Approaching retirement and need to decide where and how to invest your retirement savings? The NFMW offers post-retirement products!
There are many factors to consider as you are nearing retirement and are faced with the very important decision on which product(s) to invest your hard-earned retirement savings in. It can be quite overwhelming and daunting as making the wrong decision can have dire consequences.
The Board of Trustees of the National Fund for Municipal Workers established voluntary post-retirement default options, the NFMW Golden Income With-Profits Life Annuity underwritten by MMI and the NFMW Living Annuity, for members who want to manage their own pension benefits after retirement.
In short, it means that members do not have to make use of an external product provider but may instead select an ‘in-fund’ default living or life annuity.
The major advantage for members is a cost benefit, as the management and investment fees on the fund's default options are significantly lower when compared to the products available from external providers (life insurance companies or investment platforms). There will be a low charge for benefit administration services and the investment management fees will be similar to the existing pre-retirement portfolios.
Members can choose a guaranteed income stream after their working life, in the form of a pension payable for life i.e. a guaranteed or life annuity. Alternatively, their income level post retirement can be self-determined by way of a living annuity.
For those members who cannot or do not want to manage their own pension benefits by making use of the in-fund NFMW living annuity, an out-of-fund living annuity designed exclusively for ex-NFMW members is also available.
NFMW LIVING ANNUITY
The default living annuity offered by the NFMW is managed by the Board of Trustees. Certain guidelines and rules will apply to the fund's default living annuity option which need to be carefully considered before choosing this default option:
- There is no pension guarantee i.e. your pension/income is based on the NFMW prescribed drawdown rates expressed as a percentage of assets.
- The minimum investment amount is R1.5 million. This provides for some longevity risk mitigation.
- The assets of the default living annuity may be invested in any of the following NFMW individual investment portfolios: NFMW Living Annuity Capital Protector, NFMW Living Annuity Stable Growth, NFMW Living Annuity Capital Growth and NFMW Living Annuity Aggressive Growth. This may depend on your financial position, financial needs, health and required drawdown rate.
|Age||Maximum drawdown rate|
|If aged||6% per annum|
|If aged||8% per annum|
|Older than 70 and younger than 75||10% per annum|
|Older than 75 and younger than 80||12% per annum|
|Older than 80 and younger than 85||15% per annum|
|Older than 85||17.5% per annum|
The minimum income drawdown rate is 2.5% per annum.
The balance retirement capital in your living annuity account will remain part of the fund's assets. Any remaining assets after your death will be disposed of in terms of your nomination form and in accordance with your beneficiary’s wishes.
- A flat administration fee of R73.44 per annuitant per month will be levied and actual investment management fees will apply as per the NFMW investment portfolios. On average, the total fee will be approximately one-third of industry norms. This beneficial fee structure may result in a fee saving of between 1% and 2% per year compared to externally-provided living annuities.
- No commissions are payable (advice fee where agreed, may be applicable).
- You will pay income tax at your personal income tax rate on the amount of income received.
NFMW GOLDEN LIVING ANNUITY (Out-of-Fund Living Annuity)
The Board of Trustees approved a NFMW Golden Living Annuity for those members who are unable or do not want to access the in-fund NFMW living annuity. Certain guidelines will apply to the Golden living annuity option which need to be carefully considered:
- Available to active and former members of the National Fund for Municipal Workers.
- Qualifying members may combine amounts from other retirement funds (pension, provident, preservation and retirement annuity funds) and existing Living Annuities in this product at the same pricing levels.
- This living annuity has low investment fees when compared to average available and comparable retail living annuity in South Africa. Lower fees translate into enhanced investment returns, which could lead to higher income or your pension lasting longer.
- At retirement your money is invested in an established risk profiled portfolio which will be credited with the investment returns (positive or negative) you earn on your Living Annuity fund value.
- Minimum investment amount R100 000.
- Important, you must decide how to invest your fund credit. Please consult with your own financial advisor or one of our approved financial advisors accredited to promote the NFMW Golden Living Annuity.
- It is a flexible pension, where you can decide how much money to draw each year as income. The law allows you to draw between 2.5% and 17.5% of your fund value each year. However, it is important to draw your income responsibly to provide you with a sustainable income throughout your retirement. A financial advisor helps you decide on the right level of income to ensure that you do not run out of money.
- Upon your death the balance of your fund value will be paid to your estate or your nominated beneficiaries. Section 37C of the Pension Funds Act does not apply.
- Your spouse will have the option to continue with the Living Annuity at the same pricing levels that you enjoyed while belonging to the Living Annuity.
- A Living Annuity provides you with an income and you may only access your capital once your remaining fund reduces to below the value set by regulation, which is currently R50 000, or R75 000 if the retiring member invested his/her full member share and did not access cash benefits.
- Advisor fees are capped at 50% of industry standards.
- Discounted administration fees compared to retail Living Annuities.
- Fee comparison based on R2 mil invested in the NFMW GLA Low Income portfolio:
|Retail Living Annuity||NFMW Golden Living Annuity|
|Asset Management Fees||1.68%*||1.22%|
|Advisor Fees (maximum)||1.15%||0.58%|
|Total Annual Fees||3.41%||2.06%|
|Total Monthly Saving||R2 250|
*Retail Asset Management Fee is based on the average fee payable in the ASISA Multi-Asset High Equity Sector Average
NFMW GOLDEN INCOME WITH-PROFITS LIFE ANNUITY
The default life annuity offered by the NFMW is underwritten by MMI. The following standard features will apply:
- It provides a guaranteed monthly pension for life.
- It will target pension increases equal to 75% of inflation every year i.e. your pension will increase annually by a targeted 75% of inflation, but is dependent on the actual investment return.
- The guarantee period is 10 years/120 months i.e. if you pass away within 10 years after retirement, the full pension will still be paid (to a beneficiary) for the remainder of the 10-year period. If you pass away more than 10 years after your retirement date, pension payments will cease unless your spouse is still alive, subject to a joint life annuity purchase.
- If you are married, the life annuity will be a compulsory joint life annuity that will pay the spouse 75% of the pension should you pass away.
- If you are unmarried and you pass away during the guarantee period (within 10 years of retirement) the balance of the pension will be paid to your beneficiaries/nominees.
- The amount of pension will only be determined once you have reached retirement age. The pricing should be favourable compared to what external life annuity product providers will offer.
- If you and your spouse pass away after the 10-year guarantee period, no further payments will be due or payable to your beneficiaries.
- Provision is made for a 13th cheque which is payable in November every year i.e. in effect two months' worth of pension is paid every year in November.
- You will pay income tax at your personal income tax rate on the amount of pension received.
- Please contact the fund's appointed in-fund counsellors on (012) 743 3000 who will guide you through the process to make a post-retirement investment choice.
- A brief needs analysis will be completed to assess your financial position.
- The in-fund counsellor will provide you with relevant information pertaining to your specific situation and discuss the various post-retirement fund options.
- If you select one of the fund's default options, a relevant Post-retirement option-form and disclaimer will be provided to you confirming your annuity choice in writing.
- On completion, the forms will be sent to the fund for processing. The process and final arrangements in respect of your pension payments will be communicated to you in writing.