RETIREMENT PLAN
Retail Mass Market
Broker Distribution
February 2014
Ensuring Extra Wealth at Retirement
RETIREMENT PLAN
The Retirement Plan is designed to provide an affordable and tax-efficient long-term savings vehicle, to offer
the individual a (supplementary) retirement income for life.
Min. Premium:
R150.00 pm
Min. Term:
10 years
Policy Term:
Maturity to occur after the age of 55
Max. Premium (guide): R1 000.00
API
Automatic Premium Increase (API) is effective each year on the 1st July. The client
can switch off the API in any given year, if the client is unable to pay the increased
premium for that particular year. The premium escalation will automatically revert
back for the policy in the following year.
Retirement Capital
1/3
Withdrawal Option first 5 years
Monthly Premiums
Savings
Savings term (min. 10yrs)
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F2014 SAVINGS BENEFIT RANGE
2/3
Tax-free cash lump sum
tax
Net
income
Monthly annuity
PRODUCT FEATURES AND BENEFITS
Surrenders:
The Retirement Plan may not be surrendered. (Unless paid-up and aggregate
across the fund is <R7 000)
Paid-ups
The Plan has a paid-up value available after receipt of first payment
Withdrawls
Part-withdrawals may not be made from the retirement plan, unless there is a
valid divorce or maintenance order
Premium Holiday Benefit:
The Premium Holiday allows for up to six premiums to be skipped, during the term
of the policy. This benefit is available again to the client, on payment of the
skipped premiums
Benefit Payable:
On reaching the retirement age (at least 55), or on the policyholder's earlier death
or disablement
Benefit Ceases:
On death/disablement of policyholder, at end of investment term, or if premiums
cease
Continuation
The retirement plan may be transferred to an approved retirement fund
Disability:
On disablement of the policyholder prior to the end of the investment term, the
policyholder may either continue with premium payments, make the benefit paidup or take early retirement
Maturity:
The investment term may terminate after the age of 55. Up to one-third of the
maturity value may be taken as a cash lump sum and the remainder must be
used to purchase a compulsory annuity. The one-third lump sum amount is taxfree up to R300 000. If the value of the retirement benefit is less than R75 000, the
full benefit may be taken in cash
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F2014 SAVINGS BENEFIT RANGE
24 HOUR FAMILY SUPPORT SERVICES
Access to the following Family Support Services* from independent service providers:
Health support*:
Telephone access to health advisers for assistance with health queries
Trauma, assault and HIV treatment*:
Assistance and treatment following assault (e.g. rape, hijacking, child
abuse), accidental exposure to HIV or other kinds of trauma
Emergency medical response*:
Advice, emergency treatment and transportation to an appropriate
medical facility
Legal support*:
Free telephone advice and assistance on legal matters, help with legal
documents
Important note:
*Family Support Services - Certain terms and conditions apply to the facilitation of this access. For a copy of these, call 0860 00 1919.
Old Mutual facilitates access to independent Family Support Service providers. Such access is not offered as a benefit under your insurance policy
and may be varied or cancelled at any time. The service providers provide services directly to you on terms agreed between you and the service
providers. Old Mutual does not accept any liability arising from the services rendered by the service providers.
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F2014 SAVINGS BENEFIT RANGE
RETIREMENT PLAN - BENEFIT PAYABLE
A. On Retirement
 (i) The maximum amount that may be taken as a cash lump sum, is:
One-third of total value (if balance – 2/3rds, is less than R50 000, then full benefit may be taken as a
lump sum)
̶
 (ii) The tax-free portion of the cash lump sum
No tax payable on lump sums for individuals with taxable income of R46 000 or less.
̶
Alternatively:
̶
̶
̶
Z (tax free portion) = C + E - D
̶
C = R300 000 (across all retirement funding funds)
̶
E = previously disallowed own contributions
̶
D = total previous tax-free deductions allowed to the taxpayer
Tax rates:
̶
First R300 000 taxable at 18%
̶
Next R300 000 taxable at 27%
̶
Balance of taxable amount at 36%
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F2014 SAVINGS BENEFIT RANGE
RETIREMENT PLAN - BENEFIT PAYABLE
B. Disablement of the Assured
 The Retirement Plan offers Type D disability, which is defined as follows:
 ‘Disability is recognised if the assured has suffered permanent incapacity resulting from any
cause whatsoever, such that he is prevented from engaging in his usual occupation for
remuneration or profit’.
 Depending on the assured’s financial circumstances, he may elect to make the Plan Paid-
up, continue making contributions or have the benefit paid out.
̶
(i) Benefit made Paid-up
̶
If the Fund is large enough for a paid-up value to exist, the fund will continue to build up as bonuses
are added until the proceeds are paid out on the elected retirement date. Rule: On non-payment of
the monthly contribution, once the 31 days grace period has expired, the benefit will automatically be
made paid-up. (R100 admin fee payable)
̶
(ii) Contributions continue
̶
The assured continues paying premiums and the retirement value is paid out on the elected retirement
date.
̶
(iii) Benefit paid out
̶
If the assured chooses to have the benefit paid out after the disability occurs, then the same
procedure as for the death benefit will be followed (see A above).
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F2014 SAVINGS BENEFIT RANGE
RETIREMENT PLAN - BENEFIT PAYABLE
C. Assured Dies – Death Benefit

Cash Lump sum:
Premiums plus reasonable interests (viewed as 7%)
One-third may be commuted
Balance must be used to purchase a compulsory annuity
̶
̶
̶

This translates to:
Premiums + 7% + 1/3rd (death benefit – premiums + 7%) as a lump sum, and
the balance as a compulsory annuity.
̶
̶

Tax free portion of Death benefit:
̶
Will be taxed as at retirement.
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F2014 SAVINGS BENEFIT RANGE
RETIREMENT PLAN: ANNUITY TYPES
Whole Life annuity
Assured will receive a monthly income until
his/her death. Thereafter no further payments
will be made.
Retirement
capital
Monthly annuity
tax
10yr Guarantee & Life annuity
Assured will receive a guaranteed income for a
minimum period of ten years. Should he/she die
within the first ten years, the income will
continue to be paid to the beneficiary. Should
assured survive the first ten years, the income
will continue to be paid until his/her death.
Retirement
capital
Monthly annuity
tax
For life
income
Guaranteed income
Joint Life with 10yr Guarantee
Assured will receive a guaranteed income for a
minimum period of ten years. Should he/she die
within the first ten years, the income will
continue to be paid to the spouse until his/her
death.
For life
income
Retirement
capital
Death of assured
Monthly annuity
tax
income
Guaranteed income
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F2014 SAVINGS BENEFIT RANGE
For life
of spouse
CHANGE IN CHARGING BASIS: SAVINGS BUSINESS
As a result of the Statement of Intent, and the inherent need to now meet the Early
Surrender value requirements, the basis of charging for our Savings business
(Investment, Education, Retirement Plans) has equally needed to change.
All savings business will now be charged on a level-loading basis.
Charges:
-
9.0% of monthly premium (Debit-order business)
-
11.5% of monthly premium (Stop-order business),
Plus R9.00 pm
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F2014 SAVINGS BENEFIT RANGE
INTRODUCTION OF STANDARD COMPOUND INTEREST TABLE
 As part of changes brought about to the
Code on Policy Quotations, no Product
Provider may present Illustrative/Projected
Maturity values, as from 1st January 2009.
 A standard, industry-wide, Compound Interest
table must be used.
 While this approach is intended to ‘manage’
the clients expectations of ‘end-values’, given
varying market and performance conditions,
this will undoubtedly cause some confusion.
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F2014 SAVINGS BENEFIT RANGE
OMGS SMOOTHED BONUS PORTFOLIO

Smoothed Bonus funds are balanced funds that use the smoothing mechanism to ensure a less
volatile investment performance for investors. The assets underlying these funds include equities,
bonds and property. By holding back some of the returns during times of market growth, the
fund manager is able to ‘add’ additional returns during times of poor market performance. This
approach removes the market performance extremes – giving the ‘smoothed’ performance

Established as a separately managed portfolio 25 years ago

Funds under management: ~ R4 bn

Fund Objective:
-

Int.Equities
1%
SA Property
4%
to provide a balanced fund with returns consistent with a
smoothed bonus portfolio
Fund Mandate:
-
for the portfolio to be managed, with each asset class
measured against specified benchmarks, broadly in-line
with the portfolio mix
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F2014 SAVINGS BENEFIT RANGE
SA Bonds
35%
SA Equities
60%
OMGS SMOOTHED BONUS PORTFOLIO
to a
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Endowment policies
20% 20%
18% 18%
G un ateraendte e d
G u a ra
To ta lTo ta l
18 % 18 %
16% 16%
14% 14%
15 % 15 %
13 % 13 % 1 3 % 1 3 %
12% 12%
11 % 11 %
10% 10%
8%
8%
6%
6%
4%
4%
2%
2%
0%
0%
15% 15%
9% 9%
6% 6%
9% 9%
5% 5%
6% 6%
*5 % *5 %
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* Interim
resultsresults
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H istorica
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as an indication
of possible
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P leasePnote:
istorica
l perform
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ance. ance.
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F2014 SAVINGS BENEFIT RANGE
OMGS SMOOTHED BONUS PORTFOLIO
H is to ric a l O M G S Po rtfo lio P e rfo rm a n c e
H isto rica l O M G S Po rtfo lio Pe rfo rm a n c e
E n d o w m e n t p o lic ie s
Re tire m e n t A n n u itie s
22% 20%
G u aGra
tenete
d ed
u anra
21%
To taTo
l ta l
18 %
20% 18%
18%
16%
14%
1 8%
16%
15 %
16 %
14%
15 %
13 %
13%
12%
12%
10%
11 %
9%
10%
9%
10 .2 %
9%
8%
8%
4%
1 6 %1 5 %
14 %
12%
6%
Retirement Annuities
6%
6%
7%
6%
5%
6%
*6.2%
*5 %
4%
2%
2%
0%
0%
c 0 1 D e c D02
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D e cD e0c0 0 0 D e cD e
01
* Interim
resultsresults
* Interim
P leaseP lease
n ote: Hnote:
istorical
perform
anc e should
not be not
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an indic
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future perform
ance. ance.
H istorica
l perform
ance should
be as
used
as anation
indication
of possible
future perform
12
F2014 SAVINGS BENEFIT RANGE
THE REDUCTION IN YIELD FACTOR
 The Reduction in Yield (RIY) factor, expressed as a percentage, represents the
underlying expenses and charges that are/will be applied to the gross
investment returns generated – thus providing the policyholder with the actual
or net surrender/maturity value they will receive (or close thereto).
 Practically
̶
Projection rate used:
10%
̶
Return rate achieved:
15%
̶
RIY rate:
6%
̶
Actual rate realised:
9%
 Another way to interpret: The rate of return the company needs to achieve, in
order to meet the 10% projection rate quoted, is 16% p.a (if RIY is 6%).
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F2014 SAVINGS BENEFIT RANGE
THE REDUCTION IN YIELD FACTOR
What does this mean from an advice viewpoint?
Comparative RIY rates
 If two companies achieve the same investment return, but company A has a lower RIY than
company B – then the policyholder would receive a better ‘actual’ return from an
investment with company A.
alternatively,
Comparative Portfolio returns
 If two companies have the same RIY rate, but company A achieves a higher ‘gross’
investment return than company B – then the policyholder would receive a better ‘actual’
return from company A.
Consider this factor in respect of Best Advice, under the FAIS Act.
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F2014 SAVINGS BENEFIT RANGE
REDUCTION IN YIELD RATES: COMPARATIVE RANKING
Product
10-yr
Investment Plan
15-yr
Investment Plan
Premium Type
Premium
Rank
Level
R150
2
Level
R250
Level
Product
10-yr Education
Plan
Premium Type Premium
Rank
Level
R150
1
3
Level
R250
2
R500
3
Level
R500
3
Increasing
R150
1
Increasing
R150
1
Increasing
R250
1
Increasing
R250
1
Increasing
R500
2
Increasing
R500
2
Level
R150
1
Level
R150
1
Level
R250
1
Level
R250
1
Level
R500
1
Level
R500
1
Increasing
R150
1
Increasing
R150
1
Increasing
R250
1
Increasing
R250
1
Increasing
R500
1
Increasing
R500
1
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F2014 SAVINGS BENEFIT RANGE
15-yr Education
Plan
THANK YOU
Old Mutual is a Licensed Financial Service Provider