EAC and Your Retirement

Despite significant advances in technology aimed at driving down costs, many South African retail investors are routinely still paying between 2% and 6% for the “privilege” of saving for retirement.


Recent research from OUTvest CEO Grant Locke, shows that 88% of investors sampled for research, were paying over 3% per year in fees.  



The effect of fees on investment performance over time can be quite substantial and in many cases threaten one’s ability to retire comfortably.


“But I only pay 1.5% - my statement tells me!”


Here is a challenge for you – go and pull up your investment statement from your financial advisor or download the fund fact sheet for your unit trust investment. Scroll down to where it talks about the Total Expense Ratio (TER) and we are sure you will breathe a sigh of relief when it says that you are paying somewhere between 1.5% and 2.5% - still high – but definitely not 3%...… or are you?


This is one of the single biggest challenges facing the industry at the moment – what you see on your statement is not necessarily the true cost of your investment.


Your investment cost is usually made up of three components:  

  • The Total Expense Ratio or Investment Management Fee (Typically quoted inclusive of VAT)

  • The Administration Fee (Typically quoted excluding VAT)

  • The Ongoing Advice Fee (Typically quoted excluding VAT)

We mention VAT because when you are entering into a long-term investment – such as a Retirement Annuity (RA) – the impact of these fees on your investment can become quite significant as your investment compounds.  

Our next challenge to you is to scour your statement and see if you can find the Administration Fee and the Ongoing Advice fee that you are being charged by the platform administrators and your Financial Advisor. It’s not that easy – is it?


In contrast, when you save through OUTvest, you can log in to your profile at any time using a computer or mobile device and get a breakdown of these fees.


So how does one go about comparing apples with apples, so to speak, when trying to compare the three main cost components applicable to your investment with the various product suppliers in the market? It’s called the Effective Annual Cost or EAC for short and allows you to compare the charges you incur and their impact on investment returns when investing in different Financial Products.


Ask for your EAC from your investment provider today and stay informed when it comes to understating the fees applicable to your investment. Over time fees have a significant impact on your investment return.


The OUTvest Retirement Annuity offering allows you to configure a low-cost, fee-transparent, technology-savvy and tax-efficient investment with one of the most competitive fee structures in the market. Ask for the EAC and compare OUTvest’s fee with the rest.  


For more information on the OUTvest RA, please click here.


Marc Ashton


OUTvest is an Authorised FSP.  All investments are exposed to risk and not guaranteed


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