I have a retirement annuity (RA) that is maturing in six months. It was with Old Mutual for 20 years and I am now a 55-year-old man. I plan to work until 65. I have another RA with Allan Gray. My question is: could I transfer the full amount into my Allan Gray RA, or would it be better to leave it in the Old Mutual one until I’m 65?
You are able to transfer your Old Mutual RA to Allan Gray via the Section 14 transfer process and choose the same underlying funds if it has those funds available on its platform. You can choose new, or switch between funds as you please, without any cost or tax implications (provided the fund is within the Regulation 28 limits).
Due to Allan Gray platform constraints, you will not be able to invest the money directly into your existing Allan Gray RA.
Instead, should you wish to contribute on a regular or ad hoc basis, you will need to set up a separate RA in which to house these funds.
There are other considerations to be made when determining if such a transfer would be beneficial for you as an investor:
- Consolidation of investments: Having your investments consolidated on one investment platform could result in you paying lower administration fees, as most service providers have a sliding scale on the admin fee charges based on the total assets you have invested on their platform.
- Investments housed in insurance companies versus new generation investments: RAs that are housed with insurance companies tend to have higher fees associated with them, due to upfront commissions paid to brokers for selling the RA policy. Typically, investors complain of the fee structures on these insurance-based RAs being opaque and complicated, whereas a unit trust-based RA housed with an asset manager will have transparent fees, with no commissions being paid on the investments.
- Cost of transferring: Depending on the type of your Old Mutual RA, there might be a penalty value for cancelling the contract and transferring the benefits to Allan Gray. It is important to ask this question of your current advisor, as they will be able to provide you with this confirmation.
That said, before making any decisions, we advise that you have an accurate cost analysis done to ensure that it is financially viable to transfer your Old Mutual RA.
We recommend that you consult with an experienced, independent advisor who can guide you through the decision-making process.