Retirement Income Plan

Transcription

Fact File
Retirement
Income
Plan
Contents
01 | L inked Retirement Income Plan 1
02 | Fixed Retirement Income Plan 8
03 | Guaranteed Escalator Annuity 9
04 | A nnuity Integrator 17
05 | I nvest Aware 24
06 | B usiness practices 26
Discovery Invest’s Retirement Income Plan
The Retirement Income Plans are built on innovative thinking, tax efficient structures and
cutting edge investment strategies. These aspects ensure that you have a more comfortable
and rewarding retirement. This Fact File will allow you to understand your Retirement Income
Plan and how you can make it work better for you.
Discovery Invest’s Retirement Income Plans are designed to provide you with a regular income
throughout your retirement. This is called annuity income and the level of annuity income
you receive will depend on the structure of your Retirement Income Plan and your applicable
tax rate.
The Retirement Income Plan can be structured as either a Linked Retirement Income Plan,
a Fixed Retirement Income Plan or a Guaranteed Escalator Annuity.
This Fact File is designed for your easy reference.
01
Linked Retirement
Income Plan
If you have selected the Linked Retirement Income Plan, your lump sum
contribution will be invested (after any initial fees) in your choice of
investment options as offered by Discovery Invest.
The annuity income that you receive will be determined by the amount
that you choose to withdraw out of your investment fund, plus any
additional income from the Retirement Income Investment Integrator
(explained below). You may choose an annuity income level between
2.5% and 17.5% of your investment fund per year according to current
legislation (September 2015). These limits may be reviewed from time
to time.
The value of your investment fund reflects the investment returns
earned on the various investment options that you have selected and
will be reduced by your chosen withdrawal amount for the annuity
income as well as any fees and premiums deducted by Discovery Invest
(this may include financial adviser fees).
The initial annuity income amount that you choose will be paid to you
in the first year of your policy. On each policy anniversary, annuity
income is recalculated by multiplying the value of your investment
fund by your selected annual income percentage and dividing that
amount by the number of annuity income payments in the forthcoming
policy year. Alternatively, you can select a rand income amount to be
paid to you in the forthcoming policy year. You will receive the annuity
income after the required tax has been deducted. This will apply
throughout your lifetime.
You may change your selected income level on any policy anniversary
subject to Discovery Invest’s practices and legislative requirements.
Please note that changes to your annuity income may influence the
additional income you receive from the Retirement Income Investment
Integrator (see section 1.1 below for details).
Discovery Life is the owner of the underlying assets of the Linked
Retirement Income Plan.
On your death, the investment fund will be paid to your nominated
beneficiaries, as an annuity or cash lump sum. In the absence of a
nominated beneficiary, the investment fund will be paid to your estate
as a lump sum.
Transferability
Your investment fund may be
transferred from one insurer
to another. Any such transfers
are subject to the provisions
of Directive 135 and Directive
135(A) issued by the Registrar
of Long Term Insurance.
Convertibility
Your Linked Retirement Income
Plan may be converted to a
Guaranteed Escalator Annuity
or a Fixed Retirement Income
Plan at the rates applicable
at the time of conversion.
Taxation
All investment growth on
the investment options that
you choose in the Linked
Retirement Income Plan is taxfree under current tax practice
(September 2015).
Annuity income amounts
and additional income from
the Retirement Income
Investment Integrator will be
aggregated and taxed according
to income tax tables as released
by SARS each year, unless a
tax directive is provided to
Discovery for a different rate.
Income from other policies with
Discovery or other providers
will not be allowed for in this
aggregation. Discovery Invest
will implement any changes to
tax practice as appropriate.
1
Income frequency
You can select to receive your
annuity income monthly,
quarterly, bi-annually
or annually.
Surrenders
According to current legislation
(September 2015), your Linked
Retirement Income Plan may
not be surrendered unless
the investment value declines
below a certain amount. The
amount depends on whether
you’ve made a once-off
withdrawal from your savings at
retirement before transferring
the remainder into the Linked
Retirement Income Plan. The
amount is:
75 000 – if you did not
R
make a once-off partwithdrawal at retirement; or
R50 000 – if you did make
a part-withdrawal at
retirement
Beneficiaries
You may at any time appoint or
remove a beneficiary. This must
be recorded by Discovery Invest.
Benefits payable on death
Any annuity taken will be taxed
at your marginal rate of tax. The
Retirement Income Investment
Integrator will cease on death
Contributions to the Linked
The lump sum contribution to
the Linked Retirement Income
Plan must be a transfer value
from an approved fund.
In the event of your death, the
investment fund of the Linked
be taken either in cash or as
an annuity. In the absence of
a nominee the benefit may be
paid to the deceased estate as
a lump sum. The investment
fund will be subject to tax at the
highest average rate of tax paid
by you in the tax year of death
and the preceding tax year.
1.1 | T
he Retirement Income Investment Integrator (applicable to the Linked
Retirement Income Plan only)
The Retirement Income
Investment Integrator rewards
you for conserving your
retirement savings and looking
after your health by boosting
your annuity income by as much
as 50%. These income boosts
will be paid by Discovery
and will not reduce your
investment value.
Investment Integrator
percentage enhancement
of your annuity income is
determined based on the
table below. It depends on:
the annual annuity income
percentage that you select
at the start of each policy
year; and
your Vitality status at
the time of each annuity
income payment.
Annual Annuity Income
Percentage
Vitality status
None
Blue
Bronze
Silver
Gold
Diamond
From 2.50% to 3.25%
20.00%
30.00%
35.00%
40.00%
45.00%
50.00%
From 3.26% to 4.00%
15.00%
17.50%
20.00%
25.00%
30.00%
35.00%
From 4.01% to 4.75%
10.00%
12.50%
15.00%
17.50%
20.00%
25.00%
From 4.76% to 5.50%
5.00%
7.50%
10.00%
12.50%
15.00%
17.50%
From 5.51% to 7.00%
2.50%
2.50%
5.00%
7.50%
10.00%
12.50%
From 7.01% to 8.50%
0.00%
0.00%
2.50%
5.00%
5.00%
7.50%
From 8.51% to 10.00%
0.00%
0.00%
0.00%
2.50%
2.50%
5.00%
From 10.01% to 17.50%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
2
The proportion of your annuity
income that qualifies for
this boost is based on the
proportion of your Linked
invested in qualifying Discovery
Funds at the time of each
annuity income payment.
Qualifying Discovery Funds
consist of Discovery Funds,
Escalator Funds based on
Discovery Funds and indices,
and Target Retirement Date
Funds. The list of qualifying
funds may be updated from
time to time.
Investment Integrator will apply
for the first 10 years of your
Linked Retirement Income Plan.
Changes to your annual annuity
income percentage, your
Vitality status or membership,
or the proportion of your
Linked Retirement Income
Plan invested in qualifying
Discovery Funds, will result in
changes to your Retirement
Income Investment Integrator
income boost. If you select
a rand value annuity income
amount, Discovery will calculate
the equivalent annual annuity
income percentage and apply
the table on the previous page.
Investment Integrator will stop
on your death or if you transfer
your Linked Retirement Income
Plan to another provider. The
Retirement Income Investment
Integrator will only apply to
your annuity income and not
any additional instalments
from other products such
as the Discovery Retirement
Optimiser or Annuity Integrator
(if applicable).
1.2 | Phasing-in your lump sum contribution
Lump sum contributions may be phased in monthly through a money
market account. If you want to phase-in your investment, the full lump
sum contribution will be invested into the Discovery Money Market
Fund. The lump sum contribution (plus interest) will be divided by the
number of months you chose and the amount derived will be withdrawn
in the first month from the Discovery Money Market Fund and invested
proportionately in the investment options selected.
In the second month, the remaining amount will be divided by the
number of phase-in months remaining and invested. This will continue
until all the money is phased in. You can choose to phase in your
investment over 3, 6, 9, 12, 15, 18, 21 or 24 months.
Your selected phase-in period (if applicable) is shown on your
policy schedule.
The Retirement Income Investment Integrator may change after each
phase-in month based on the proportion of your total investment value
in qualifying Discovery Funds.
1.3 | F
ees applicable to your
Linked Retirement Income Plan
The fees are categorised into initial fees and annual fees and must
be paid to:
Discovery Invest for administering your policy.
Your financial adviser for performing financial planning
on your behalf.
The investment managers of the underlying investment choices
you have selected.
1.3.1 | Initial fees
There are no initial administration fees for the Linked Retirement
Income Plan.
Financial Adviser Initial Advice Fee
On a lump sum contribution, your financial adviser may charge an initial
advice fee as a percentage of your contribution amount, which Discovery
Invest will pay over to your financial adviser from your contributed
amount. You can negotiate with your financial adviser to determine
your initial fee.
The qualification criteria and
table for the Retirement Income
Investment Integrator may be
reviewed by Discovery from time
to time.
3
100% allocation or upfront payment
You can choose the 100%
allocation option, which means
that you avoid the initial fees
to your financial adviser being
deducted from your investment
upfront. The value of the fee is
instead increased and paid in
monthly instalments over the
next five years. However, if you
surrender or transfer your plan
within the first five years, unpaid
fees resulting from the 100%
allocation will be charged on
your plan.
The amount that you will have
to pay over the five years is
the Financial Adviser Initial
Advice Fee (including VAT if
applicable) multiplied by 1.262.
This is divided over 60 months
and paid in level monthly
instalments. If you choose
this option, 100% of your
initial contribution amount
is allocated to the underlying
investment options at
inception of your contract.
Example of how the initial fee calculation works:
You and your financial
adviser agree to a 2%
Financial Adviser Initial
Advice Fee on a lump sum
investment of R75 000
to the Linked Retirement
Income Plan. This fee
amounts to R1 710
(including VAT), which is
deducted from your lump
sum contribution upfront.
This leaves you with
R73 290 (R75 000 minus
R1 710) that would
be invested into your
underlying fund choices.
What if you chose 100% allocation?
If you would rather pay
the Financial Adviser Initial
Advice Fee over five years
in monthly instalments so
that your total contribution
of R75 000 is invested
into your underlying fund
choices, then you should
choose the 100% allocation
option. Under this option
the initial fee of R1 710 for
your financial adviser will
be multiplied by 1.262 and
divided by 60 to determine
your monthly instalments
to be paid for five years:
So instead of paying
R1 710 immediately, you
will pay R35.97 per month
for a period of 60 months.
If you surrender or transfer
your investment before
the end of the 60 months,
any remaining unpaid
fees from 100% allocation
will be deducted before
you receive your
investment value.
Please note: this fee will
not change and will remain
R35.97 for the entire 60
months in this example.
R1 710 x 1.262 = R2 158.02,
then R2 158.02 ÷ 60 = R35.97
Investment Manager Initial Fees
Please remember that certain investment management companies may
charge initial fees for investing in their funds. The initial fees applicable
to each fund can be found on the respective fund fact sheets available
on www.discovery.co.za.
4
1.3.2 | Annual fees
Discovery Invest Annual
Administration Fee
The annual fee charged for
administering your Linked
Retirement Income Plan is 0.55%
of your investment fund. This
fee will be increased by 14%
to offset VAT expenses. Units
in your investment fund are
redeemed on a monthly basis
as 1/12th of this fee.
Financial Adviser
Annual Advice Fee
Your financial adviser may also
charge an annual advice fee as
a percentage of your investment
fund value for managing your
investment fund. Units will be
for this as 1/12th of the advice
fee selected, increased by VAT.
Discovery Invest will deduct
these from your investment
and pay them over to your
financial adviser.
Investment Manager
Annual Fee
The investment managers to
your underlying investment
choices will normally charge
an annual management fee as
in their fund. This fee is divided
by 365 and deducted daily in
the unit prices provided by
the investment manager to
Discovery Invest. The annual
fees that apply to each fund
can be found on their respective
fund fact sheets available on
www.discovery.co.za
Fee reviews for
Linked Retirement
Income Plans
Fees quoted at
inception are not fixed
and may be reviewed
during the investment
contract term. Before
any fee increases,
Discovery Invest will
inform you in writing
about the changes as
well as the options
available to you.
1.4 | C
hoosing the underlying funds for your Linked
Investment choices that are available
Your contributions to the Linked
Retirement Income Plan will
be invested in the underlying
investment options that you
have selected. The investment
options selected and the
allocation of the contributions
between these investment
options will be shown on your
policy schedule.
Should any of the underlying
investment options be capped
or cease to exist, Discovery
Invest will request an instruction
for a new selection from you.
Discovery’s range of investment options
1.4.1 | Discovery Invest Funds
Discovery’s range of funds
caters for a full range of risk
profiles. There are single
manager unit trust funds which
offer flexibility and control for
clients with specific investment
objectives, while the multimanager funds offer solutions
for clients who want an
additional layer of investment
manager diversification.
Discovery Invest has
partnered with Investec Asset
Management, one of South
Africa’s leading asset managers,
to manage the range of single
manager Discovery Invest Funds.
Discovery has partnered with
Investment Solutions to provide
the multi-manager offering.
Through Discovery’s association
with international banks,
Discovery Invest is able to
provide investors with access
to new generation investment
methodologies. Since these are
not unit trusts, they are
not regulated by the Collective
Investment Scheme’s Act.
5
1.4.2 | Dynamic Asset Optimiser
1.4.3 | Escalator Funds
The Dynamic Asset Optimiser is built on the premise that correct asset
allocation is the main driver behind the matching of risk and return,
as market conditions change.
The Escalator Funds are
designed to provide unlimited
upside potential in bull markets,
while offering downside
protection in bear markets.
You are protected at a level
of at least 80% of the highest
value the Escalator Fund has
ever reached. This ensures that
if markets are down when you
want to realise your investment,
you have the guarantee that you
will be always be able to realise
at least 80% of the highest value
of your Escalator Fund.
There are three steps that you can follow to make the investment:
01 | Identify your investment risk profile as aggressive, moderate
or low risk.
02 | Through the Dynamic Asset Optimiser, you will be provided with
a split of asset classes that matches your risk profile at inception
of your contract.
You may choose between:
¡¡ D
iscovery Funds – a range of Discovery Invest unit
trusts selected by Discovery Invest
¡¡ C
lient choice – you can select from a range of external
unit trusts or Discovery Invest unit trusts.
03 | Discovery will rebalance the Discovery Funds or your chosen
funds from time to time based on the optimal asset class mix.
This rebalancing is designed to ensure that the split between
the various asset classes matches your selected risk profile
on an ongoing basis.
The annual fee charged for administering the Dynamic Asset Optimiser
is 0.25% if you selected one of the Discovery Dynamic Asset Optimiser
options and 0.50% if you made your own investment choices.
These are annual fees, so they are divided by 12 and charged monthly.
These fees will be increased by 14% to offset VAT expenses.
These fees may be reviewed in the future. Before any fee increases,
Discovery Invest will inform you in writing about the changes.
The fund is calculated with
reference to a mix of assets that
dynamically rebalances between
an underlying riskier asset and
a cash component on an
ongoing basis.
This rebalancing is done
according to a defined
algorithm. As the performance
of the riskier asset improves,
the allocation to the riskier asset
increases. If the performance
of the riskier asset falls,
the allocation to the riskier
asset decreases.
Discovery Invest provides
a range of Escalator and Life
Escalator Funds with various
unit trusts and indices as the
underlying riskier asset that
you may choose from.
6
Geared Escalator Funds
You can choose the Geared
Escalator Funds that give
you the same ‘downside’
protection of at least 80%
of the highest level that
the fund has ever reached.
The Geared Escalator Funds are
calculated with reference to the
rebalancing between the riskier
asset and the cash component
in a similar way to the Escalator
Funds described above, except,
that when the riskier asset is
performing well, the Geared
Escalator Fund is based on
using gearing (borrowing
money, internally within the
fund at a rate of SAFEX + 0.8%)
to give up to 120% exposure
to the riskier assets.
You will earn any excess returns
on the borrowed money that the
riskier asset earns over SAFEX +
0.8%. Because of this borrowing,
the Geared Escalator Funds are
appropriate for an investor with
a more aggressive risk profile
than the Escalator Funds.
Additional information
regarding the provider of the
guarantees and any credit risk
associated with a particular
Escalator, Life Escalator or
Geared Escalator Fund can be
found on the relevant fund fact
sheet at www.discovery.co.za
1.5 | S
witching between investment options in your
You may switch between investment options at any time, subject to
Discovery Invest’s practice at the time.
The current practice (September 2015) is to allow four free switches per
year. Additional switches will attract a fee of 0.25% of the value switched.
This will be increased by 14% to offset VAT expenses and is capped
at a maximum of R500 per transaction.
A switch will be subject to any initial fees levied by the investment
managers to which the funds are switched. Switches that result in
a change in the proportion of your Linked Retirement Income Plan
invested in qualifying Discovery funds will result in changes to your
Retirement Income Investment Integrator.
1.6 | LifeBooster
The LifeBooster is designed to reduce the risk to your dependants or
beneficiaries of your death, resulting from the investment being less
than expected (given the performance of markets or the underlying
choice of funds at that point in time).
If you die at any stage after taking out a Linked Retirement Income Plan,
preceding the policy anniversary before age 70, your fund value will be
boosted by the LifeBooster. The boost will depend on your
Vitality status and can be as high as 15%. There is no additional
charge for this benefit.
The LifeBooster does not apply if your Linked Retirement Income Plan is
funded from a Discovery Reitrement Optimiser policy.
Please note: Death as a result of all pre-existing conditions, physical
defects, illnesses, bodily injuries or diseases you have suffered from,
were aware of, or received medical treatment or advice for during three
years before the commencement date of the policy, are excluded from
the LifeBooster described above. If a death is related to any of these
pre- existing conditions at policy inception or as a result of suicide,
the fund value will not be boosted.
1.4.4 | External funds
Discovery also offers access
to a wide range of external
investment managers to
provide flexibility in your
investment choice.
7
02
Fixed Retirement
Income Plan
The Fixed Retirement Income
Plan provides you with a
guaranteed level of annuity
income throughout your
retirement years as long as
you are alive.
Your lump sum contribution
will be reduced by any financial
adviser initial fees plus VAT if
applicable. The balance will
be used to buy your annuity
income. You will receive the
annuity income after the
deduction of any required tax
throughout your lifetime. On
death, the annuity income will
cease. The Fixed Retirement
Income Plan provides the
following options at inception
of your policy (note, these
cannot be changed after
inception of your policy):
Annuity income increase
rate – you can choose at
what level to have your
income increase at each
policy anniversary.
Guarantee term – you can
choose to have your income
payable for a guaranteed
period. This ensures that on
death before the end of the
guarantee term, your annuity
income will continue until the
end of the guarantee term.
The income will be payable
to your chosen beneficiaries.
Joint Annuity – you can
choose to have your income
payable for as long as you or
your spouse is alive. You may
also choose to have your
income decrease to a certain
level after the first death for
the remainder of the life of
the surviving spouse.
The options that you have
chosen are displayed on your
policy schedule.
8
Income frequency
You can select to receive
your annuity income monthly,
quarterly, bi-annually
or annually.
Beneficiaries
be recorded by Discovery.
Surrenders
(September 2015), your Fixed
not be surrendered, commuted
or assigned. It may also not be
pledged as security for any loan.
Contributions to the
The transfer value from
an approved fund will be
the lump sum contribution
to the applicable Fixed
Additional contributions cannot
be made to your existing Fixed
Retirement Income Plan. A new
Fixed Retirement Income Plan
will need to be started in this
case. The annuity income
that can be received from a
new Fixed Retirement Income
Plan will depend on financial
conditions and what Discovery
Invest is able to offer at
that time.
Taxation
Convertibility
A Fixed Retirement Income
Plan may not be converted
into a Linked Retirement
Income Plan or a Guaranteed
Escalator Annuity.
Annuity income amounts from
the Fixed Retirement Income
Plan will be taxed according to
income tax tables as released
by SARS each year unless a
tax directive is provided to
Discovery for a different rate.
Income from other policies with
Discovery or other providers
will not be allowed for when
applying the income tax tables.
Discovery Invest will implement
any changes to tax practice
as appropriate.
03
Guaranteed
Escalator Annuity
If you have selected the
Guaranteed Escalator Annuity,
your lump sum contribution
will be invested (after any initial
fees) in an investment fund in
your choice of Annuity Escalator
Funds as offered by Discovery
Invest.
The annuity income that you
receive will be determined by
the amount that you choose to
withdraw out of this investment
fund. You can only choose an
annuity income percentage
that falls within certain limits.
Your annuity income is paid
monthly. It is calculated as 1/12th
of the percentage chosen at
the start of the policy year
multiplied by the fund value
at that time. The income level
will not change during the
policy year regardless of the
fund’s performance. You will
receive the annuity income after
deduction of any required tax
throughout your lifetime.
The value of the investment
fund reflects the investment
returns earned on the various
Annuity Escalator Funds that
you have selected and will
be reduced by your chosen
annuity income as well as any
fees and premiums deducted
by Discovery (this may include
financial adviser’s fees).
Income frequency
Convertibility
Your annuity income will be
paid monthly.
Your Guaranteed Escalator
Annuity may be converted into
a Linked Retirement Income Plan
or a Fixed Retirement Income
Plan at the rates applicable
at the time of conversion.
The amount converted is the
value of the investment fund
at that point in time. In this
case all guarantees from the
will no longer apply.
Beneficiaries
be recorded by Discovery.
Surrenders
(September 2015), your
may not be surrendered,
commuted or assigned.
It may also not be pledged
as security for any loan.
Transferability
The value of the investment fund
may be transferred to another
insurer. Any such transfer is
subject to the provisions of
Directive 135 and Directive
135(A) issued by the Registrar
of Long Term Insurance.
Any guarantees will no longer
apply if you transfer out of the
Guaranteed Escalator Annuity.
Benefits payable on death
On your death, an amount equal
to any remaining investment
fund will be payable to your
nominated beneficiaries.
This payout is subject to tax.
Contributions to
the Guaranteed
Escalator Annuity
The transfer value from an
approved fund will be the
lump sum contribution to the
Additional contributions cannot
be made to your existing
Guaranteed Escalator Annuity;
a new Guaranteed Escalator
Annuity will need to be started.
Discovery Life is the owner of
the underlying assets of the
9
3.1 | F
ees applicable to your
The fees are categorised into
initial fees and annual fees
and must be paid to:
Discovery Invest for
administering the policy.
Your financial adviser for
performing financial planning
on your behalf.
Discovery Life for the Annuity
Escalator Funds.
3.1.1 | Initial fees
There are no initial
administration fees for the
Financial Adviser Initial
Advice Fee
On a lump sum contribution,
your financial adviser may
charge an initial advice fee as a
percentage of your contribution
amount, which Discovery Invest
will pay over to your financial
adviser from your contributed
amount. You can negotiate
with your financial adviser to
determine your initial fee.
Example of how the initial fee calculation works
You and your financial adviser agree to a 2% Financial
Adviser Initial Advice Fee on a lump sum investment of
R75 000 into the Guaranteed Escalator Annuity. This fee
works out to an amount of R1 710 (including VAT), which
is deducted from your lump sum contribution upfront.
This leaves you with R73 290 (R75 000 minus R1 710)
that would be invested into your underlying fund choices.
Annuity Escalator Fund Initial Protector Premium
An Initial Protector Premium is charged on the Annuity Escalator Funds
chosen in the investment fund.
3.1.2 | Annual fees
Discovery Invest Annual Administration Fee
The annual fee charged for administering your Guaranteed Escalator
Annuity is 0.55% of your investment fund. This percentage will be
increased by 14% to offset VAT expenses. Units in your investment fund
are redeemed on a monthly basis as 1/12th of this fee.
10
Financial Adviser
Annual Advice Fee
Annuity Escalator Fund
Annual Protector Premium
Your financial adviser may also
charge an annual advice fee as
fund value for managing your
investment fund. Units will be
for this as 1/12th of the advice
fee selected, increased by VAT.
Discovery Invest will deduct
these from your investment
and pay them over to your
financial adviser.
An annual Protector Premium
is charged on the Annuity
Escalator Funds. These are
a percentage of the investments
in the Annuity Escalator Funds.
This premium is divided by
365 and deducted daily in the
unit price.
Annuity
Guarantee Premium
A non-vatable Annuity
Guarantee Premium of 0.75%
on Annuity Escalator Funds
based on Discovery Funds and
1.25% on Annuity Escalator
Funds based on external funds
is charged for providing the
Guaranteed Minimum Income.
These Annuity Guarantee
Premiums will be divided by 12
and deducted monthly from the
In addition, the investment
managers to the underlying
investment choices within
the Annuity Escalator Funds
will normally charge an
annual management fee as a
percentage of the investment
in their fund. This fee is divided
by 365 and deducted daily in
the unit prices provided by the
investment manager.
Fee reviews for
the Guaranteed
Escalator Annuity
Fees and initial and
annual premiums
quoted at inception
are not fixed and may
be reviewed during
the investment
contract term. Before
any fee increases,
Discovery Invest will
inform you in writing
about the changes as
well as the options
available to you.
3.2 | W
hat are Annuity
Escalator Funds
Your contribution to the
will be invested in your choice
of Annuity Escalator Funds.
The Annuity Escalator Funds
are designed to provide
unlimited upside potential in
bull markets, while offering
downside protection in bear
markets. You are protected at
a guaranteed unit price of at
least 80% of the highest value
the Annuity Escalator Fund has
ever reached. This ensures that
if markets are down when you
want to realise your investment,
you have the guarantee that you
will be always be able to realise
at least 80% of the highest value
of your Annuity Escalator Fund.
The fund is calculated with
reference to a mix of assets that
dynamically rebalances between
an underlying riskier asset and
a cash component on an
ongoing basis.
This rebalancing is done
according to a defined
algorithm. As the performance
of the riskier asset improves,
the allocation to the riskier asset
increases. If the performance
of the riskier asset falls,
the allocation to the riskier
asset decreases.
Discovery Invest provides a
range of Annuity Escalator
Funds with various unit trusts
as the underlying riskier asset
that you may choose from.
11
3.2.1 | Geared Annuity
Escalator Funds
You can choose the Geared
Annuity Escalator Funds that
give you the same ‘downside’
protection of at least 80% of
the highest level that the fund
has ever reached.
The Geared Annuity Escalator
Funds are calculated with
reference to the rebalancing
between the riskier asset and
the cash component in a similar
way to the Annuity Escalator
Funds described above, except,
that when the riskier asset is
performing well, the Geared
Annuity Escalator Fund is based
on using gearing (borrowing
money, internally within the
fund at a rate of SAFEX + 0.8%)
to give up to 120% exposure
to the riskier assets.
You will earn any excess returns
on the borrowed money that
the riskier asset earns over
SAFEX + 0.8%. Because of this
borrowing, the Geared Annuity
Escalator Funds are appropriate
for investors with a more
aggressive risk profile than
the Annuity Escalator Funds.
Should any of the Annuity
Escalator Funds be capped or
cease to exist, Discovery Invest
will request an instruction
for a new selection from you.
Depending on which Annuity
Escalator Fund you choose to
switch into, this may have an
impact on your Guaranteed
Escalator Annuity. Please see
section 3.7 for details.
Additional information
regarding the provider of the
guarantees and any credit risk
associated with a particular
Annuity Escalator or Geared
Annuity Escalator Fund can be
found on the relevant fund fact
sheet at www.discovery.co.za
12
3.3 | Your initial Guaranteed Minimum Income
Each Annuity Escalator Fund in the investment fund of the Guaranteed
Escalator Annuity provides an automatic Guaranteed Minimum Income
that is payable for your whole life even if the investment fund runs out.
Your initial Guaranteed Minimum Income for each Annuity Escalator
Fund is determined by your age at the inception of your contract
and your gender. The initial annual Guaranteed Minimum Income is
expressed as a percentage of the total net investment into each Annuity
Escalator Fund according to the following table:
Males
Females
Age next
Initial Guaranteed
Minimum Income
Initial Guaranteed
Minimum Income
56 to 60
3.25%
3.00%
61 to 65
3.50%
3.25%
66 to 70
3.75%
3.50%
71 and older
4.25%
4.00%
The annual Guaranteed Minimum Income will be divided by 12 and paid
to you monthly.
Example of how the initial Guaranteed Minimum
Income is calculated
On a net investment of R1 000 000, the initial Guaranteed
Minimum Income for a male investor aged 73 next is
R3 541.67 per month.
This is calculated as R1 000 000 x 4.25% / 12
Note that the net investment is the amount allocated after
the Financial Adviser Initial Advice Fee has been deducted
from the lump sum contribution.
Your total Guaranteed Minimum Income is the sum of
the Guaranteed Minimum Income linked to each Annuity
Escalator Fund you have chosen.
3.4 | Y
our annuity
income each year
While the Guaranteed Escalator
Annuity provides a Guaranteed
Minimum Income, you have the
option at the end of any policy
year to select a different income
level than this. You may choose
between 2.5% and 17.5% of
the investment fund. However,
to maintain the Guaranteed
Minimum Income, you should
not select an annuity percentage
in excess of the recommended
maximum annuity percentage.
The recommended maximum
annuity percentage at the
start of your policy is 7.5% for
each Annuity Escalator Fund
that you have chosen. At each
subsequent policy anniversary
it is the higher of:
a|8
0% of the annual growth
rate of the Annuity Escalator
Fund’s unit price over the
past year at your anniversary
b | Your current annual
Guaranteed Minimum
Income for that Annuity
Escalator Fund as a
percentage of the Annuity
Escalator Fund value at the
policy anniversary.
Example of how the recommended maximum
annuity percentage is calculated
At the first policy anniversary, the Annuity Escalator Fund
value is R900 000 and the Guaranteed Minimum Income is
R42 500 per annum. The Annuity Escalator Fund’s unit price
had grown by 6%.
The recommended maximum annuity percentage is the
higher of:
80% of 6% = 4.8%
42 500 / 900 000 = 4.72%
The recommended maximum annuity percentage is
therefore 4.8%.
3.5 | W
hat is the impact on the Guaranteed
Minimum Income if I select an annuity income
percentage above the recommended maximum
annuity percentage?
Should you select an annuity income percentage in excess of the
recommended maximum annuity percentage, then the total Guaranteed
Minimum Income will be reduced by 120% of any excess percentage
above these limits.
Example of how the total Guaranteed Minimum
Income is recalculated if your chosen annuity
income percentage is above the recommended
maximum annuity percentage
If the recommended maximum annuity percentage for
the year is 4.8% and the actual annuity income percentage
chosen is 6.8%, then the current total Guaranteed
Minimum Income will reduce by
(6.8% – 4.8%) x 120% = 2.4%
This means that if the current total Guaranteed Minimum
Income is R42 500 per year, then this will reduce by 2.4%
to R41 480.
13
3.6 | I ncreases in the Guaranteed Minimum Income
at each policy anniversary
If the guaranteed unit price of the Annuity Escalator Fund you have
chosen reaches a new highest value over the year, your Guaranteed
Minimum Income for that Annuity Escalator Fund will increase to a new
level for the rest of your life. The increase will be equal to the increase
in the guaranteed unit price of your chosen Annuity Escalator Fund
multiplied by the number of Annuity Escalator units in the fund and
then multiplied by Discovery’s age factors.
Discovery’s age factors depend on:
Your age at the policy anniversary
Your chosen annuity income percentage for the upcoming year
Your gender
The age factors are shown in the tables below
Male age next
Chosen annuity income percentage
5% or less
7.5% or less, but
more than 5%
10% or less, but
more than 7.5%
More than 10%
56-60
3.60%
2.80%
2.40%
1.80%
61-65
4.10%
3.10%
2.70%
2.00%
66-70
4.70%
3.60%
3.00%
2.30%
71-75
5.40%
4.10%
3.50%
2.60%
76-80
6.30%
4.80%
4.10%
3.10%
81-85
7.50%
5.70%
4.80%
3.70%
86-88
9.20%
7.10%
6.00%
4.50%
89-90
10.80%
8.20%
6.90%
5.30%
91-92
12.30%
9.30%
7.90%
6.00%
93-94
14.60%
11.10%
9.40%
7.10%
95-96
18.70%
14.20%
12.00%
9.10%
97+
27.10%
21.60%
18.50%
14.00%
14
Female age next
Chosen annuity income percentage
5% or less
7.5% or less, but
more than 5%
10% or less, but
more than 7.5%
More than 10%
56-60
3.10%
2.40%
2.10%
1.60%
61-65
3.50%
2.70%
2.30%
1.80%
66-70
4.10%
3.10%
2.70%
2.00%
71-75
4.80%
3.60%
3.10%
2.40%
76-80
5.60%
4.30%
3.60%
2.80%
81-85
6.80%
5.20%
4.40%
3.40%
86-88
8.50%
6.50%
5.50%
4.30%
89-90
10.00%
7.70%
6.50%
5.00%
91-92
11.50%
8.80%
7.50%
5.80%
93-94
13.70%
10.50%
8.90%
6.90%
95-96
17.70%
13.50%
11.50%
8.80%
97+
27.10%
20.80%
17.80%
13.70%
These factors may change from time to time at Discovery’s discretion
Example of how the Guaranteed Minimum Income increases
At policy anniversary a 67-year-old male investor has 6 000 units in an Annuity Escalator Fund
which has a guaranteed unit price of 120. The guaranteed unit price at the previous policy
anniversary was 115. His Guaranteed Minimum Income is R41 480 per year and he has chosen
an annuity income percentage of 6.8%.
Based on his age and chosen annuity income percentage the appropriate age factor from the
tables above is 3.6%.
Since the guaranteed unit price has increased, his Guaranteed Minimum Income will increase by:
6 000 x (120 – 115) x 3.60% = R1 080
This increase will be added to his current Guaranteed Minimum income of R41 480.
His new Guaranteed Minimum Income will therefore increase to R42 560.
15
3.7 | Switching between Annuity Escalator Funds in your Guaranteed Escalator Annuity
You may switch between
Annuity Escalator Funds,
subject to Discovery Invest’s
practice at the time.
The current practice (September
2015) is to allow four free
switches per year. Additional
switches will attract a fee of
0.25% of the value switched.
This will be increased by 14%
to offset VAT expenses and is
capped at a maximum of R500
per transaction.
Switching may have an impact
on the following aspects of your
Guaranteed Escalator Annuity:
01 | Your current Guaranteed
Minimum Income. This may
increase or decrease.
02 | The growth of your
Guaranteed Minimum
Income at your next
policy anniversary.
03 | Your recommended
maximum annuity
percentage at your next
policy anniversary.
3.7.1 | Your current
Guaranteed
Minimum Income
Switching between any of the
Annuity Escalator Funds will
result in the recalculation of the
Guaranteed Minimum Income
for funds which are affected by
the switch.
If the rand value of the
guarantee from your Annuity
Escalator Funds increases or
reduces following a switch then
your total Guaranteed Minimum
Income for the funds affected
by the switch will increase or
reduce proportionately.
16
Example of how the Guaranteed Minimum Income
is recalculated following a switch
An investor has R900 000 invested in Annuity Escalator
Fund A which has locked in a guarantee of R720 000.
His current Guaranteed Income is at R44 720 per annum.
He switches the R900 000 to Annuity Escalator Fund B
which has locked in a guarantee of R855 000.
Following his switch his Guaranteed Minimum Income
will be recalculated as follows:
Guaranteed Minimum Income = R44 720 x 855 000 / 720 000
The Guaranteed Minimum Income following the switch
is therefore R53 105 per annum.
3.7.2 | Your current Guaranteed Minimum Income
As detailed in section 3.6, your current Guaranteed Minimum Income
can increase at each policy anniversary. If you switch from one Annuity
Escalator Fund to another Annuity Escalator Fund your Guaranteed
Minimum Income will be recalculated. In this case, the increase in your
Guaranteed Minimum Income at your policy anniversary will be based
on the increase in the guaranteed unit price of an Annuity Escalator
Fund you are invested in over the period since your most recent switch,
rather than over the full year.
3.7.3 | Your recommended maximum annuity
As detailed in section 3.4, your recommended maximum annuity is
based on 80% of the annual growth of the Annuity Escalator Fund at
your anniversary. If you have switched from one Annuity Escalator
Fund to another Annuity Escalator Fund over the year, then this annual
growth will be calculated based on the growth of the funds you switched
from, as well as the growth of the funds you switched into.
04
Annuity Integrator
The Annuity Integrator is
aimed at enhancing your
annuity income in retirement.
The Annuity Integrator provides:
01 | Enhancements to your
annuity income from the
Life Plan Optimiser;
annuity income from the
Ill-health Income Booster
in the event of you
suffering a severe illness;
annuity income every 10
years after the inception
date of your Retirement
Income Plan if you survive
to the respective 10-year
anniversaries. This is
achieved through the
Longevity Booster;
Longevity Booster benefit
payment through the
Investment Performance
Protector. The enhancement
will depend on the
performance of your
Linked Retirement Income
Plan or Guaranteed
Escalator Annuity and
your average annual
income percentage over
the previous 10 years.
Any applicable benefits from
the Annuity Integrator will
not apply to the payments
from the Retirement Income
Investment Integrator.
If you have a Discovery Life Plan,
you will be entitled to apply for
all four of the above boosters
(qualifying criteria will apply).
Your Life Plan will be reduced
in retirement to provide these.
Only one Annuity Integrator is
allowed per Life Plan.
If you do not have a Discovery
Life Plan, you will be able to get
access to the Ill-health Income
Booster, Longevity Booster and
the Investment Performance
Protector at an additional
premium. If you have selected a
this premium will be 1.14% per
year of your fund value at each
policy anniversary, deducted
according to the frequency of
your annuity income. Discovery
Invest will deduct the value of
this premium from your net
annuity amount (after tax). If
you have a Fixed Retirement
Income Plan, the premium will
be 1% of your initial contribution
per year and this will be charged
at the same frequency as your
annuity income is received.
The Life Plan Optimiser will
not be available if you do not
have a Discovery Life Plan.
4.1 | T
he Life Plan
Optimiser
The Life Plan Optimiser provides
additional annuity benefits from
inception of your Discovery Invest
Linked or Fixed Retirement
Income Plan or Guaranteed
Escalator Annuity. The amount
of the additional benefit is paid
to you over a 15-year term as
an enhancement to each
annuity income instalment
from your Retirement Income
Plan. Your entitlement to each
Life Plan Optimiser instalment
depends on whether your Life
Plan policy is in force at the
time of the payment of the
instalment. The size of your
Life Plan Optimiser depends
on the details of your Life
Plan and is indicated on
your policy schedule.
Under current tax practice
(September 2015), these
instalments are paid tax free.
If you choose the Guaranteed
Escalator Annuity you will
need a Life Plan to qualify for
the Annuity Integrator. If you
choose the Fixed Retirement
Income Plan, you will not
qualify for the Investment
Performance Protector.
17
Example:
The Life Plan Optimiser is calculated as a 20% enhancement
to the Retirement Income Plan annuity income.
The annuity income is R100 000 per year, growing by 10%
per year. The Life Plan Optimiser boosters paid from the
selected annuity inception date are as follows:
Payment at annuity inception
R20 000
Payment one year after annuity inception
R22 000
Payment two years after annuity inception
R24 200
Payment three years after annuity inception
R26 620
Payment four years after annuity inception
R29 282
Payment five years after annuity inception
R32 210
Payment 14 years after annuity inception
R75 950
Should you voluntarily reduce your Life Plan or its attached ancillaries
during this 15-year payment period, your entitlement to the remaining
instalments will be reduced or fall away.
4.2 | The Ill-health Income Booster
If you are receiving an income from Discovery in retirement, this income
will be enhanced on the occurrence of a severe illness of the principal on
the Life Plan. The amount of the enhancement is based on the average
level of income received in the 12 months before the occurrence
of the illness.
Although you are not required to have the Severe Illness Benefit on your
Life Plan to receive this enhancement, the amount of the enhancement
will be based on the severity of your illness as described in the
definitions of the Severe Illness Benefit as contained in the Individual
Life Plan Guide.
18
The income will be enhanced by a percentage for the duration
set out below:
4.3 | T
he Longevity
Booster
If you have a Discovery Life Plan
Severity of severe
illness event
Percentage enhancement
to gross income
Term of income
enhancement
A
25.00%
Whole of life
B
18.75%
10 Years
If you don’t have a Discovery Life Plan (not available on the
Guaranteed Escalator Annuity)
Severity of severe
illness event
Percentage enhancement
to gross income
Term of income
enhancement
A
15.00%
Whole of life
B
11.25%
10 Years
If the annuity income from your Linked Retirement Income Plan or
Guaranteed Escalator Annuity exceeds 10% per year of the value of the
investment fund at the beginning of that year, the enhancement will be
capped based on an amount of annuity income that would have been
provided had you received an annuity income of 10% of the investment
fund value at the beginning of that year in which the illness occurred.
The Ill-health Income Booster is not applied to any benefits received
in retirement from the Life Plan Optimiser and the Longevity Booster.
The amount of the enhancement will be increased if the severity of your
current illness or a subsequent illness is at a higher severity than the
previous enhancement. In this case, the increased enhancement will
be provided for the remaining term of the enhancement at the higher
severity as shown in the table above. Should a new illness occur six
months or later after the expiry of the benefit enhancement term of the
previous illness, a subsequent enhancement will commence, based on
the severity of the new illness.
The Ill-health Income Booster is provided as long as your Life Plan
remains in force. If you cancel or reduce your Life Fund and its attached
benefits at any time in retirement, your current and future entitlement
to the Ill-health Income Booster will be reduced or fall away.
If you do not have a Discovery Life Plan
The Ill-health Income Booster is provided as long as you continue to pay
the premium for the Annuity Integrator.
Your annuity income will be
enhanced by the Longevity
Booster. The Longevity Booster
is payable every 10 years after
inception of the annuity as an
enhancement to the annuity
income. The amount payable
every 10 years is equal to the
Longevity Booster percentage,
multiplied by the net investment
amount (as indicated on your
Discovery Invest Retirement
Income Plan policy schedule)
at the selected annuity inception
date. The Longevity Booster
is tax free under current tax
legislation (September 2015).
If your Discovery Life Plan
is being reduced to provide
the Annuity Integrator
boosters, your Longevity
Booster percentage will
be equal to 7.5%.
If you do not have a Discovery
Life Plan and you are paying
the additional premium
for the Annuity Integrator
boosters, your Longevity
Booster percentage will
be equal to 5%. (This is not
available on the Guaranteed
Escalator Annuity.)
The Longevity Booster
is payable in 10 annual
instalments from the 10th
anniversary following inception
of the Retirement Income Plan.
The annual instalments are
increased each year by the
CPI rate applicable over the
duration from the inception
date of your Retirement Income
Plan to the payment date of
each annual instalment.
All enhancements to income arising from any physical defects, illnesses,
bodily injuries or diseases that the life assured has suffered from, was
aware of, or has received medical treatment or advice for in the three
years prior to inception date of the Annuity Integrator, are excluded.
19
Example:
A client has a Life Plan and has a net investment amount in his Retirement Income Plan, at age 65,
of R1 000 000.
The Longevity Booster is calculated as follows (assuming CPI of 10% per year):Longevity Booster at
age 75 = (R1 000 000 x 7.5%), increased at CPI for 10 years = R194 531. This is payable over 10 years
as follows:
Payment at age 75
R19 453
Payment at age 76
R21 398
Payment at age 77
R23 538
Payment at age 78
R25 892
Payment at age 79
R24 481
Payment at age 80
R31 329
Payment at age 81
R34 462
Payment at age 82
R37 908
Payment at age 83
R41 699
Payment at age 84
R45 869
If you die before the completion of the 10 annual instalments are paid, the balance of the Longevity
Booster, accumulated at CPI from the date that it accrues to the date of death is payable to the
nominated beneficiaries on your Life Plan. If you do not have a Life Plan, it will be paid to the
nominated beneficiaries on your Retirement Income Plan.
To illustrate how the death benefit is calculated, assume that death occurred after three years in
the above example:
Death benefit = Accumulated Longevity Booster after three years after deductions of instalments
already paid
Accumulated value after year 1
= (R194 531 – R19 453) x (1.1) = R192 585
= (R192 585 – R21 398) x (1.1) = R188 305
= (R188 305 – R23 538) x (1.1) = R181 244
Therefore the death benefit = R181 244
The Longevity Booster is only provided if your Life Plan remains in force. If you cancel or reduce your Life Plan
and its attached benefits at any time in retirement, your current and future entitlement to the Longevity Booster
will be proportionately reduced.
If you do not have a Discovery Life Plan (not available on the Guaranteed Escalator Annuity)
The Longevity Booster is provided if you have paid (and continue to pay) the premiums for the Annuity Integrator.
20
4.4 | T
he Investment Performance Protector
(only applicable to the Linked Retirement
Income Plan and Guaranteed Escalator Annuity)
The Investment Performance Protector enhances your Longevity Booster
benefit payment. The enhancement will depend on the performance
of your Linked Retirement Income Plan (excluding any boosts from the
Reitrement Income Investment Integrator) or Guaranteed Escalator
Annuity and your average annual income percentage over the previous
10 years.
The Investment Performance Protector Matrix is used at the end of
every 10 years to determine the enhancement you will receive to your
Longevity Booster for the next full 10-year period.
Annual income percentage
Average
annual return
2.5%
to 4%
Above 4%
to 7%
Above 7%
to 10%
Above 10%
to 13%
Above 13%
to 17.5%
Less than or equal
to CPI - 5%
100%
80%
50%
30%
20%
CPI - 5% < return
< CPI -2.5%
80%
60%
40%
25%
15%
CPI - 2.5%
< return < CPI
60%
35%
30%
20%
10%
CPI < return
< CPI + 2.5%
35%
30%
25%
15%
5%
CPI + 2.5%
< return < CPI + 5%
30%
25%
15%
10%
0%
> CPI + 5%
25%
20%
10%
5%
0%
To illustrate how the Investment Performance Protector is calculated for
the example in section 4.3, assume over the previous 10 years that the
average annual return was equal to CPI and the average annual income
percentage was 10%. The Longevity Booster will therefore be enhanced
by 30% (the Longevity Booster percentage if the client has a Life Plan is
recalculated to equal 7.5% x 1.3) over the next 10 years, resulting in the
annual Longevity Booster payments increasing to:
Payment at age 75
R25 289
Payment at age 76
R27 818
Payment at age 77
R30 600
Payment at age 78
R33 660
Payment at age 84
R59 630
21
4.5 | T
he following points apply if your Annuity Integrator
benefits are as a result of reductions in your Life Plan
4.5.1 | What happens
if I cease or reduce
my contributions
to the Life Plan?
If you cancel your Life Plan
during the term of your
Retirement Income Plan,
you will not be entitled to
any future benefits from the
Life Plan Optimiser, Ill health
Income Booster, Longevity
Booster and Investment
Performance Protector.
Should you reduce your
premium to the Life Plan
and the attached ancillary
benefits during the term
of your Retirement Income
Plan or change your Life
Plan funding structure,
your current and future
entitlements to the Life Plan
Optimiser, Ill-health Income
Booster and Longevity
Booster will be reduced. This
reduction is based on the
duration in force of your Life
Plan, your age at the time
of alteration and the size of
the Life Fund and attached
ancillary benefits after the
alteration to these benefits.
If you change the automatic
annual premium increases
on your Life Fund during
the term of your Retirement
Income Plan, your Life Plan
Optimiser, Ill-health Income
Booster, Longevity Booster
and Investment Performance
Protector will be recalculated.
22
4.5.2 | How do claims
on my Life Fund
affect the Annuity
Integrator?
On the death of the
principal life in retirement,
the instalments, if any, of
the Life Plan Optimiser
will end. There will be no
future entitlement to the
Ill-health Income Booster.
The Longevity Booster that
has accrued but not yet been
paid (as described above) will
be paid out as a lump sum to
the nominated beneficiaries.
If the Life Fund is reduced
by a claim on the ancillary
benefit(s) of the principal
life and/or spouse, the
entitlement to the remaining
Life Plan Optimiser
instalments will be adjusted
based on the duration in
force of your Life Fund,
your age at the time of the
claim and the size of the Life
Fund and attached ancillary
benefits after the claim.
If a claim occurs on any of
the spouse benefits attached
to the Life Fund which results
in the Life Fund terminating,
the principal life will be given
the option to continue the
risk benefits applicable at
that time without medical
underwriting. Continuation
of these risk benefits in full
will reinstate the entitlement
to the Life Plan Optimiser,
Ill-health Income Booster
and Longevity Booster.
4.5.3 | How do the benefits
from the Annuity
Integrator and the
Retirement Income
Plan affect my
Life Fund?
Benefits received from the
Annuity Integrator and
Retirement Income Plan will
reduce your Life Fund during
the term of your annuity.
The reductions to your Life
Fund occur as follows:
Gross annuity income,
excluding benefits received
from the Retirement Income
Investment Integrator,
paid by Discovery Invest,
will reduce your Life Fund
as the income is received.
The Life Plan Optimiser
is paid in 15 instalments
annually in advance during
the first 15 years of your
Retirement Income Plan and
is deducted from the Life
Fund when the payments
are made.
The Longevity Booster
(including the potential
enhancement from the
Protector) is paid in 10
instalments from each
10-year anniversary
in retirement. These
instalments are deducted
from the Life Fund when
the payments are made.
The deduction from the Life
Fund in any year as a result
of the annuity income from
your Retirement Income
Plan, the Life Plan Optimiser,
the Longevity Booster and
Protector (if applicable), may
not exceed 4% of your Life
Fund at the inception date
of your Discovery Invest
The Ill-health Income Booster has no impact on your Life Fund.
The Life Fund will not be reduced below 50% of the Life Fund value
at the inception date of the Retirement Income Plan as a result of
these deductions.
All ancillary benefits attached to the Life Fund, including the Minimum
Protected Fund, are also proportionately reduced as a result of the
deductions described above.
The example below illustrates how the deductions from inception
of the Retirement Income Plan affect your Life Fund.
Example:
A client has a Life Fund of R1 000 000 at age 65.
The client has a lump sum contribution to the Fixed Retirement Income Plan of R360 000 with
an annuity income of R12 000 per year (excluding the Retirement Income Investment Integrator)
growing by 10% each year.
The Life Plan Optimiser boost is equal to 20% of the annuity income for 15 years.
Age
Life Fund
Deduction
from Life Fund
as a result of
annuity income
Deduction from
Life Fund as a
result of the Life
Plan Optimiser
Remaining
Life Fund
65
R1 000 000
R12 000
R2 400
R 985 600
66
R985 600
R13 200
R2 640
R 969 760
67
R969 760
R14 520
R2 904
R 952 336
68
R952 336
R15 972
R3 194
R 933 170
69
R933 170
R17 569
R3 514
R 912 087
70
R912 087
R19 326
R3 865
R 888 895
71
R888 895
R21 259
R4 252
R 863 385
72
R863 385
R23 385
R4 677
R 835 323
Note:
The sum of the annuity income deductions and Life Plan Optimiser deductions does not exceed
4% of the Life Fund at age 65 and is therefore deducted in full over a 15-year period from age 65.
Had it exceeded R40 000 (4% of R1 000 000), the total reduction would have been capped at
R40 000 per year.
Had a Longevity Booster been payable, it would also have been deducted from the Life Fund
over a 10-year term. The amount of the deduction would have been added to the annuity income
deductions and Life Plan Optimiser deductions up to a maximum of 4% of the Life Fund at the
inception date of the Retirement Income Plan.
23
05
Invest
aware
5.1 | What you should know about Escalator
and Annuity Escalator Funds
They are based on a riskier
asset and a cash component.
The riskier asset may be
a Discovery unit trust, an
external unit trust, an index
or set of indices (the list
of funds is available from
Discovery Invest). The value
of the fund at any point in
time is based on the market
value of both the underlying
riskier asset and the cash
component.
For Geared Escalator and
Geared Annuity Escalator
Funds, the exposure to the
riskier asset may exceed
100%. This additional
exposure is achieved by
borrowing money. If the
additional growth on the
additional exposure is less
than the interest rate on
the borrowed component,
the overall fund value
may decrease.
The 80% dynamic market
value guarantee level is
based on the overall value
of each Escalator or Annuity
Escalator Fund and not on
the value of the riskier asset
only. The guarantee applies
at all times and not only at
the end of a specified time.
The allocation between the
riskier asset and the cash
component is determined
through an algorithm which
enables the guarantee at
any time.
The guarantee that the
Escalator or Annuity
Escalator Funds will not fall
below 80% of the highest
value reached (the guarantee
level) is a guarantee provided
by Deutsche Bank or BNP,
as the case may be, and not
Discovery Life Limited. This
means that the investor
bears the risk if Deutsche
Bank or BNP is unable to
meet the guarantee for any
reason whatsoever.
24
5.2 | W
hat you should know about
the Guaranteed Escalator Annuity
To maintain your current
Guaranteed Minimum
Income, you may not choose
an annuity percentage of
more than 80% of the growth
rate over the previous
year of the chosen Annuity
Escalator or Geared Annuity
Escalator Funds subject to a
maximum of 17.5% per year.
However, if your current
total Guaranteed Minimum
Income level is higher than
this, you may take an annuity
of up to your current total
Guaranteed Minimum
Income. At inception of your
contract, you may choose an
annuity percentage of up to
7.5% of your net investment
amount without affecting
your Guaranteed Minimum
Income. Depending on
your Annuity Escalators
performance in subsequent
years, you may be required
to reduce your withdrawal
to maintain your guarantee.
If you withdraw more
than these limits above,
the current Guaranteed
Minimum Income will
reduce by 120% of any
excess withdrawal above
these limits.
Please note that if your
chosen Annuity Escalator or
Geared Annuity Escalator
Fund’s performance is
lower in a subsequent
year compared to the year
before, you may be required
to reduce your annuity
percentage to maintain
your guarantee.
The annuity percentage you
choose may affect the growth
in your Guaranteed Minimum
Income in the future.
Please also note that
switching between Annuity
Escalator Funds may affect
the Guaranteed Minimum
Income level as well as the
recommended maximum
annuity in the upcoming
year. Any guarantees will
fall away if you transfer
out of the Guaranteed
Escalator Annuity.
You may only invest in
Annuity Escalator and Geared
Annuity Escalator Funds
that are made available by
Discovery Invest. Discovery
Invest may change the list
of funds from time to time.
If Discovery is unable to
invest in Annuity Escalator
Funds due to legislative
changes or other factors
beyond Discovery’s control,
you will have a choice of
transferring to a linked or
fixed annuity from Discovery
Invest. If you choose a fixed
annuity, your income level
will be at least as high as
the Guaranteed Minimum
Income from the Guaranteed
Escalator Annuity.
Your initial Guaranteed
Minimum Income is a Rand
amount determined based
on your age at inception
and your gender. Your actual
initial Guaranteed Minimum
Income may be adjusted
upwards if the guaranteed
unit price of the Annuity
Escalator Fund is higher
than 80% of the Annuity
Escalator price at inception
of your Guaranteed
Escalator Annuity.
The Guaranteed
Escalator Annuity is
not a linked annuity.
25
06
Business
practices
6.1 | H
ow should I issue
instructions to Discovery Invest?
Instructions must be given in writing on the relevant forms.
These instructions must be sent to Discovery Invest either by
fax on 011 539 5777 or emailed to invest_support@discovery.co.za
The forms are available from the Discovery Invest contact centre
on 0860 67 5777.
6.2 | W
ill I receive regular
statements on my investment?
Discovery Invest will provide a quarterly statement reflecting your
investment values and all transactions during a specified period
(or previous quarter).
6.3 | W
hat happens if an investment
choice that I selected is unavailable?
It may happen that Discovery Invest is unable to continue offering a certain
investment option as an investment choice. In the event of this happening,
Discovery Invest will inform investors accordingly and will request an
instruction to select a new investment choice.
6.4 | Misrepresentation
The information given to Discovery Invest in your application form,
or any other documents that you provide in support of your application,
forms the basis upon which your contract is entered into.
If you fail to disclose any information, or provide false information or
distort information when applying for your contract, Discovery Invest
will be entitled to suspend your cover from the inception date of your
contract. In addition to this, Discovery Invest will also be entitled to:
¡¡ R
efuse to pay out any current or future claims that are related
to the misrepresentation or non-disclosure
¡¡ A
djust your premium or contribution from the date of the
misrepresentation or non-disclosure
¡¡ R
ecover monies already paid to you for claims that relate
to the misrepresentation or non-disclosure
¡¡ C
ancel certain benefits or your entire contract with immediate effect,
and retain any premiums or contributions paid to Discovery Invest
or Discovery Life as a penalty.
26
6.5 | Fraud
Your contract and all its benefits
will be cancelled should you:
Submit a fraudulent claim
Use any fraudulent means
or devices to make your
claims
Provide false information
in order to obtain a benefit
Knowingly allow anyone
acting on your behalf to
provide false information in
order to obtain a benefit
Deliberately and wilfully
cause or conspire to cause
the illness or disability that
gives rise to a claim.
6.6 | Consent
to disclosure
You have consented to the
exchange of information,
including medical information,
between Discovery Invest,
Discovery Life, any medical
practitioner you have consulted
or any other life office, Discovery
Health and Discovery Health
Medical Scheme.
6.7 | Contact details
Please remember that in addition
to talking with your financial
adviser, if you have any Discovery
Invest questions or service
needs, you can call the dedicated
Discovery Invest contact centre
on 0860 67 5777.
You can also visit
www.discovery.co.za/invest
for additional resources and a
downloadable version of this
fact file (as a PDF file).
Notes
27
Discovery Invest
Contact Centre 0860 67 57 77 | invest_support@discovery.co.za | www.discovery.co.za
www.discovery.co.za
@Discovery_SA
discoveryinvestSA
Discovery_SA
The Fact File is part of Discovery Invest’s commitment to fairness and full compliance with legal requirements for financial service providers to provide detailed
easy-to-understand information about how each product works. Each investor must consult their own financial adviser who must be an authorised financial
services provider to advise the investor as to the suitability of the products and funds for the investor’s personal investment needs. The Discovery Invest
Retirement Income Plan is administered by Discovery Life Investment Services (Pty) Limited trading as Discovery Invest, a subsidiary of Discovery Holdings Limited.
Discovery Life is a registered long-term insurer and an authorised financial services provider. Registration number 1966/003901/06. Discovery Invest is an
authorised financial services provider. Registration number 2007/005969/07. Copyright – Discovery Invest – All rights reserved
IRIFFE 09/15
GM_34727DI_09/10/15_V11

Retirement Income Plan

Transcription

Similar documents

Tax Smart Financial Strategies for Our Employees

Page 08 - Fruitport Area News

PDF Template - A Door Properties

Sun Life Financial and you

Exit Planning for Freight Brokers

Fall 2014 - RetirementQuest Magazine

Marius du Toit Chief Actuary FSB

Plan Well to Live Well

Sun Park - Lanzarote Information

2010 Annuity Fund Summary Plan Description

The ABC`s of Annuity Investing