What do I do with my RA?

Q: I contribute to retirement annuities (RAs) monthly. The current value of the funds in these policies is R1.640 million, held at PPS. I’m considering early retirement when I turn 62 next year. How do I deal with these funds? Should I call up the annuities and invest the proceeds elsewhere? A: Please note the following isn’t holistic advice as there are a few variable aspects I don’t have information on.

If you choose to withdraw funds (assuming you’ve not made any previous withdrawals) you’ll only receive one-third of the total amount (R546 667). If you’ve not drawn from the RA previously, the first R500 000 will be tax freeThe remaining two-thirds must be used to purchase an annuity.

However, if your main concern’s the RA’s performance you can consider switching fund portfolios to effect better performance, or move the RA by means of a ‘section 14 transfer’ to a new RA with new portfolio funds.

If you use the section 14 transfer, there’ll be fees payable to the advisor and a new minimum fiveyear term you’ll need to abide by.