{"id":951,"date":"2017-03-27T15:09:16","date_gmt":"2017-03-27T13:09:16","guid":{"rendered":"https:\/\/www.namfisa.com.na\/educates\/?p=951"},"modified":"2025-07-19T22:13:14","modified_gmt":"2025-07-19T20:13:14","slug":"life-assurance-retirement-annuities","status":"publish","type":"post","link":"https:\/\/www.namfisa.com.na\/educates\/life-assurance-retirement-annuities\/","title":{"rendered":"Life Assurance: Retirement Annuities"},"content":{"rendered":"\t\t
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What are retirement annuities (RA\u2019s)?<\/h3><\/span><\/div>
RA\u2018s are safe forms of long-term savings plans where you pay a monthly premium into the retirement annuity plan and in return, upon retirement receive a monthly payment for the rest of your life. An annuity is a long term insurance product that pays out income and can be used as part of a retirement plan. Annuities are a popular choice of saving for those who want to receive a steady income stream in retirement. You make an investment in the annuity and the insurer then makes payments to you at a future date(s) upon retirement.<\/div><\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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How many types of retirement annuities are there?<\/h3><\/span><\/div>
Although there are many variations of retirement annuity policies to choose from, there are mainly two types, deferred and immediate. With a deferred annuity, your money is invested for a period of time until you are ready to begin making withdrawals, typically when you reach retirement at the age of 60 years. If you opt for an immediate annuity, you begin to receive payments soon after you make your initial savings. For example, you might consider purchasing an immediate annuity as you approach retirement age with your lump sum payout from your pension benefit payout.

The deferred annuity accumulates money while the immediate annuity pays out. Within these two types, annuities can also be either fixed (conventional) or variable (living annuities) depending on whether the payout is a fixed sum (guaranteed). The insurers take the responsibility for fluctuations in the market and the risk that you may live longer than average but the investment dies with you.

The living annuity is tied to the performance of the overall market, group of investments, or a combination of the two, and the policyholder carries both investment and mortality (death) risk.

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Are Retirement Annuities a safe way of saving?<\/h3><\/span><\/div>
It is comforting to know that RA\u2019s are lawfully protected from creditors meaning that not even in the event of insolvency or bankruptcy, will anybody ordinarily have access to the funds before the selected maturity date. Therefore, these savings can always be left to grow until you are ready to start withdrawing (benefiting) from them, when you reach the age 60 years, depending on the savings plan. NAMFISA supervises the insurers through regular monitoring of their solvency levels and assesses whether these insurers will be able to honour their obligations when your savings mature.

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Is there any tax incentives involved in Retirement Annuity savings?<\/h3><\/span><\/div>

The premiums you pay towards retirement saving are tax deductible i.e. you can apply for a tax refund on your premium contribution as an incentive for you to save towards your retirement. On the other hand, if you contributed towards a retirement fund while working, the Income Tax Act of Namibia allows you at retirement, only one third (1\/3) of the pension savings benefit to be taken out as cash (tax free), while the other two thirds (2\/3) must be invested to give you a regular income.

You may also invest your one third (1\/3) lump-sum payout should you wish to do so. If you belong to a provident fund you may receive either monthly pension payments or a lump-sum payment which you should use to buy an annuity (monthly pension).

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Why do I need to save when I already belong to an employer sponsored retirement savings plan?<\/h3><\/span><\/div>

It is a fact that studies conducted over the years have shown that most people do not have enough money to maintain their standard of living when they retire. Even if you have a retirement fund which guarantees an income for the rest of your life, it is unlikely that you will have enough money to live comfortably when you retire.

Make sure your retirement savings are not eaten away by inflation (rise in the general price of goods) and that these savings last as long as you do <\/blockquote>

Therefore to make sure your retirement savings are not eaten away by inflation (rise in the general price of goods) and that these savings last as long as you do, some retirements allow for top up contributions. If yours does not, it would be wise to make additional savings in a form of retirement annuities as soon as you can.

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What are the benefits of RA\u2019s?<\/h3><\/span><\/div>

1. With the conventional annuity, your regular monthly income is guaranteed for life. The insurer takes responsibility for fluctuations in the market and the risk that you may live longer than the average. However, the disadvantage is that you get the same income every month or year regardless of inflation and your investment dies with you. Generally you cannot use these funds before the age of 55 years, so ensure that you know how you should invest and when the money will become available for your use.
2. Another advantage is that there is tax incentive involved of which a portion of your premium is tax deductible.
3. A creditor may not lay claims against your retirement savings so these funds are relatively safe and protected by law. <\/div><\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Understanding Retirement Annuities <\/h3><\/span><\/div>
A Retirement Annuity (RA) is a long-term savings product designed to provide you with a steady income during retirement. You contribute a monthly premium, and upon retirement\u2014usually from age 60\u2014you receive regular payments, typically for the rest of your life.\n

\n\nRAs are insurance-based products and are popular among individuals who want a guaranteed income stream after they stop working. You invest during your working years, and in return, the insurer pays you from your accumulated savings at retirement.\n

\n\nRetirement annuities are protected by law from creditors\u2014even in the event of insolvency or bankruptcy. This ensures your savings remain secure until you reach retirement age. Additionally, NAMFISA supervises insurers and regularly monitors their financial strength to ensure they can meet their obligations to policyholders.<\/div><\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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What are some of the reasons that can contribute to you finding yourself in a situation where you do not have enough money to cover your living expenses after retirement?<\/h3><\/span><\/div>

1. Not having a proper financial plan that you regularly review and adjust goals.
2. Nowadays, there is a possibility of living longer after retirement than initially forecasted, which means we will need more money when we retire.
3. There is usually a shortfall between the benefits of an employer sponsored pension savings scheme and what you need to retire on.
4. Healthcare costs continue to grow and medical inflation is higher than ordinary inflation, hence high medical costs can be expected after retirement. It is a fact that the older you get the more prone to sickness you become; hence high medical bills will be expected.
5. Taking early retirement or retrenchment packages e.g. five years before normal retirement means you have added five years to your life after retirement and subtracted five years from your retirement savings. Therefore, you could have saved and earned more returns on your savings had you worked until the normal retirement age.
6. Sometimes there is just too little, too late, especially when many of us leave saving for retirement too late in our years. This may result in too little capital being accumulated for a comfortable retirement.
7. Not saving towards your retirement as well as spending your retirement payout when you change jobs is the worst mistake you can make. Rather reinvest your payout so that it will remain part of your retirement plan.

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Additional points<\/h3><\/span><\/div>
1. You can invest up to the age of 65 years but can only withdraw or access your retirement investments from the age of 55 years.
2. There are other added benefits to the retirement savings such as the adding of life cover and disability to your annuity.
3. You should ask about the related fees that can cut into any profits the annuity pays out, such as commissions, annual fees and any other charges. Most annuities are sold by insurance brokers or other sales people who collect a commission.

It is a fact that studies conducted over the years have shown that most people do not have enough money to maintain their standard of living when they retire <\/blockquote>

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What must I do when I want to buy a Retirement Annuity policy?<\/h3><\/span><\/div>

1. Make sure that the insurer as well as the intermediary (insurance agent or broker) from whom you buy an RA, is registered with NAMFISA and licensed under the Long-term Insurance Act.
2. Ask for or obtain proper advice and also request for a personal needs analysis to make sure you need an RA policy before you buy one.
3. Although we always encourage you to save, ensure that you can afford to save.
4. Always read your policy contract to ensure that you understand the terms and conditions before you sign.
5. Beware of savings scams.
6. Gather all the information you can get about annuity policies because the more you know the better position you are in to get great annuity rates.
7. Compare annuity quotation sheets to find out which insurance providers and finance companies are looking out for your best interest as well as their own. This step will give you the highest annuity rates possible, with the lowest prices too.
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Summary<\/h3><\/span><\/div>
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Types of Retirement Annuities<\/h5><\/div>
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  • <\/span>Deferred Annuity: Your money is invested over time and only pays out when you reach retirement age.<\/li>
  • <\/span>Immediate Annuity: Payments begin shortly after you invest a lump sum, often used when you retire and receive a pension payout.<\/li><\/ul><\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    <\/h5><\/div>
    Within these, annuities may also be:<\/div><\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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    • <\/span>Fixed (Conventional Annuity) \u2013 Offers guaranteed, unchanging monthly income.<\/li>
    • <\/span>Variable (Living Annuity) \u2013 Payment varies depending on investment performance; you carry the investment and longevity risk.<\/li><\/ul><\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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      Saving through a Retirement Annuity comes with tax incentives:<\/h5><\/div>
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      • <\/span>Premium contributions are tax deductible, up to N$40,000 per year.<\/li>
      • <\/span>Upon retirement, you may withdraw one-third (1\/3) of your pension benefit tax-free.<\/li>
      • <\/span>The remaining two-thirds (2\/3) must be used to buy a pension income product (annuity).<\/li><\/ul><\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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        <\/h5><\/div>
        Even if you are a member of an employer-sponsored retirement fund, it may not be enough to maintain your current standard of living after retirement. Inflation, medical expenses, and longer life expectancy mean you\u2019ll likely need more savings.\n

        \n\nIf your current pension plan does not allow for additional contributions, opening an RA gives you the opportunity to top up your retirement savings.<\/div><\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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        Yes, you may contribute to multiple RA plans. However, keep in mind that only up to N$40,000 per year in total RA contributions is tax deductible.<\/div><\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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        Benefits of Retirement Annuities<\/h5><\/div>
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        • <\/span>Guaranteed Income: A fixed annuity provides predictable monthly payments for life.<\/li>
        • <\/span>Tax Advantages: A portion of your premiums is tax-deductible.<\/li>
        • <\/span>Creditor Protection: RA funds are legally protected from debt collectors.<\/li>
        • <\/span>Flexibility: You can invest until the age of 65 and withdraw from 55.<\/li>
        • <\/span>Added Benefits: Some annuities offer optional life cover and disability protection.<\/li>
        • <\/span>Diversification: You can shop around and compare annuity options to suit your needs and risk tolerance.<\/li><\/ul><\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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          Why Some People Retire Without Enough Savings<\/h5><\/div>
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          • <\/span>Lack of a proper, regularly updated financial plan.<\/li>
          • <\/span>Longer life expectancy than previously anticipated.<\/li>
          • <\/span>Shortfall between employer pension and retirement needs.<\/li>
          • <\/span>Rising healthcare and medical costs in old age.<\/li>
          • <\/span>Early retirement or retrenchment, which reduces saving time.<\/li>
          • <\/span>Delaying retirement saving until it\u2019s too late.<\/li>
          • <\/span>Withdrawing pension savings when changing jobs instead of reinvesting them.<\/li><\/ul><\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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            When purchasing an RA, follow these steps:<\/h5><\/div>
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            • <\/span>Ensure both the insurance company and intermediary are registered with NAMFISA.<\/li>
            • <\/span>Seek proper financial advice and request a personal needs analysis.<\/li>
            • <\/span>Only save what you can realistically afford.<\/li>
            • <\/span>Read the policy contract carefully before signing.<\/li>
            • <\/span>Stay alert and beware of scams.<\/li>
            • <\/span>Do your homework\u2014understand annuity features, fees, and investment options.<\/li>
            • <\/span>Compare quotes to get the best annuity rates and value.<\/li><\/ul><\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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              <\/h5><\/div>
              A Retirement Annuity is not just a savings plan\u2014it\u2019s a financial safety net for your future. The earlier you start saving, the greater your retirement security. Make sure to review your policy regularly, seek expert advice, and take control of your financial future today.\n

              \n\nFor more information or to verify if your insurer is registered, contact NAMFISA or visit: www.namfisa.com.na\n\n<\/div><\/div>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"

              What are retirement annuities (RA\u2019s)? RA\u2018s are safe forms of long-term savings plans where you pay a monthly premium into the retirement annuity plan and in return, upon retirement receive<\/p>\n","protected":false},"author":1,"featured_media":952,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_eb_attr":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_EventAllDay":false,"_EventTimezone":"","_EventStartDate":"","_EventEndDate":"","_EventStartDateUTC":"","_EventEndDateUTC":"","_EventShowMap":false,"_EventShowMapLink":false,"_EventURL":"","_EventCost":"","_EventCostDescription":"","_EventCurrencySymbol":"","_EventCurrencyCode":"","_EventCurrencyPosition":"","_EventDateTimeSeparator":"","_EventTimeRangeSeparator":"","_EventOrganizerID":[],"_EventVenueID":[],"_OrganizerEmail":"","_OrganizerPhone":"","_OrganizerWebsite":"","_VenueAddress":"","_VenueCity":"","_VenueCountry":"","_VenueProvince":"","_VenueState":"","_VenueZip":"","_VenuePhone":"","_VenueURL":"","_VenueStateProvince":"","_VenueLat":"","_VenueLng":"","_VenueShowMap":false,"_VenueShowMapLink":false,"footnotes":""},"categories":[428],"tags":[],"class_list":["post-951","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-long-term-insuarence"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.namfisa.com.na\/educates\/wp-json\/wp\/v2\/posts\/951","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.namfisa.com.na\/educates\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.namfisa.com.na\/educates\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.namfisa.com.na\/educates\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.namfisa.com.na\/educates\/wp-json\/wp\/v2\/comments?post=951"}],"version-history":[{"count":7,"href":"https:\/\/www.namfisa.com.na\/educates\/wp-json\/wp\/v2\/posts\/951\/revisions"}],"predecessor-version":[{"id":35786,"href":"https:\/\/www.namfisa.com.na\/educates\/wp-json\/wp\/v2\/posts\/951\/revisions\/35786"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.namfisa.com.na\/educates\/wp-json\/wp\/v2\/media\/952"}],"wp:attachment":[{"href":"https:\/\/www.namfisa.com.na\/educates\/wp-json\/wp\/v2\/media?parent=951"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.namfisa.com.na\/educates\/wp-json\/wp\/v2\/categories?post=951"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.namfisa.com.na\/educates\/wp-json\/wp\/v2\/tags?post=951"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}