Absa Bank’s Corporate and Investment Banking division, a member of Barclays, has launched a low-cost retirement annuity based on a life-stage investment philosophy with automatic portfolio rebalancing with a predefined investment methodology and risk reduction as savers near retirement.
The Absa Retirement Annuity Fund: Core Portfolio, or the Core Retirement Annuity, will provide investors with an increased income generated by higher risk-taking when young, while automatically reducing risk and consolidating gains as members approach retirement age.
The Core Retirement Annuity provides diversified exposure to multiple asset classes such as domestic and international equities, property, fixed income and the money market. The risk associated with the investment is automatically adjusted according to the investor’s life stage.
The South African bank stressed that since the portfolio is built from passive portfolio building blocks - exchange-traded funds (ETFs) and exchange-traded notes (ETNs)- investment costs are very low, approximately 0.51 – 0.55% pa (all inclusive). The bank also said that contributions are tax-deductible by up to 15% of non-pensionable income, returns on investment are tax free, and, at retirement, a significant portion of the lump sum payout will not be taxed.
“Younger investors, for example, whose primary objective may be to build their wealth, will have a greater exposure to risky assets such as equities. Exposure will then automatically reduce as the investor approaches retirement and the goals shift to protecting their retirement nest egg,” said Vladimir Nedeljkovic, head of exchange-traded products at Absa’s Corporate and Investment Banking division.
The minimum lump sum investment is R10 000 ($927), but investors can set up a recurring debit order of only R500 ($46) a month.