INSURANCE giant Metropolitan Lesotho has advised clients nearing retirement to purchase annuities to ensure they have adequate income in the post-employment period.
An annuity is a financial instrument that enables an investor to derive periodic income at some agreed future date in exchange for once-off lump sum or periodic premiums to be issued depending on their needs.
Metropolitan Business Development Consultant, Thabang Mapena recently addressed a pre-retirement seminar in Maseru where he said it was important for clients to have an additional retirement provision to sustain and maintain their lifestyles.
He said that inflation was inevitable and the public could “prepare for it by purchasing annuities that are tailored for different individuals”.
“There are four types of annuities that are beneficial for pensioners.
“One of these is a Fixed Annuity that is payable for a specified number of years, irrespective of whether the insured life is alive or not. If death occurs within the fixed period, the annuity becomes payable to the deceased’s dependents for the balance of the selected period.
“There is also the Joint Life Annuity that is taken on the life of more than one person. It provides for the life payment of an annuity for as long as both insured lives are alive.”
Mr Mapena also said they offered a Capital Preservation Annuity plan which is a compulsory purchase annuity with an embedded life cover that provides a guaranteed life income and a return of capital at death by means of splitting the annuity.
There is also the Ultimate Retirement Annuity plan which is a flexible compulsory purchase life annuity that allows the annuitant to make a choice at the outset of the policy and every policy year thereafter regarding the level of periodical income he or she requires.
“This annuity, unlike other choices, will be restricted to minimum and maximum amounts which will be recalculated each year, taking into account the value of the annuitant’s fund account, the life expectancy of the annuitant and the expected return over the remaining lifetime of the contract,” he said.
The seminar was attended by clients ranging from those who were a year to those who still had five years before retiring.
They listened to presentations by financial advisors and psychologists.
For his part, Metropolitan Managing Director, Nkau Matete told the Lesotho Times that the seminar was meant to equip their clients with relevant information to enable them to transit from employment to retirement without becoming broke.
He said retirees often used their retirement funds without planning for the future.
“Most of the pensioners do not plan their retirement funds well, they invest in property which does not entirely benefit them,” he said.
“We care for our clients, we don’t want to see them broke, so we saw it fit to avail other retirement investing options to them.
“Prepare for retirement when you are still at your working place, because once you leave, your influence ends,” Mr Matete said
A psychologist, Ntoetse Makhupane said retirement was an avoidable stage that needed to be prepared for.
“After you retire, you have the chance to do all the things you always wanted to do, but were sidelined by the job then,” she said.
Ms Makhupane also advised employees to form relationships outside their offices in order to acquaint themselves with community life and not to lose their identity as individuals as the failure to do so could traumatise them after retirement.
Another presenter, Seenyane Nthejane reminded pensioners that the retirement fund was made to reduce dependence on government, hence they had to save for their retirement.