What’s the difference between a retirement annuity and Wealth Bonus?
A retirement annuity, or RA, is a kind of investment account that allows you to earn tax-free returns.
Wealth Bonus is a built-in, extra investment account that comes with every policy we sell. Portions will regularly unlock (every 60 premiums), but the full amount only unlocks when you turn 70.
The similarity is that you get to use the cash when you retire. Otherwise, they’re a little different...
The way they’re taxed
In an RA, your contributions and the growth on those contributions isn’t taxed until the time comes for you to withdraw the money. Only at that point is the money taxed, often as income. There are strict rules about when you can withdraw the money, and what penalties you would pay if you did it early.
Your Wealth Bonus is taxed differently to an RA. The contributions that we make on your behalf are taxed, but we pay the tax for you. That means that what you see on your statements, and whatever unlocked cash you withdraw, has already been taxed. What you see is what you get, including the full lump sum at 70. 🎉
The way the contributions are made
You would choose how much you contributed to an RA (although there might be a minimum contribution you had to make). Some RAs allow you to make occasional lump sum contributions over and above your regular contributions. In theory you’d keep track of how much you needed to earn in retirement, and adjust your contributions over the years if you needed to to meet your goal.
With Wealth Bonus, we automatically match a portion of every premium you pay into your Wealth Bonus account, depending on your age. So you don’t get a say in how much Wealth Bonus goes in, and the amount you end up with won’t necessarily reflect your actual retirement needs.
What happens to the investment if you die
If you died before you retire, all the money in an RA would go to your beneficiaries or to your estate. With Wealth Bonus, the growing investment is just for you. If you die or leave Sanlam Indie before 70, most of your Wealth Bonus will fall away, and only the unlocked portions would be paid out to your estate.
We like to think of Wealth Bonus as a bonus for staying alive and healthy all the way to 70 - an awesome extra that you can use to supplement your retirement fund. Every little bit helps, right?