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Making retirement money last longer

By: Nosipho Nhleko, Investment Product Specialist at Liberty.

Having to retire in the face of a market downturn in which a lifetime’s amount of hard-earned savings may appear to be worth somewhat less can be one of the most daunting challenges anyone can face.

The fact is, markets go up and down all the time, mostly in the long-term they go up, but having a depressed market can make clients question the real value of their investments. The current COVID-19 pandemic may seem troubling, but for many who have been around long enough to retire, they’ll remember September 11, and the markets crisis of the late 1990’s for example. They’ll also know that markets recover in the end. But they would be wise to ask what one can do to buffer themselves against these kinds of swings.

This is what Liberty’s Living Annuity is designed to do. It offers features and benefits retirees find the most valuable and can even offer these as stand-alone add-ons. It gives them the flexibility to choose from 190 Funds managed by some of the country’s top asset managers. With such a wide range, including offshore funds and trackers, they can switch funds or invest in a combination of any of these funds at any time without losing or affecting their Liberty return guarantee.

The Liberty Living Annuity comes with an optional High-Water Mark Guarantee feature which protects funds against any potential market crashes. A High-Water Mark Guarantee is the highest value an investment is expected to reach and, by purchasing this option, you are guaranteed to receive at least 80% of that value. So even if the markets go down, the investment is protected, thus creating a safety net during market downturns.

Today’s economic climate is more challenging than ever with volatile investment markets and inflation pushing up the costs of living. This is why having a reasonably low drawdown rate is important in ensuring people do not start eating into their capital base. But it’s well-known that medical advancements, together with healthier diets and lifestyles, mean that people are living longer which brings the risk of clients outliving their retirement savings.

This is where the Liberty Living Annuity’s Income Enhancer Benefit can make a difference. This is designed to provide an additional layer of security against the client running out of money. They have the option to commit a percentage of their investment to a bonus pool when they pass away. In exchange, they will receive a bonus pay out when other contributors to the bonus pool pass away. In essence this benefit enables individuals to get bonuses as they grow older to help offset living longer than expected and potentially running out of money.

When Liberty redesigned the Living Annuity, it was felt that a more efficient and simpler fee structure would make it more user-friendly. The updated fee structure is thus designed to save client’s money by aggregating investment values.

This means that if they have two or more Liberty investments, we will group their combined investment values to reduce the overall platform fee. The higher the combined value of their investments, the lower the aggregated platform fee.

In all, these enhancements give clients many more planning options for the long-term, so they can be comfortable knowing their money will see them through.

This article appeared in the October edition of COVER magazine.

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