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Retirement planning can be very stressful and as Financial Advisers, we understand that serious decisions have to be taken regarding the implementation of your post-retirement plan. In the past individuals had the choice of either a Guaranteed Life Annuity or a Living Annuity but, unfortunately could not have the features of both in one product.

Ideally an investor would like to choose the underlying funds within an annuity to participate in upside growth but at the same time have a guarantee on the downside. He or she would also like the proceeds to pass on to a beneficiary upon death. There has always been a trade-off between the product features of these two types of annuities and this has made the dilemma around choosing the correct annuity extremely difficult, and even more daunting in a poor global and local economic environment.

Liberty has taken heed of the above concerns and have just launched the Liberty Bold Living Annuity which works just like a normal living annuity, but has the added feature of an optional Risk Enabler Guarantee that protects your initial unit price at 80% of the initial price. This guarantee will move higher depending on the performance of the portfolio as measured every 3 months from inception. This means that a new guarantee level will be re-set to 80% of the unit price reached quarterly if it is higher than what it was in the previous quarter – the highest point is called the High-Water Mark and the guarantee will be set at 80% of the High-Water Mark. Once the High-Water Mark moves upwards, it cannot fall even if the actual unit price drops thereafter, meaning that you will not have to sell as many units to retain your existing income as you would in a traditional living annuity if there is a reduction in the unit price – the High-Water Mark will not reduce.

The Risk Enabler Guarantee is an optional feature and does not have to applied at the outset – you can opt for it at any time. You can also opt out of it at any time. The Risk Enabler Guarantee does however come at a once off fee of 1% of your capital at the time of purchase. If you opt out and want to later re-instate it, payment of the 1% upfront fee will have to be made again, so it is not advisable to cancel the guarantee once applied. Furthermore, if you add in monies from other retirement funds after 6 months, a further fee of 1% applies on the total capital, so in order to avoid duplicating this upfront fee, rather enter into a new living annuity on the additional amount and pay the 1% upfront fee for the guarantee on that portion only.

There are no investment or administrative costs applicable on your investment should the return be lower than 14% per annum in any investment year. Liberty will charge a small fee, termed Growth Sharing, of 20% of the amount earned above the targeted return, which is currently 14% and guaranteed for a term of 5 years. This fee will be deducted from the portfolio at the end of the 12-month period. If the portfolio does not meet the targeted return in any given year, then no Growth Sharing is applied for that respective year. Here is an example: if you earn a return of 20% at the end of year 1, Liberty will deduct 20% of 6% which equals 1.2% at the end of that year as the Growth Sharing Fee. Liberty will revise that targeted return on the 5th anniversary of the investment which means that the target return may be higher or lower than the 14% after year 5 – this will only be determined by their actuaries closer to the time.

All of the fees mentioned above are over and above the fund charges, platform costs, and adviser upfront and ongoing costs, but it gives you peace of mind.

One final feature that is must be taken cognizance of in this product is the Guarantee Top-Up at the end of the 5 years – should there be underperformance in the portfolio in those 5 years, in other words the capital value has dropped to below what it would have been at 80% of the High-Water Mark unit price, Liberty will top-up your capital to what it would be at 80% of the High-Water Mark unit price on the 5th Anniversary  and the next 5 year guarantee cycle will start.

The Liberty Bold Living Annuity thus provides one with the ability to take on risk with guaranteed protection on the downside. This enables one to choose carefully selected high quality growth funds as part of the underlying portfolio despite economic uncertainty.

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Morebo Financial Solutions (Pty) Ltd, an affiliate of Liberty, the Liberty Group Ltd is an authorised Financial Services Provider in terms of the FAIS Act. (No. 2409)
Morebo Wealth (Pty) Ltd, an affiliate of Liberty, the Liberty Group Ltd is an authorised Financial Services Provider in terms of the FAIS Act (no. 2409)
Morebo Brokerage (Pty) Ltd is an Authorised Financial Services Provider in terms of the FAIS Act (no. 48360)

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