Moving my RA

[shogolist4jesus]

Hi folks. I've decided to become a grown-up and make active decisions about my future. One of those has been to reassess my RA. About 10 years ago I unthinkingly did what my parent's financial advisor said I should do and started contributing to a Sanlam Glacier RA. While not the most expensive, 2.17% plus 0.5% to the advisor is a lot more than I could be paying. The question is what to choose.

Everywhere I look, people seem to really like Sygnia's Skeleton Balanced 70 fund. However, I have a concern about it that I'm not sure how to resolve. According to their fund fact sheet, the fund has performed at7.8% to date. 10x has performed much better from what I can see.

Obviously, no consumer can control or predict performance and I certainly don't want to watch my RA. I want to make a good choice and try not to think about it too much. I guess it's all a gamble in the end, which fund would've been the best in 20 years time, which is why choosing the lowest fees is the one thing you can control...

Anyway, my specific questions are:

1. Am I being wrongheaded being concerned about the Skeleton Balanced 70 fund's comparative performance to date?
2. From what I can tell, with the current economic climate, the basket of assets that make up my RA has lost a fair amount of value. Is there any sense in holding off on moving my RA, considering this?
3. I've been thinking of starting a second RA as an alternative to moving my RA investment (perhaps even as a transitionary step). The one warning against this that I've had is reg 28 (although as a South African, I'm sceptical of any consequence given govt powers to enforce anything). Does anyone else have more than one RA product? How d you manage it?

Thanks in advance for any advice to someone who may be overthinking and overcomplicating.

 

[chootas]

@shogolist4jesus How old are you and how much do you make a year. It could very well be that you shouldn't have an RA at all

 

[abeaba]

@chootas I see you getting downvoted, but I share these sentiments. Not having an RA doesn't mean that you aren't saving for retirement. It could be as simply as prioritizing offshore exposure, liquidity and wanting to avoid ZAR and political risk.

I personally dont have one.

 

[ffriemann]

@abeaba A lifetime tax free savings limit of R500,000 is what is the problem with not having an RA.

Retirement Annuities are very tax efficient and they have recently raised the offshore exposure limit to 45%.

 

[abeaba]

@ffriemann Yeah. I'm a bit conflicted on the matter to be honest. But I think a fair argument can be made re: avoiding an RA, depending on ones perspectives and life plans.

 

[richardsonmommy5]

@chootas Why would you suggest this? It’s never too young to start saving for retirement. OP says he/she started 10 years ago, so serious kudos are in order.

 

[shogolist4jesus]

@chootas I’m 38 and I make about R1.1 million a year. I must say, the tax deduction benefit of an RA is very attractive. I’m here for contrasting opinion; what would you do?

 

[chootas]

@shogolist4jesus You have a minimum of 17 years till you can touch an RA investment. You have a marginal tax rate of 41. If you dint put in RA, you have 17 years to make up the diference. Given the fact that you pay over 2% a year in fees for the RA, and the fact that when grow money from the RA you will pay income tax vs capital gains , I would rather invest directly offshore.

 

[babytoe]

@shogolist4jesus Good question I’m also looking to move mine due to costs but also busy considering options.

You have the above direct costs.. and then you have the performance fees aspect which re-adjusts Ie historic base so when market goes up expect that performance fees to go up

 

[shogolist4jesus]

@babytoe Thanks for the comment. I appreciate it.

 

[freddied]

@shogolist4jesus Don't rush the decision. Do you know what your EAC is? Ie total cost of glacier platform plus fund management plus advisor? Half a percent for an advisor isn't bad if they are actually doing financial planning for you. If you never hear from them then obviously not worth it.

Be wary of 10x and sygnia - they trash active management but their funds are also active and don't actually beat alot of passive or even active. Not to say they are bad, but look at what their factsheets say as opposed to how they sell their funds

 

[zandry42]

@freddied Sygnia skeleton is a passively managed fund - do your research

 

[freddied]

@zandry42 "The Fund remains overweight global assets (and therefore underweight South African assets) and maintains its overweight exposure to Emerging Markets, particularly China." - from their factsheet.

Sounds like active decisionmaking about under and overweight, yes? But they do market the skeleton series as passive, so their marketing material says passive. So the research will say passive, unless you read the factsheet

 

[zandry42]

@freddied Passively managed is still managed. They set a LONG term view on the asset mix they want and rebalance to remain at that asset mix. (Nevermind the fact that a regulation 28 fund needs to make sure that they remain within the prescribed asset limits). Because assets gain / lose value you need to rebalance to stay as a certain asset mix.
Actively managed funds are a completely different ball game where they are actively trying to beat the market by buying and selling different assets to get quick wins.

 

[shogolist4jesus]

@freddied Thanks for the comment! Yes, I have been looking at EAC and will incorporate that into my decision-making.

 

[zandry42]

@shogolist4jesus

1. I think you aren't being silly looking at the performance. But also remember that past experience is no indicator of future performance. You are going to have your moment in there for a long long time so rather aim for low fees and an asset mix you agree with (hopefully high equity if you're young) and choose the company you like. In the long term you probably won't see much difference between the funds.
2. This is also a fair point - and yes by selling your assets when they are down you "cement" (or realise) the loss, but also remember that investing when the market is low is a good thing (because you expect it to return to normal) so I'd suggest to move out the high fee environment asap even if the market is currently depressed.
3. Regulation 28 only regulates the limits of certain assets within a fund in order for the fund to be designated "for retirement" and thus give you the reduction of taxable income for investing in it. There is nothing that limits you to only saving for retirement in one retirement product, so don't let regulation 28 hold you back! In terms of the maximum contribution to RAs per annum (min of R350k or 27.5% of annual income), this will be regulated during your tax return (I would assume) so just make sure you are keeping to the max retirement contribution and yiu should be fine!

Well done to you for doing your research and I wish you well in this endeavour!!

P.s. If you expect to withdraw cash at a lower tax bracket than you are going to be before you retire, the RA is definitely worth it (remember when you are 60 you get additional tax rebate and you will likely have lower living costs). Everyone in PersonalFinanceZA has a bit of a hard on for TSFA and not RAs so don't be way laid by the naysayers!

 

[shogolist4jesus]

@zandry42 Thanks so much for the comments! Very helpful. I appreciate your perspective.

 

[zandry42]

I personally really like Sygnia - mostly for what they stand for but feel free to come to your own conclusions!

 

[babytoe]

@zandry42 When it comes to money, returns matter more than sentiment.

I agree with the what they stand for thing, but it’s not a reason to put money with a org/fund.

Performance, cost efficiency and strategy matter.And then a lot of funds do performance calc over a period and recalc..