A road trip to financial freedom

Best retirement annuity (RA) in South Africa?

By Lizelle Steyn

Updated 2 July 2022

is one ETF enough

Photo credit: Pavel Danilyuk


While searching for the best retirement annuity (RA) in South Africa, you would have heard about the new flexible type of RA. That’s the one you want. Because the older types charge you so much for ‘breaking up’ with it, it feels like you’re joining finances with a divorce lawyer. If you’re a fan of passive investing, you’ll also be happy to hear that you now have the option to choose one of these low-cost index trackers as the underlying fund for your new RA. Just keep in mind that you can’t touch your money before age 55, but the long wait is worth the tax benefits of an RA. Now where do you go for the best passive retirement annuity in South Africa?

For this ’Best RA in South Africa’ comparison, I’ve looked at the main RA providers that:

These are the results.

Retirement annuity comparison for a lump sum investment

Allan Gray Easy Equities OutVest Satrix Sygnia 10x
Minimum amount needed R50 000 lump sum or R1000 per month No minimum - can invest small amounts R5 000 lump sum R10 000 lump sum or R500 per month R20 000 lump sum or R500 per month R12 000 lump sum or R1000 per month
Platform/ admin fee (incl VAT) 0.58% p.a. for amounts up to R1.5m and 0.23% on portion above R1.5m but less than R5m; 0.12% on portion above R5m 0.345 RA fee About 1.5% up to R330 667; thereafter fixed at R4 960 p.a. and stays fixed until the total investment is worth more than R2 480 000. You’re then only charged about 0.2% of the value of your investment. 0.345% p.a. 0% if you choose Sygnia underlying fund; 0.46% p/a for an external fund for amounts up to R2m and 0.23% on portion above R2m 1.035% for amounts up to R1m and 0.81% on portion above R1m but less than R5m; 0.58% on portion above R5m
Most popular Reg 28 (balanced) passive fund Nedgroup Investments Core Diversified Fund Emperor Core Balanced RA bundle OUTmoderate index fund Satrix Balanced Index Fund Sygnia Skeleton Balanced 70 unit trust fund 10x will risk profile you and allocate one of their funds. Fees are for the 10x High Equity Fund
Total Investment cost of above fund (incl VAT) 0.40% p.a. 0.69% Sponsored by the all-in product fee above 0.48% p.a. 0.52% p.a. Up to 0.115% p.a.
Combined total platform + total fund fee (incl VAT) on above fund choice 0.98% p.a. for amounts up to R1.5m and 0.63% on portion above R1.5m but less than R5m; 0.52% on portion above R5m 1.035% p.a. About 1.5% up to R330 667; thereafter fixed at R4 960 p.a. and stays fixed until the total investment is worth more than R2 480 000. You’re then only charged about 0.2% of the value of your investment. 0.825% p.a. 0.52% p.a. Up to 1.15% for amounts up to R1m; less for larger amounts
Size of fund range Few passive funds but large active range (Allan Gray + several external fund managers) Substantial passive and active range of balanced unit trusts and bundled ETFs Range of four OUTvest risk profiled funds Two Satrix Reg 28 passive funds Substantial passive and active range (Sygnia + many external fund managers) Own risk-profiled lifestage funds only
Service channels and quality Latecomer to social media, but excellent service across all other channels. Good educational email series on your chosen topic delivered weekly Query response time has improved significantly. Really fun content via social media and email channels. Engaging and quality podcast series, Easy Does It, plus educational webinars Available across traditional channels like telephone as well as digital channels. Some good YouTube presentations by their CEO Available across traditional channels like telephone as well as digital channels. Educational 'deeper dive' videos + webinars in collaboration with BlackRock A Big improvement on email responses since two years ago. Also very quick to respond on Twitter. Digestible market and economic social media content Excellent response time and quality of interaction. Available across traditional channels like telephone as well as digital channels.

Source: Allan Gray | Easy Equities | Outvest | Satrix | Sygnia | 10X | gofreedom.co.za

The only reliable fees: ask for a full effective annual cost (EAC) breakdown

What struck me while gathering the fee data, is that you can’t always rely only on the fees you see quoted online. It’s vital to contact each provider and ask for a full effective annual cost (EAC) breakdown inclusive of VAT, specifically for the amount you’re investing and the underlying fund you’re selecting.

Here are the links to some of the fees online (but the quote you receive in your inbox is the one you should be able to rely on):

And more excellent RA comparisons are avalaible from MyMoneyTree.

No reason to pay more than 1.2% in fees per year

Overall, it makes me really happy to see that with the majority of the above options you won’t pay more than 1.2% in fees per year. That’s a considerable improvement compared to what was available in the industry 15-20 years ago, when most RA products’ EAC was closer to 3%. (This is still the ball park figure for the more traditional RAs for sale today.)

For investment values below +/- R954 000, Sygnia with the Skeleton Balanced 70 unit trust fund currently has the lowest fees. For amounts above R954 000 Outvest currently beats its competitors.

If you're interested in the Skeleton Balanced 70 fund and only concerned about fees, remember to ask for the unit trust fund (0.52%) and not the life pooled version of it, as the latter has a higher total investment charge. The life pooled fund can invest in more interesting assets, though, which may sweeten returns.

The verdict: the best retirement annuity in South Africa

‘Best RA’ is about more than just the lowest fees. The fees keep on changing anyway as the transaction and other costs on the underlying fund vary from quarter to quarter. Make sure you’re happy with the level of service, and the digital slickness and payment process of your RA provider. Specifically, make sure that it will be quick and easy for you to add money to your retirement annuity in future. The ‘best’ retirement annuity in South Africa is as much about your actions as an investor and how often you invest as it is about the product. In the end, the best RA is the one to which you'll be contributing as much as you can, as often as you can, at a low fee, and in the underlying fund that’s appropriate for the number of years you’ll be invested.




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