Retirement annuities – here’s what happens if your fund manager goes bankrupt
A retirement annuity (RA) is a great, tax-efficient way to save for retirement.
They are, however, extremely long-term investments, impossible to cash out before the age of 55.
So, what if you took one out with, for example, Sygnia Asset Management as a 30-year-old in 2019?
A lot can happen in 25 years; will Sygnia Asset Management still be around in 2044?
What happens to your retirement savings if it goes bankrupt?
Nothing happens to your investments if your fund manager goes bust
Your RA is just a “wrapper” - managed by your fund manager - holding various investments.
You are not investing in Sygnia Asset Management (or Allan Gray or Liberty, etc.) if your RA is with it.
Your investments are in the companies the fund manager chose to invest in on your behalf.
In other words, you’re investing in Naspers, Standard Bank, MTN, etc.
Because you’re not investing in the fund manager (you’re simply paying them to manage your investments) it doesn’t matter all that much if it goes under.
Another one will simply take over the funds under its management.
The Collective Investment Schemes Act protects your Retirement Annuity
The Financial Services Board regulates asset managers.
The law prohibits fund managers from holding investors’ funds on their balance sheets.
Your funds are therefore safe no matter the financial state of the company you chose to manage your Retirement Annuity.
The Financial Services Board ensures the enforcement of the “The Collective Investment Schemes Act” which compels fund managers to make use of a separate trust with independent trustees and auditors.
Your Retirement Annuity will not be affected if your fund manager goes bankrupt and the manager’s creditors will have no claim against your investment.
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