How to get an Retirement Annuity RA Fund – Why you should get one and where is the best place to invest
“You don’t need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.” ~ Warren Buffett
A few years ago, my wife and I had the discussion about retirement. We knew we had to start saving for it. But we weren’t sure how to go about it. Where do you start and who do you trust? Who can you really ask for advice without paying for it. And getting the right advice if you don’t know someone personally who is already clued up with this stuff is really hard? Because most brokers and financial planners are in for the money. And the more fees they can get out of you, the more money they make.
A little bit about my investing history
I signed up for an RA fund with Sanlam in 2008 at a company I was working at. They got a financial planner in for a day to give some advice about why we needed an RA fund. So I signed up for it although I didn’t really know much about it and what it was for. I was 22 years old at the time, and in 2016 where I was 31 years old (8 years later), I had a look at all my policies and my financial situation and realised I had two RA funds.
I was still paying for the Sanlam RA fund all these years and in 2016 I signed up for another RA fund with Liberty through a broker because I didn’t know any better. A colleague at work set up a meeting for me with his broker who worked for Liberty, and this broken showed me all kinds of stats and figures and graphs etc etc. I had no idea what I was listening to and this broken knew I didn’t know anything and really overwhelmed me.
So after doing A LOT of research, talking to any friend or family member who could possibly give me an honest opinion and advice, I checked my Liberty RA fund again and realised that there is such a thing as EAC (Effective Annual Cost).
What does EAC or Effective Annual Cost mean for dummies?
“The Effective Annual Cost (EAC), expressed as a percentage of your investment amount, is a measure which has been introduced to allow you to compare the cost you incur when you invest in different financial products.”
So for us normal people that doesn’t know about this stuff, this essentially means the fees that your financial planner/broken charge you for advice, investment management and administration of your policy or investment. So this depends what fund you invest in and who your broker is.
The EAC is made up of four charges which are added together, as indicated below:
- Investment Management
You don’t need a broker to have an RA fund. You can invest directly with companies such as Allan Gray
So what I realised is that you don’t need to go through a broker who will charge you extra unnecessary fees. You can invest directly with an investment company. And after I spoke to family and friends, I decided to move my RA fund from Liberty to Allan Gray.
Liberty’s EAC fees were between 5.8 % and 4.6% per year. And when I signed up with Allan Gray,my EAC fees went to 1.79%. So as you can see, when you invest directly with Allan Gray, you will pay much less on fees.
Okay. You’ve convinced me. But which RA fund do I choose with Allan Gray?
The safest and best option to go with is the Balanced fund. If you would like to get an RA fund with Allen Gray, follow these steps:
- Go to the Allan Gray website www.allangray.co.za
- Click on the “Invest Now” button at the top right of the website
- It will now give you steps you need to follow, click the Next button
- Select the Retirement Annuity Fund
- Accept the Regulation 28 Compliance. This is just to say that Allan Gray’s Retirement Annuity Fund complies with the Regulation 28 of the Pension Funds Act.
- Select the Allan Gray Balanced Fund and enter the amount that you would like to invest in your RA fund on a monthly basis. You can also invest a lump sum and then you can do a monthly payment.
- Then just follow the steps and fill in all your details. Allan Gray will then be in contact with you and send you a form that you need to sign etc.
If you have any questions you can phone Allan Gray directly or you can leave a comment below and someone will reply on your question.