Question:
Difference between normal RA versus unit trust RA I need to know what the difference is between these two types of annuities; which one yields a greater return and cost efficiency?
Answer:
Bongani,
A normal (life-insurance) retirement annuity is based on a policy, a unit trust retirement annuity is not. This makes the unit-trust type retirement annuity more flexible as you are not bound by the policy terms and you do not incur penalties when you break these terms (eg by stopping or changing your contributions). The unit-trust type retirement annuities also tend to be a lot cheaper, and costs have a big impact on your long-term savings outcome. As lower costs mean a higher return, lower cost retirement annuities will likely have a better return over time. But the gross return (before fees) largely depends on your asset allocation and should not be affected by the type of retirement annuities you choose.
