Best retirement annuity (RA) in South Africa?

By Lizelle Steyn

Updated 7 February 2023

Photo credit: Pavel Danilyuk

Twenty years ago, the only retirement annuities around were sold by insurers, inflexible and expensive - often with commission ("marketing fees") frontloaded so you would see very little growth in the first few years. You no longer have to settle for this when searching for the best retirement annuity (RA) in South Africa. If you’re a fan of passive investing, you’d be happy to know you can now choose a low-cost index tracker as the underlying fund for your new-generation 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 index-tracking retirement annuity in South Africa?

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

• Allow you to stop-start your contributions with no penalty
• Allow you to transfer your RA to another company with no penalty
• Have at least one low-cost passive fund – an index tracker - to choose from their underlying fund range
• Are geared towards direct investors and can service them well

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	R5 000 lump sum or R500 per month
Platform/ admin fee (incl VAT)	0.58% p.a. for amounts up to R1m and 0.23% on portion above R1m but less than R3m; 0.115% on portion above R3m	0.345% p.a. RA admin fee + 0.29% brokerage + 0.29% SST per transaction + settlement fees	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 R1 102 222. Above R1 102 222, you’re charged only 0.45% of the value of your investment.	0.58% 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)	0.39% p.a.	0.69%	Sponsored by the all-in product fee above	0.62% p.a.	0.51% p.a.	Up to 0.115% p.a.
Combined total platform + total fund fee (incl VAT) on above fund choice	0.97% p.a. for amounts up to R1m and 0.62% on portion above R1m but less than R3m; 0.52% on portion above R5m	More than 1% p.a. + costs relating to each transaction. Can only calculate effective annual cost if term of investment is known	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 R1 102 222. Above R1 102 222, you’re charged only 0.45% of the value of your investment.	1.2% p.a.	0.51% 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	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 | Fees December '22

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):

• Allan Gray
• Easy Equities
• Outvest
• Satrix
• Sygnia
• 10x

And more excellent RA comparisons are available 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 traditional insurance-based RAs for sale today.)

For investment values below +/- R973 000, Sygnia with the Skeleton Balanced 70 unit trust fund currently has the lowest fees. For amounts above R973 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 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 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 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 the one you understand and relate to, 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 suits your investment horizon.