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'Savinvest retirement funds outperform in 2012'

This week we present a comparison of the 2012 performance of some the retirement funds available. The retirement funds are divided in two broad classes, namely Individual Retirement Funds and the Group Retirement Funds. These two classes are further segregated based on the funds asset allocation. In the category of Balanced Funds the assets can be heavily weighted in either Equities or Fixed Income, both local and foreign depending on the economic climate whereas in the category of Equity funds the assets are mainly invested in equities. However, in the Income Funds category the fund assets are heavily invested in Fixed Income securities. The Savinvest Individual Retirement Fund and the Savinvest Group Fund were the top performers in their classes with returns of 11.51 per cent and 11.99 per cent respectively.

Individual retirement funds

An Individual Retirement Fund is a long-term investment that allows the financier the opportunity to accumulate cash for future needs and at the same time obtain significant tax benefits and superior returns. For the Individual Retirement Funds, tax savings are calculated up to a maximum amount of $30,000. The contract is between the individual and the financial provider offering the retirement plan.

Results for the Individual Retirement Funds examined at the end of 2012 were positive. Table 1 outlines the returns on these funds for the year 2012 that are currently available.

Balanced Funds

BOURSE's Savinvest Individual Retirement Fund (IRF) was the top performer in its class, producing returns of 11.51 per cent, superseding its 2011 performance of 7.33 per cent. Guardian Asset Management (GAM) Deferred Annuity Plans- Balanced Fund generated returns of 5.94 per cent.

Income Funds

For the year 2012, GAM Deferred Annuity Plans- Conservative posted a return of 4.37 per cent whilst Royal Bank of Canada (RBC) Future Cash (TT$) produced returns of 4 per cent. Republic Bank Limited (RBL) Individual Tax Incentive Plan (TISP) came in at the lower end gaining only 3.50 per cent.

Equity Funds

UTC Universal Retirement Fund led the pack with a return of 8.31 per cent followed by RBL Individual TISP Equity Fund gaining 8 per cent. Unit Trust Corporation (UTC) Individual Retirement Unit Account (IRUA) and UTC Pension Plus both produced returns of 7.67 per cent. It should be noted that UTC's IRUA and Pension Plus are a subset of UTC's First Unit Scheme, the Growth and Income Fund. GAM Deferred Annuity Plans-Aggressive recorded a return of 1.64 per cent.

Group retirement funds

A Group Retirement Fund is a long- term investment which has been designed mainly for employers who are seeking a convenient and cost effective method to either provide retirement benefits for their employees or to augment present retirement benefits. It is the ideal solution for company executives, senior management and employees who pay large sums of income tax. The contract is between the employer and the financial provider offering the retirement plan. In order to benefit from the tax advantage the aggregate of the contributions made by the employer on behalf of the employee, together with any other contributions made to other individual retirement funds or deferred annuity plans and NIS must not cross 1/3 of chargeable income or 20 per cent of Gross Income.

Table 2 illustrates the returns of the Group Retirement Funds for the year 2012.

Balanced Funds

Bourse's Savinvest Group Retirement Fund gained 11.99 per cent versus the 5.89 per cent produced in 2011. GAM Deferred Annuity Plans- Balanced Fund followed generating returns of 5.94 per cent.

Income Funds

In the Income funds category GAM Deferred Annuity Plans-Conservative generated a return of 4.37 per cent whilst the RBC Future Cash-Group produced returns of 4 per cent. The RBL Corporate TISP posted returns of 3.50 per cent.

Equity Funds

RBL Corporate TISP Equity fund recorded a return of 7.54 per cent. However, GAM Deferred Annuity Plans- Aggressive came in on the low end generating a return of 1.64 per cent.

Retirement is one of the most momentous events in an individual's life. Saving too little for retirement can lead to disaster in forthcoming years thus individuals need to plan for retirement today. It is of extreme significance to understand how a retirement plan works and the benefits that will be reaped.

Managing one's retirement is a constant responsibility that carries well into one's golden years. The process of planning a successful retirement is complicated and time consuming. Fortunately, there are many local organisations that provide retirement products that will aid individuals in attaining a comfortable retirement.

The benefits of planning for retirement are tremendous. Investing in a retirement fund provides benefits in the form of higher returns, as assets can be invested in equities or fixed income, both local and foreign depending on the economic climate. As well as it mitigates the effects of inflation on wealth erosion. Beginning to save for retirement at an early age is one of the main factors to ensure one is financially secure in the future. However, it is never too late to start saving for retirement. At the end of the Christmas season companies would have paid bonuses and profit sharing schemes. This is an idyllic time to start saving for retirement.

When choosing a retirement fund investors select an option that is in alignment with their objectives. Younger investors require a different plan compared to those investors closer to retirement as they have the benefit of having a longer time horizon and can therefore be riskier in their asset selection. On the other hand, those investors closer to retirement are more concerned with preserving capital and generating income and prefer to include safer assets such as bonds. A good retirement fund has the potential for superior returns, flexibility in contribution levels, and a high aggregate plan value at maturity. Overall, retirement planning is an on-going lifelong process that takes decades of commitment in order to receive the ending payoffs.

—This report is for informational purposes only and does not constitute an offer or solicitation to buy or sell any mutual funds or securities discussed herein. The information and any data contained herein have been obtained from financial data provided to us by the issuers of the subject mutual funds or securities. Investors wishing to purchase any of the mutual funds or securities mentioned should consult an investment advisor. Projections and estimates are those of Bourse Securities based on current available information. E-Mail us at askus@boursefinancial.com or phone 628-9100/ 628-6204.

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