 at 11:53 am, 10X Investments said:

          Mpho, The Normal Retirement Age at the GEPF is 60. Reply
  17. May 14, 2014 at 3:40 pm, Marius said:

    How should I reinvest my pension once retired? I Planned to resign and then I want to invested the money that is paid out from the Government Pension Fund. I Have 33 years service. What will be the best option to do so. I Did not want to invest in a high risk investment. Thanks. Reply
    • May 15, 2014 at 3:49 pm, 10X Investments said:

      Marius, Unfortunately, we cannot dispense investment advice on this site, as this would require us to do a needs analysis on your behalf. Also, this is a very involved subject, and we could write a book about it. "Risk" can refer to many things, including investment risk, inflation risk, longevity risk, counter-party risk, active management risk etc. But when you say "avoid high risk", we assume that you want little or no volatility (ie little exposure to the share market). In that case, your options are to either buy a guaranteed annuity (which has its own draw-backs) or to put your money in the bank (where it will earn a low real return, and in all likelihood lose its purchasing power over time). But for detailed advice, you should probably speak to a reputable financial adviser, who has your interests at heart. Reply
  18. April 09, 2014 at 1:08 pm, Jeremia said:

    I have a stop order on my salary and want to know what will happen when I resign, since I'm prepared to pay it in cash. Reply
    • April 11, 2014 at 2:25 pm, 10X Investments said:

      Jeremia, Unfortunately, we can only answer questions related to pension fund law and retirement investing. Reply
  19. January 19, 2014 at 5:19 am, Angella said:

    If GEPF pension BENEFITS were not paid out before 1994 at the time the member was exiting, which formula and rules will GPAA follow to calculate fair and square what the ex-employee deserves? Can they use laws that were scrapped and were replaced by the Government Employees Pension law? Thanks Reply
    • January 21, 2014 at 8:10 am, 10X Investments said:

      Angella, They will follow the current rules. The pay-out is made according to a formula, and they will apply this formula. But for a clearer answer you should deal with the GEPF, not with us, as we are not connected to them in any way. This site serves to assist with private sector retirement fund law and investment principles. The GEPF is covered by its own Act, which does not apply to anyone else and we are therefore not experts in this area. Reply
  20. January 14, 2014 at 9:44 am, Gerrit said:

    I am a 42 year-old male currently working at a university. I have what I believe is a good pension fund for retirement, yet I have a feeling that I need something more to make sure that I will receive a good monthly income after retirement. What would you recommend? Reply
    • January 14, 2014 at 4:03 pm, 10X Investments said:

      Gerrit, This begs the question: how much money do you need at retirement, and will you get there? We invite you to visit our Retirement Calculator, to help you answer this question. The sliders on the right of that calculator allow you to play with the key inputs (contribution rate, retirement age, investment return, desired income replacement ratio). Importantly, the calculator highlights the long-term impact of fees on your savings outcome. We typically recommend that to reach your retirement savings goal (effectively, a lump sum, that when converted into annuity, replaces at least 60% of your final salary, growing with inflation thereafter, for life) you need to save 15% of your total income for 40 years through a tax-incentivised retirement fund, holding an age-appropriate but well-diversified asset mix in your retirement fund (at your age you would still have a high allocation to equities), eliminating unrewarded risk (ie active management risk) and paying low fees. In the context of your current savings plan, and the prognosis of our retirement calculator, you will get a sense of whether you are on track to meet your retirement goal, or whether you need to adjust your contribution rate, or your asset mix (likely investment return), or expected retirement date. If you need to save more, you can consider upping your contribution to your pension fund, or, if this is not possible, taking out a separate retirement annuity. Note that you can presently only deduct contributions your RA up to 15% of your so-called non-pensionable income. As you belong to a pension fund, most of your income will be pensionable. This restriction will fall away in term of National Treasury's retirement reform, possibly by 2015. You can also pursue other forms of saving, such as unit trust, but these are not tax-incentivised and are often-times more expensive. Reply
  21. September 15, 2013 at 3:47 pm, Howard said:

    Should I take out more than one retirement annuity? Hi there I am in the process of joining you, but siting with five retirement annuities from PPS/Sanlam at the moment. Is five better than one, or did I not understand my financial advisor properly? Reply
    • September 18, 2013 at 8:16 am, 10X Investments said:

      Howard, Five is definitely better than one when it comes to fingers on your hand, but no so much with retirement annuities. This is especially true if you are merely buying into a balanced portfolio, as you would be through 10X. The question is: why do you own five retirement annuities? To get exposure to five different fund managers, or five different investment styles or five different asset classes? Often, a financial adviser will argue that you need to diversify, to reduce your risk. That is true up to a point - as a long-term investor retirement annuity investor (subject to the constraints of Reg 28) you should own mainly equities (local and overseas), and some property, bonds and cash. So you should be diversified across these asset classes, across securities within these asset classes, and then across regions and across currencies. If your five retirement annuities give you the different elements of this equation, then there may be some justification to owning so many. But you are bound by Reg 28, so you can't just own a local equity retirement annuity or an overseas equity retirement annuity, or a property retirement annuity. So each of your retirement annuities should already be reasonably diversified within itself. If you own five retirement annuities and they each give you similar exposure to these asset classes through different fund managers, then what do you own? You effectively own 5 portfolios that a) trade AGAINST each other (your one retirement annuity may be selling a share while one of your other retirement annuity is buying it); and b) by being so diversified, you effectively own the whole market. But instead of then just using an index fund and paying low fees to own the market, you are still paying high active management fees, to still just earn the average market return. By owning so many retirement annuities, you may also be duplicating some expenses. And of course, every time you buy another retirement annuity, your adviser earns more commission, which comes out of your investment return. If you had wanted to save more, you could simply have made top-payments before 28 February each year, to claim the tax deduction. Realistically, the only real benefit we can see of owning five retirement annuities is that you can cash them in at different times, should this be important to you. The 10X Retirement Annuity offers a balanced portfolio across the five asset classes mentioned above. You are well-diversified in each asset class, and your portfolio risk automatically adjusts to your expected/stated retirement date (although you can opt out of this). Each asset class uses indexing, so you earn the market return at low cost. Best of all, our initial low fee (0.9% plus VAT) tiers down once your assets exceed R1m; by combining your retirement annuities you therefore pay a lower average fee across all your retirement annuities. Reply
  22. July 18, 2013 at 7:24 pm, Cindy said:

    How to save for retirement How will I save money? Reply
    • July 19, 2013 at 11:25 am, 10X Investments said:

      Cindy, The best way to save money is to put some money away as soon as you are paid and before you spend money on anything else. Also avoid short term debt to fund your life style (clothes, furniture etc). This ensures that you adjust your life style and living expenses according to what you earn and what can afford after you have provided for your retirement. You should endeavor to save at least 15% of you income from the time you start earning. It is a good idea to invest this money in a place that earns you a risk-appropriate return, and where you cannot easily withdraw it. If you put your money in the bank, your return will merely compensate for the effects of inflation, and you will be able to withdraw it any time you run short. This does not make for disciplined saving. If you invest through a formal retirement fund (a work place retirement fund is normally your best choice, alternatively you have to go for retirement annuity fund, which is a retirement fund for individuals) then you cannot withdraw your money until you turn 55. A RA fund allows you to deduct your contributions for tax, earns you tax-free investment income, and also pays you a tax-free lump at retirement. You must use two-thirds of the fund to purchase an annuity, which ensures you receive a regular income in retirement. You should select a low-cost RA (less than 1% pa), so that your investment return is not eaten away by fees. Your RA should be invested risk-appropriately. This means you should invest according to your age and expected retirement date. If you are young, you can afford to invest a high proportion of your savings in shares, as this asset class has produced the highest return over the long term. But share returns are volatile, so nearer your retirement date, you should invest mainly in cash, to preserve your accumulated savings. To find out more, please visit our Financial Education section. There are other ways to save, for example by buying unit trusts, or shares, but these routes are not so tax efficient. Reply
  23. July 06, 2013 at 12:52 am, Alex said:

    What is a composite annuity? What is a composite annuity and what are the fees? Reply
    • July 09, 2013 at 1:22 pm, 10X Investments said:

      Alex, As indicated, a composite annuity splits your retirement capital in both a conventional guaranteed annuity and a living annuity. The products fall under one policy and are provided by one service provider. The fees will depend on the terms and conditions of the provider you choose, and may in part be negotiable. Reply
  24. July 05, 2013 at 1:26 am, Alex said:

    How to save on fees with your living annuity Can I save on paying fees by buying my living annuity as a direct client? Reply
    • July 05, 2013 at 11:03 am, 10X Investments said:

      Alex, This depends on the terms and conditions of the annuity provider. Most will charge an initial fee and a broker/adviser fee even if you come direct. However, some may allow you to negotiate the price, and even waive the fee if you come with enough money, so you will have to find one who will allow you to do this. 10X expects to launch a direct low-cost living annuity within the next year; we will not charge an initial or annual advice fee, only a minimal annual management fee. Reply
  25. April 25, 2013 at 8:11 pm, Don said:

    High fees erode your retirement savings Hi I am 62 yrs old and have three years to retirement. I have been employed by a local authority for 25 years and feel I am being ripped off three ways a) portion to my pension fund b) a portion to the pension fund administrators c) a portion to the investors. Do I retire now, do I resign and take my savings? I am struggling to come to terms as to what to do. Please advise Many thanks Don Reply
    • April 29, 2013 at 10:36 am, 10X Investments said:

      Don, We are struggling with what you are saying, and where your concern lies. Are you worried that a part of your salary is going towards your retirement savings and that you are paying high administration and investment fees? Saving for retirement is obviously a good thing, and you will be grateful once you receive your pension, or cash lump sum. On the other hand, paying high fees is not such a good thing as it erodes your retirement savings, which ultimately results in a lower retirement income. But your decision whether to retire now cannot be distilled down to that. Instead, it requires a proper analysis of your needs and and your overall financial position. If you retired now, could you live on those saving for the rest of your life, without sacrificing too much of your standard of living? If the answer is yes, and mentally you feel ready to retire, then you should probably do so. You may not be able to answer the first question though, as it is quite a difficult one. How do you know you have enough money? If you use the savings to buy a conventional annuity growing with inflation (and possibly provide for a spousal survivor benefit, if you are married), will it replace 60% of your final salary? If yes, you probably have enough. But for that, you will need savings around 13x your current salary at age 62. If you are single, you will only require around 10x your final salary. Understand however that the younger you are, the longer your money will have to last (if you take cash) and the more expensive an annuity becomes (ie the less money you will receive monthly). By delaying retirement, you will a) be saving for longer and thus have more money saved b) earn investment income on all your savings for longer and c) the saved money will have to last for fewer years. All the above improve your odds that your savings will last. High fees are a problem in the SA retirement industry, but unfortunately the biggest damage already happened over the past 25 years. Reply