Please advise whether investment linked living annuities (Illas) are subject to regulation 28 after they "mature" and withdrawals have commenced.
The purpose of regulation 28 is to protect investors in retirement funds from the effects of poorly diversified investment portfolios, over-exposure to higher-risk asset classes as well as complex financial instruments and portfolios.
Nico-Louis Minnie, head of investment customer value at Liberty, responds:
Living annuities don't "mature". At retirement a client has the option to use the proceeds of his retirement annuity to buy either a living annuity or a life annuity.
Both of these will then provide regular income in retirement.
Living annuities don't form part of the Pension Funds Act and therefore they don't have to comply with regulation 28.
Asisa issued guidelines for asset allocation on living annuities, but this is not a regulation and it is for information purposes only.
The retirement annuity used to buy the living annuity is the product that has to comply with regulation 28.
Until the proceeds are used to purchase a living or life annuity it will have to continue to comply with regulation 28.
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