According to Stats SA, only 6% of South Africans can afford to retire comfortably, while retirement planning was highlighted as the biggest financial planning concern amongst commercial farmers in a recent study for Farmbiz by Marketing Surveys and Statistical Analysis.
While the reasons why sufficient retirement provision vary for South Africans and may be a low priority for some, this article serves to highlight the challenges unique to farmers and provide possible solutions.
A retirement annuity (RA) is a long-term savings vehicle that allows you to accumulate retirement capital that may be accessed from the age of 55. The retirement capital (two-thirds) is then invested to help provide you with an income after you retire.
Why an RA?
How much should you save?
Sale of land
If you have more than one child and one child is keen to farm/already farming, how do you transfer the farm to that child while being fair to the other child/children and still have enough money to fund your retirement? The answer lies in a Living Buy and Sell.
The farmer and child may enter into an agreement in terms of which the farmer agrees to increase the child’s salary increase on condition the increased amount is used as the premium for an endowment policy owned by the child.
The child should be given an increase that would cover the amount of the premium as well as any tax payable by the child as a result of the increase.
The child then agrees to sign a security cession in favour of the farmer to prevent the policy being surrendered. Upon maturity of the policy, the farmer agrees to cancel the security cession so that the lump sum is payable to the child for the purchase of the farm at the end of the specified term (usually years to retirement).
The material is not intended as and does not constitute financial or any other advice. The material does not take into account your personal financial circumstances.
For this reason, it is recommended that you speak to an accredited broker or financial adviser to consider all your options and draw up a plan to achieve your financial goals.
You can also contact Koos Nel, Head of Old Mutual Agri via email email@example.com.
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