Benefits of RAS far outweigh drawbacks How to save on your insurance premium
I understand that there are tax benefits to investing in a retirement annuity (RA) fund, but do these really outweigh the drawbacks, particularly the fact that you can’t access your funds until age 55?
Name withheld
Schalk Louw, a financial adviser from PSG Wealth Old Oak, responds: Most people are aware that your RA contributions are tax-deductible. However, fewer people are aware of the significant tax benefits within an RA. In short, no taxes are payable within your RA, ever. There is no tax payable on the interest and dividends earned in your RA, and you don’t have to pay capital gains tax on the growth earned on your investment.
Your RA is also protected from creditors, and it offers amazing benefits in terms of estate planning, including a possible 3.5% saving on executor’s fees, and a maximum saving of
25% on estate duty, because it’s excluded from your estate when estate duty is calculated.
People worry that with an RA they will be “locked in”, but this isn’t quite true. Section 14
I am concerned about cutting my short-term insurance, but I need to save some money in my budget.
Are there any safe suggestions?
Name withheld
Joelinda Dimond, an insurance adviser from PSG Vanderbijlpark, responds: The irony of insurance is that keeping cover consistent increases your chances of insurance paying out when you most need it. For budgeting purposes, it’s always best to keep proper insurance in place (so financial setbacks don’t knock you down completely). However, there are a few suggestions that could reduce your premium.
Insurers tend to increase household content or building values between 8% and 10% automatically each year. A close eye on this escalation might reveal room for negotiation.
The largest contributing factor to your monthly premium is likely to be your vehicle. If you are working from home half the time, your risk is potentially reduced, and it could influence your short-term insurance premium. You must remember to update this if you go back to the office full-time. Making the wrong assumptions about your cover can work against you, and can cost you dearly, so another top tip is to go through your entire policy and note any essential questions for your adviser. There may be areas where you can reduce cover, or some small increases could cover some large gaps you didn’t realise you had in your cover to begin with.
It is always best to speak to your adviser before making any changes to your policy to confirm the impact on your cover and premium.