Best-Kept Secret: Direct Shares In Your Retirement Annuity

There are tax benefits if you structure your retirement annuity in a certain way.

- Schalk Louw

The 28th of February doesn’t only mark a very important date for most companies who face financial year-end, but also for countless personal taxpayers. Before you lose hope when thinking of the massive task that lies ahead of you, however, I would like to focus on the advantages of tax returns that most taxpayers are often not fully aware of.

I have made several references to the Matryoshka doll (aka Russian nesting doll) in the past, by discussing how investment products often remind me of these dolls. The concept is based on one doll (or investment product) that fits into another, which fits into another, and another, and so on. Eventually, the accumulated fees attached to these “nested” products become so unattractive that the product gains nothing but a bad reputation. Although many product providers have made an effort to keep costs low, we still find that in some instances they can add up.

Retirement annuities (RAs) are one example of this. But why? Let’s start by taking the dolls apart:

The costs attached to an RA itself;

In many cases, an RA is invested in a Fund of Funds, which as the name suggests, is one unit trust that invests in other unit trusts, that each comes with its own over head costs;

The costs attached to the unit trusts used within the RA.