Your money questions answered | Retirement lump sum to settle debt; transfer fees; grandchildren and pension

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Your personal finance questions answered. Photo: Archive
Your personal finance questions answered. Photo: Archive


City Press readers seek financial advice regarding investments, loans and pension funds.

Should I use my retirement lump sum to settle my debt?


I have just retired from work and expect a lump sum amounting to about R1 million.

I still owe about R100 000 on my car and have other debts.

I would like to know if I should invest the whole amount short term or pay off the debts and invest the remainder.


It is a good idea to contact a financial planner, especially near retirement, as it is important to understand how your income and lump sum can be used to meet your retirement needs.

During the week of October 4, the Financial Planning Institute will be holding Financial Planning Week and many financial planners will be offering pro bono sessions.

READPrepared to pay for advice?

When it comes to deciding what to do with your lump sum, you first need to establish whether your pension income is sufficient to live on, or whether you need to generate an income from the R1 million lump sum. These are some points to consider:

  • Generally, it is a good idea to settle debts before you retire, as your retirement income is fixed and you don’t want to be using it to pay off debt.
Any interest you would receive on the lump sum investment would be lower than the interest you pay on the debt, and the income could be taxable if your interest income exceeded R23 500 a year.

So, paying off the debt with the lump sum would make more sense.

  • You should allocate some funds for emergencies such as medical bills – a money market account would be a good option.
  •  If you need to supplement your income, you would need to consider income-generating investments. Given that what is left of your lump sum would not be a large amount of money, products like the RSA Retail Savings Bond could be an option.

READAre retail savings bonds still a good investment

  • If you did not require any additional income, you could invest the remainder in a longer-term investment such as a market-related unit trust or exchange-traded fund. This would allow the money to grow and could be used to supplement your retirement in later years.

Who pays transfer fees?

Maggi writes:

Who should pay the transfer costs if a spouse gives the house to another spouse? Do you pay to change the title deed?

City Press:

It is an important point that you raise. Many people do not realise that, if you transfer a house to a spouse or even your child, transfer costs apply. The same applies if you have a property in a joint name and transfer to just one owner. It also applies on death when the property is transferred from the deceased estate into the name of the beneficiary.

There are three transaction costs to consider:

  • Transfer of title deed – this is done through conveyancing attorneys.
  • Transfer duty – this is a tax and only applicable to property purchases over R1 million.
  •  Bond registration – this is paid to attorneys if you take out a bond on the property.

Traditionally these costs are all paid by the buyer of the property. Therefore, in theory, the spouse who receives the property would be liable.

However, there is nothing stopping you from coming to an arrangement to share the costs – this could be part of a divorce settlement, for example.

Do grandchildren receive a pension?

Tebogo writes

My 78-year-old father passed on last month. He had been receiving R8 000 from the Transnet pension fund from 2005. After he passed away, the pension transferred to his wife (my mother). Unfortunately, she herself passed away.

My parents were supporting two grandchildren. The pension administrator said that, in the event of my mother’s death, there would be no more payments from the pension fund. This means all those who were depending on my father’s pension are now left without any income. Is this correct?

City Press replies:

Unfortunately, the administrator is correct. The pension is guaranteed for the lives of the member and spouse, not to support extended family.

READMaking a plan for protecting your legacy

If one is in a situation where family is relying on an income from a pension, it would help to ensure there is some form of life cover in place.

Many pensioners lapse their life cover at retirement as it is an additional cost to carry on their limited income. One way to keep this cover in place is for the children to take over the premium payments on any life cover their parents may have at retirement.


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