Research has shown that most people change jobs at least three or four times in their lives. As more people are moved from defined benefit to defined contribution pension funds, in most cases when you change jobs you will be paid out a lump sum of money to invest. A sensible option is to invest in a preservation fund, which preserves the money until you retire. But the problem with most preservation funds is that it is impossible to know what income you will get at retirement because of market fluctuations.
The Income Preservation Fund, was launched recently by The Income Specialists, a division of Marriott. The Income Specialist claims that the new product is the only preservation fund that can forecast how much you will get when you retire.
What it is:
A preservation fund is a one in which you can preserve your retirement savings, paid out from pension or provident funds, until you retire.
Who should invest:
The product is suitable for members of pension or provident funds who may transfer their benefits when they resign, are retrenched or dismissed or when their fund closes down.
Guarantees provided: There are no guarantees because investors would have to pay a premium to avoid volatility.
Risk level:
The portfolio is invested according to prudential investment guidelines which dictate that the fund should not be more than 75 percent invested in equities; no more than 25 percent in property and the balance in bonds and cash. There should also be no more than 15 percent invested offshore.
Minimum investment amount:
R50 000.
Minimum investment term:
There is no minimum investment term but you can only access your money on your retirement date.
Costs:
An initial fee of 0.5 percent and a one percent annual administration fee. Fees exclude VAT.
Commissions:
A financial adviser's initial fee of up to three percent (excluding VAT) is payable.
There are no further underlying investment fees.