Question:
Is the annuity that is purchased at retirement with the 2/3 portion of the retirement annuity always from an insurance company? Which annuity would 10X recommend considering that insurance companies do not have good reputations with regards to investment fees? Can I purchase a Swiss annuity while still a South African resident at retirement or must it be from a local insurer?
Answer:
Shaun,
Presently yes. An annuity is in substance an insurance policy, that protects you from the "risk" of longevity (outliving your capital), inflation eroding your standard of living (with an escalating annuity) and low market returns (eroding your capital).
You can also use your 2/3rds to invest in a living annuity. That is not really an annuity however, and the hence name has been changed to RIDDA (retirement income draw-down account). With a RIDDA, you carry all the risks above. Moves are afoot to let collective investment schemes offer RIDDA’s, not only insurance companies. This will hopefully lower the cost of post-retirement investing.
As regards to which annuity, you will have to shop around at the time you retire, to find the best rate at the time (ie the one that will pay the highest monthly amount) as insurance companies change their rates regularly. Be sure to compare apples with apples however, as there are many different types of annuities (fixed, variable, with survivor benefits etc).
If you wish to purchase a Swiss annuity, you must formally emigrate to do so. You would then claim your entire retirement annuity as a lump sum (net of SA tax) and transfer the net proceeds to CH. You cannot do so as a South African resident.
