Contractual RAs cost you more than flexible alternatives

Contractual RAs cost you more than flexible alternatives
WORDS ON WEALTH:
Apart from the obligations that contractual retirement annuities (RAs) impose on you to keep contributing for the full term of the contract, there is a further downside to these products: their costs. Personal Finance found that the costs on a contractual product may be about 2% more a year than on a flexible unit-trust RA.
Last week, Personal Finance covered the case of Mr C, who, at the age of 61 had been sold a Discovery Invest RA that committed him to a 10-year investment term with a 10%-a-year escalation on his R10 000 monthly contribution. Charles McAllister, a Certified Financial Planner and executive director of Centric Wealth Advisory in Cape Town, took up his case (see “A case against contractual retirement annuities”).

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