Retirement Planning

When one examines the features and benefits which a retirement annuity fund provides in 2010, it’s hard to remember that retirement annuity funds were once thought by many to be inflexible, stodgy, pedestrian avenues for retirement savings. Look at them now!

The savvy entrepreneur of today who is self employed with no pension fund; or the established professional who has excess cash over and above his/her pension funding income would be hard pressed to find another avenue in the approved investment space which is as flexible, tax friendly, user friendly and which provides as many options as the modern day retirement annuity fund.

The changes in recent years to the Income Tax Act which relieve many of the restrictions which used to apply to RA funds make RA funds an inter generational product of choice for high net worth clients, as well as those clients with high earning potential who are young and just starting out. The latter group, not having being exposed to the restrictions of the past, have the benefit of being able to see the benefits of RA’s without any pre-conceived negative expectations.

So what has happened to retirement annuity funds over the past few years?

Remember the days when one was forced to retire from an RA when one reached age 70? The rules of the fund and the Income Tax Act prescribed when one should retire instead of the other way around. By implication, we were told that we were too old to be productively earning an active income by age 70. – A large number of retirement annuity funds have made the necessary rule changes to allow members to remain members of the fund until they are ready to retire. So now – it’s the other way around! The member tells the fund when he or she wants to retire, and many fund rules have been amended to accommodate this.

In the modern world many 70 year olds are still extremely active. - Some have discovered their entrepreneurial flair after retirement from employment. Many have started small businesses or are helping others with theirs. Many retirees are living into their 90’s. Retirees who have retired from formal employment may have 25 to 30 years of life left, and they should not be forced to start living on their retirement savings until they are ready. A retirement vehicle which allows them to continue making deductible contributions while their savings continue to grow, is exactly what they are seeking.

Consult your Old Mutual marketing consultant who will provide you with guidance on how this change in the law has been incorporated into the retirement annuity funds administered by Old Mutual.  Your consultant will be able to guide you through the various procedures and investment product rules which apply, in order for you to assess the opportunities available for your clients to retain membership of their RA funds for longer.

Tax deductibility - Has anything changed?