Momentum’s Investo product house offers several incredible benefits for people investing in retirement annuities (RAs) which combine to significantly increase the amount that you will receive on retirement. These include
- An enhanced allocation
- A loyalty bonus
- The retirement booster
I will give an overview of each benefit and demonstrate how they combine to offer what must be the best option available in the market.
Enhanced allocation
- Recurring contributions to a RA qualify for an enhanced allocation which means that while you pay a certain amount each month, the amount that is actually invested for you is higher. The additional investment is determined by 2 bands depending on the amount of your monthly contribution
- Band 1 (more than R1 320+/month) = Your payment + 0,5%
Band 2 (more than R3 310+/month) = Your payment + 1,0%
Loyalty Bonus
On all investments monthly fund administration fees are charged by the funds in which you invest. Investo will pay you a Loyalty Bonus which is a essentially a refund of these administration fees based on the following table
Initial savings term | Loyalty bonus % |
5 years | 85% |
10 years | 90% |
15 years | 95% |
20 years | 100% |
25 years | 105% |
30 years and longer | 110% |
Based on the table if you have an investment for 20 years you pay no fees and from 25 years you actually get more money back!
Retirement Booster
Should you have an Investo RA as well as a qualifying Myriad product (the range of life insurance products offered by Momentum) then you will receive a Retirement Booster benefit as well. The Retirement Booster is a loyalty reward that pays back up to 45% of Myriad risk premiums at retirement as a tax-free lump sum.
How does it work?
In its simplest form, each year an amount is added to your RA which is the equivalent of
- Your annual life insurance premium
- Multiplied by 1.5%
- Multiplied by the number of years your RA has to go until you retire.
i.e. if you are 30 years old and your monthly life insurance premium is R1 000 then the allocation will be R1000 X 12 months X 1.5% X 35 (65 years -30years) = R6 300.
Longevity Protector
Should your life insurance policy also have a Longevity Protector added then the percentage used to calculate the annual allocation is increased from 1.5% to 4.5% (3X)so in the example above the allocation will be R18 900
Example of the Incredible Investo RA Value
I have assumed the following
- A 40-year individual who intends to retire at 65.
- A monthly contribution to an RA of R450, increasing at 5% per annum with an assumed investment return of CPI
- A life policy with a monthly premium of R1 000
Value of RA at retirement 289 567
Loyalty bonus paid out 127 049
Retirement booster allocation 164 623
Total paid out 581 239
On this example the value of the Investo benefits (R127 049 + R164 623 = R291 672) are actually more than the amount that you contributed!
When you consider
- That the Retirement booster was calculated using 1.5% and had the life insurance policy had a longevity protector this would have been 4.5% – three times the value and
- The low amount of the RA contribution meant that no enhanced allocation
it is apparent that the benefits could have been significantly higher in this example.
Accumulating Wealth
I am often asked by clients how they may be able to accumulate wealth. The example above clearly shows that by having an Investo RA together with a Myriad life policy can create wealth well in excess of what you would have been able to achieve by just having an RA allowing you to have a much improved retirement.