Private Portfolio – Swallowing my advice
Recently we were treated by an insurer to a launch of enhancements to their product range. One underlying tenet that is now being focused on is the longevity of life.
Where many traditional protection benefits in the event of disability and dreaded disease used to cease on reaching a predetermined retirement age, the aim is now to extend these benefits to cater for after retirement as well.
We are living longer than ever before and it is alleged that the first person to reach the age of 150 years is already living today!
Apart from having a rethink on traditional insurance product structures, it also emphasises the issue of being financially able to retire for so long.
For most of us contemplating retirement at the age 60 or 65 with the prospect of having to live off our savings and investments for 30 years or even longer, is quite daunting to say the least.
Many of us will not have more than 40 years to accumulate the savings necessary to fund such a lengthy retirement. However, this discussion is not new and I know that I may be guilty of labouring this issue at nausea.
It is also here that I often punted the advantages of including a retirement annuity policy in this accumulation plan for retirement. My main reasons for this being that contributions are tax deductible within limits and that accumulated savings cannot be attached nor squandered before reaching at least age 55.
On the face of it this disciplinary measure appears to be a good thing. Unfortunately as with all disciplinary measures they must also take cognisance of social and economic changes.
If these laws are not being attended to, then they will certainly end up defeating the objective for what they were intended for. South Africa has been much more adapt at doing this.
Take for example a person emigrating. Today, changing country of residence is a common feature. Such a person cannot remove his funds from a Namibian retirement annuity unless he is 55 years old. So he has to leave his money behind until reaching that age and hope that the company and or country still exists.
The problems that one can encounter when a fund is in a different country are already becoming abundantly clear between Namibia and South Africa.
Many Namibian residents entered into retirement annuity contracts prior to independence with South African funds that operated locally. Although the insurer is still in Namibia it deems the fund to be South African.
For a Namibian to make any alterations to this policy like extending its term, changing its investment portfolio has become near impossible.
This has also happened in a span less than 20 years. With our fast changing world, what can we expect to happen even in the next five years?
From this perspective the prospect of being locked into retirement investments until age 55 does not look that appealing anymore.