Mums financial advisor advice sound? (Afrikaans)

[digitalsoldier0]

My mum has had issues financially throughout her life and my brother and I aware we’ll need to help her financially going forward, we both live and work abroad.

My mum is 70 and will retire soon and this is the advice we’ve gotten from her financial advisor. It’s in Afrikaans, sorry about this but since I don’t understand the nuances of annuities etc I didn’t want to translate. Can someone please comment if this is good advice.

Hiermee ‘n opsomming van jou beleggings by Glacier en Sanlam. Ek gaan elkeen afsonderlik bespreek en daarna ‘n opsomming gee, asook ‘n voorstel. Die waardes van die fondse is soos op 18 Januarie bekom en mag verander na gelang van markskommelinge. Die totale waarde is tans R 1 361 359.05.

Bewaringspensioenfonds : R 983 495.98 – Hierdie is fondse afkomstig vanuit ‘n vorige pensioenfonds wat beskikbaar is om saam met ander fondse gebruik te word om aan jou ‘n inkomste te voorsien.
Uittree-Annuiteit : R 10 666.46 – Hierdie is addisionele voorsiening wat jy gemaak het om jou toekomstige inkomste aan te vul, en is soortgelyk aan ‘n pensioenfonds wat al die reels betref.
Glacier Lewende Annuiteit : R 367 196.61 (R335073.02 plus R 32 123.59)- Hierdie is ‘n belegging wat aan jou inkomste voorsien van R 741.23 per maand.
Sanlam Privaat Pensioen : R 115873.06 – Hierdie is ‘n belegging (Life Annuity) wat ‘n maandelikse inkomste van R 824.85 aan jiu betaal. Hierdie inkomste betaal aan jou vir solank jy lewe. Dit het ‘n waarborgtermyn van 10 jaar. Wat dit beteken is dat sou jy te sterwe kom binne tien jaar vanaf die intreedatum (01/03/2015), sal die inkomste betaalbaar wees aan jou genomineerdes vir die oorblywende termyn. Sou jy te sterwe kom na die waarborg verstryk het, staak die inkomste betalings.

Voorstel: Al die beleggings behalwe vir die Sanlam Privaat Pensioen (4) kan saamgevoeg word om aan jou ‘n maandelikse inkomste te betaal. Dit is belangrik om te onthou dat alle inkomstes wat jy mag ontvang onderhewig sal wees aan belasting. Hierdie inkomste belegging sal ook bekend staan as ‘n Sanlam Enkellewe Lyfrente (Life Annuity) en sal aan jou ‘n maandelikse inkomste betaal van R 8155.14 wat vir lewenslank gewaarborg is, en ook jaarliks toeneem met inflasie. Hierdie inkomste is gebaseer op ‘n voorlopige kwotasie, en die werklike bedrag sal afhang van die kwotasie datum aangesien die tariewe vir die lyfrente(inkomste) op ‘n weeklikse basis verander.

Neem ook kennis dat ons tans in ‘n hoë inkomste scenario is as gevolg van hoë rente en inflasie koerse. Sou die SA Reserwebank ‘n daling in die prima uitleenkoers aankondig alvorens die belegging gedoen word, kan die inkomstebedrag ook afwaarts aangepas word. Die finale waarde sal dus bepaal word by die finale kwotasie en meegaande aansoek en sodra jy my opdrag gee om daarmee voort te gaan. Sodra die belegging gedoen is word die inkomste gewaarborg en sal nie onderhewig wees aan skommelinge in die prima uitleenkoers nie.

Die alternatief sou wees om die fondse in ‘n Glacier in ‘n Lewende Annuiteit te belê. Hier is die inkomste nie gewaarborg nie en mag daar volgens huidige wetgewing ‘n inkomste gekies word wat op ‘n jaarlikse basis aangepas kan word. Tans kan daar op ‘n inkomste gekies word tussen 2.5 % en 17.5%. Die aanbevole persentasie is tussen 4 en 6 % ten einde nie die kapitaal op te gebruik nie, en dan geen verdere inkomste te verdien terwyl jy nog lewe nie. Die inkomste is gebaseer op die balans in die beleggingsrekening en is onderhewig aan die prestasie van die onderliggende fondse. Hierdie fondsprestasie mag positief of selfs negatief wees wat gevolglik ‘n direkte impak het op die inkomste.

Ek sou nie die alternatief as die nommer een oplossing vir jou aanbeveel nie gegewe jou huidige scenario waar dit vir jou belangrik is om presies te weet wat jou inkomste gaan wees.

Thanks for any help! We appreciate it!

 

[pragyana]

@digitalsoldier0 Also check with every financial adviser what the Fees are , as this also erodes the investment. Also compare apples with apples

 

[havefaith1219]

@pragyana Check the fees!!!!!!

Sanlam and similar companies such as Old Mutual, Discovery, Liberty milk fees. Also check the commission for the financial advisor.

 

[jrm62]

@digitalsoldier0 Given that this is financial advice from a qualified professional, I don’t think it is fair to you or your mom to be asking for opinions on reddit. Rather approach a different FA who works with a different FSP (i.e. not Sanlam). They will be able to offer you a qualified opinion.

However, looking at just the numbers and options provided above it is clear that 1. Your mother did not prepare adequately for retirement (sorry about this, financial literacy in this country is shockingly low), and 2. Option 1 is indeed the better of the two given the guaranteed returns.

 

[brooktrout]

@jrm62 I am a financial planner. My understanding of the Afrikaans is so so. I feel the annuities offered seem adequate. I would understand more if it were in english. I do not think the advisor is trying anything funny. I think you should rather go to another financial advisor or two instead of asking reddit. I can also tell you that most of the clients who complain about low annuity payments are the clients that did not save enough. Rule of thumb, if you are 65 years old and retiring in South Africa this year. You need R8 000 000.00 in investments to maintain you through retirement, taking medical, travel, inflation, and longevity into account. People who argue and say you do not need to travel every year... remember what you say! When you are retired and your kids live in different countries and you want to visit them and your grandkids and you thought to yourself I don't need to save I won't need to travel when I retire. I have so many clients with kids in different countries. One year, they see the 1 child and grandkids, the next year, the other kid and grandkids. So many can't, and they miss their kids.

 

[peter_g]

@jrm62

financial advice from a qualified professional,

Hardly. While I can't speak to this person specifically, many "financial advisors" in SA are barely literate brokers that get kickbacks for selling you specific investment and insurance products and are not qualified to give financial advice in any sense of the word.

I would encourage people to be very, very careful.

 

[peterdom]

@jrm62 I agree with this comment. Tell your mom to shop around and get different financial advisors to give her quotes from different FSPs. The life annuity (or fixed annuity) might be the best option, given her low savings. Sorry for being the bearer of bad news

 

[digitalsoldier0]

@peterdom That’s ok, I didn’t expect a miracle, as I haven’t lived in SA for more than a decade I don’t really understand the scope of investments there. I will try and look into FSPs and see if we can schedule appointments. She has been with this advisor for a very long time, and she doesn’t have much of a clue about any of this. I have also only started to help her, this week.

 

[peterdom]

@digitalsoldier0 May I ask what job your mom does? My mom had slightly low retirement savings, so she did some freelance work for a few years before cashing out her savings. She didn't earn much, but enough to sustain herself and her house etc was paid off. Also, she got to choose her own work hours. Perhaps your mom can do the same?

 

[peterdom]

(For context, my mom was a language editor and did freelance editing jobs)

 

[digitalsoldier0]

@peterdom Weirdly enough my mum is also in an industry where she can earn a tiny supplemental income from freelance work. She does not own property, and has no real other assets. So even with her retirement and supplemental income we will still need to help her. Thanks for trying to help!

 

[peterdom]

@digitalsoldier0 No problem, and best of luck!

 

[stageandgrace]

@digitalsoldier0 Vee die bedrae uit. Niemand het nodig om te weet wat die bedrae is nie.

 

[digitalsoldier0]

@stageandgrace The amounts add context, and thresholds for tax or specific investments could also be applicable. There is no identifying information.

 

[nicoleeadams]

@digitalsoldier0 If your mom needs monthly income she will have to invest the full 1.3mil in order to get a good income that can maintain her lifestyle. Obviously everyone has different budgets, but 1.3mil is already under the standard for Living Annuities. Keep in mind the highest income she can draw is 17.5% and this will cause the funds to deplete rapidly.

Life Annuity is also a good option but the quote will be a lot less and less flexible, the only advantage is it’s guaranteed for like.

If your mom does not need a monthly income then she just preserve her funds in a preservation fund or Retirement Annuity and allow it to grow until she decides to take it out. She may only take 1/3rd in cash if she chooses to preserve her funds first.

Every-time she takes cash portion there’s tax implications so try to reduce the amount of cash she takes.

 

[digitalsoldier0]

@nicoleeadams Thank you for this, our hope is for her to earn as much of a monthly income as possible and to supplement what she needs above this. Until she inevitable runs out of funds.

 

[nicoleeadams]

@digitalsoldier0 Keep in mind that if she draws and income of 17.5% (approx 19k pm), there’s no guarantee the income will be the same the following year.

If she has other retirement funds she can transfer them into the Living Annuity.

I really do not recommend drawing the maximum amount

 

[smartiesrich]

@digitalsoldier0 The key thing here is not stated and the financial advisor is not privy to and that is : what are you and your brother's tolerance for risk?

Given that you will probably care your mom anyway I suggest a living annuity (non-guaranteed) instead of life annuity because the living annuity is more flexible and you can adapt with changing circumstances. Sure the life annuity will shield you and your brother from some risk I don't think it is enough to register on the scale.

Of course if your mom had to look at this in isolation without being able to depend on her children then the risk of running out might just be too high.

Sitting with a worse problem with my mom and started saving on the side for when the time comes when partial support has to transition to full financial support.

 

[stupidmike]

@digitalsoldier0 My only concern is that this purely based on Sanlam products. As some of the other comments said, she must also ask for suggestions from other advisors. As part of that excercise, akso include 10X