It depends on the circumstances, generally it is not wise for the following reasons:
- There are no cost savings. Fees and costs will be the same as they are calculated on the aggregate value of all your contracts.
- It is beneficial to have a focused investment strategy. If you have more than one policy/contract you should adopt the same investment strategy that suits your personal circumstances.
- Having one policy/contract simplifies administration for management and tax reporting purposes.
There may be circumstances where you need to have to have more than one policy/contract. For example if the funds are from different sources, that is of a voluntary or compulsory nature, they would have to be invested in separate accounts as FSP’s would have to report to SARS differently for these.
One reason you may want to have two policies/contracts is to have greater liquidity options in the future, as you would be able to retire from one retirement annuity and not the other and gain access to the one third in cash (tax implications would apply).
By Tatenda Mupunga, Rep under supervison