An ETF Retirement Annuity is defined as a tax effective discretionary managed investment vehicle designed for individual investors. Retirement annuities are managed according to Regulation 28 (issued under the Pension Fund Act) which limits the extent to which retirement funds may invest in particular assets or in particular asset classes. The main purpose of this regulation is to protect the members’ retirement provision from the effects of poorly diversified investment portfolios. The Itransact Retirement Annuity invests in a range of low cost regulated Exchange Traded Funds (ETFs) that are well diversified across local cash, bonds, property, equity and global equity market segments.

We employ a two-step process to select the most efficient ETFs in creating an ETF Retirement Annuity. Once this strict selection process is complete, we allocate the capital by according to Regulation 28 guidelines to each ETF contained in the Retirement Annuity to produce the final desired retirement product.

Step 1: ETF Selection

There are a large and growing number of ETFs in the local and global investment universe making selection of the correct blend of ETFs complex and confusing for the average investor who wants to diversify their investment over many market segments at once.

Our process only considers vanilla ETFs. The reason is simple and it’s like baking a cake. We don’t use an instant cake mix which contains all sorts of different and complex ingredients and additives. We prefer simple and natural ingredients such as eggs, milk and flour and we want the best quality.

We therefore don’t use ETFs that contain a variety of complex and expensive mechanisms which attempt to beat the market – these are what we call “already baked products”. We prefer broad stroke vanilla ETFs as building blocks which are free from expensive and pre baked complexities. Vanilla ETFs provide uncomplicated, well-diversified exposure to the markets. Vanilla ETFs are able to tolerate the failure of a stock or two without harming the overall performance of the ETF and because they are vanilla, they are predictable, making it easier for us to extract their value in a well-controlled manner.

Step 2: Asset Allocation

We use certain market segments such as local and global cash, bonds, property and equity, to construct our retirement products. Let’s call these segments “baskets”. We only use baskets which are well diversified from one another. This means that each basket must behave differently from the others. This is important as it is pointless thinking one is well diversified, when in fact, one may be inadvertently investing in segments or baskets that have the same or similar behavioural characteristics. This is called concentration risk, better known as “putting all your eggs in one basket” and we want to avoid this at all costs because it increases the inherent risk of a Retirement Annuity.

Once we are satisfied with each basket, we proceed to place the most efficient ETFs (chosen in Step 1) into their respective baskets. For example, all the bond ETFs into the bonds basket, all the property ETFs into the property basket and so on.

We now have six or seven well diversified baskets each containing their respective ETFs which represent each market segment. We select only one ETF from each basket to represent each market segment. This ETF must be the most efficient ETF meaning it must be the lowest risk, highest return ETF from each particular basket.

We now have the correct raw ingredients to bake our Retirement Annuity. These are called model Retirement Annuity portfolios, each model representing a risk band.

We have created five product risk bands to cater for each investors anticipated investment term coupled with their appetite or tolerance for risk.

Investment term Risk tolerance Risk Band
1 – 3 Years Low Conservative
3 – 6 Years Low – Medium Cautious
6 – 8 Years Medium Moderate
8 – 11 Years Medium – High Growth
11+ Years High Maximum

Investors can invest in a model Retirement Annuity portfolio according to their needs.


Conservative ETF Retirement Annuity Portfolio

Tracks the cumulative performance of mostly money market and bond indices with a small proportion of global equity to attempt to boost returns slightly above the rate a bank would provide in a current account.

Cautious ETF Retirement Annuity Portfolio

Tracks the cumulative performance of mostly bonds, low proportions of local money market, property and global equity to attempt to achieve returns in excess of a Conservative ETF Retirement Annuity portfolio.

Moderate ETF Retirement Annuity Portfolio

Tracks the cumulative performance of most, or all of the asset classes in an attempt to achieve returns in excess of a Cautious ETF Retirement Annuity portfolio.

Growth ETF Retirement Annuity Portfolio

Tracks the cumulative performance of mostly local and global equities with little or nominal money market, property and bonds in an attempt to achieve returns in excess of a Moderate ETF Retirement Annuity portfolio.

Aggressive ETF Retirement Annuity Portfolio

Tracks the cumulative performance of mostly local and global equities with little or no money market, property and bonds in an attempt to achieve returns in excess of a Growth ETF Retirement Annuity portfolio.


Easy to acquire

Investors can gain instant exposure to a wide variety of securities or assets without having to buy each of the underlying constituents individually, conducting extensive research, nor actively managing the underlying securities.


By purchasing a single ETF Retirement Annuity, investors receive immediate exposure to the performance of a wide variety of the top performing securities within an index thereby avoiding the risk of putting all your eggs in one basket by having to buy each of the underlying constituents individually which requires complex and time consuming activities like research and actively managing the underlying securities themselves.

Peace of mind

ETF Retirement Annuities are well regulated by both the Pension Funds Act and the Financial Services Board (FSB) ensuring that members are protected against unjust treatment.

Automatically re-invest dividends

Dividends from each ETF within the Retirement Annuity, are automatically re-invested by purchasing additional securities within each ETF boosting the overall performance of the ETF Retirement Annuity.

Daily liquidity

Unlike owning a single shares and having to search for a willing buyer if you wish to withdraw your share at retirement, ETF Retirement Annuities can immediately be bought and sold by the fund on any day the stock exchange is open.

Tax efficient

Investment returns are tax free – there is no income tax or capital gains tax on the investment return earned in a RA.



Besides the price of the ETF itself, there is a once off trading fee for the transaction when the ETFs contained in the Retirement Annuity are bought or sold. Annual investment management and administration fees will also apply.

Share ownership rights

The Retirement Fund owns the assets on behalf of its members. Neither the fund or the member but has a right to vote at Annual General Meetings (AGMs) of the underlying ETFs.


Contributions are tax deductible. You may deduct up to 27,5% of your gross remuneration or taxable income (whichever is the higher) in respect of your total contributions to a retirement annuity fund, subject to an annual limit of R350,000.


The purchase price of each ETF within the Retirement Annuity will always vary slightly from the selling price (aka the net asset value or NAV of the underlying fund). This difference is attributable to the ETF management costs and market forces such as supply and demand.

Market Risk

The price of ETFs in the Retirement Annuity fluctuate, as do the prices of its underlying securities. However, because of the advantage of diversification, the risk of losing money is lowered.