Preservation Pension Fund Preservation Provident Fund

1. Preservation Pension FundPreservation Provident Fund March 2012

2. General What is a Preservation Fund? • A product wrapper which provides a member with an accumulative lump sum at retirement. • Member’s paid up benefits from an employer fund can be transferred upon winding up of a pension or provident fund, resignation, retrenchment or dismissal from employment • Saves (preserve) funds for retirement (deferred tax) • Designed to provide the member with a lump sum on retirement to buy a Living Annuity, which will pay an income at regular intervals

3. Where does it fit in? Platform Offering Investment Pre-retirement Post-retirement Voluntary Investment Endowment Retirement Annuity Preservation Funds Living Annuity Retirement builder (max 25%) Capital Protector (max 100%) Various Unit Trusts as per Portfolio Selection List

4. Retirement Annuity: Preservation: Living Annuity Structured Products Retirement builder One year Three years Five years Fixed returned of capital: Market Portfolio: Cash Capital protector 100% Capital protection over 12 months Unit Trust, Segregated Mandates, White Labels, Share Portfolios

5. Pricing All life investment products are taxed according to the “four fund approach” That means a life company classifies its clients into four different tax categories 01 – Individuals 30% 02 – Companies 28% 03 – Trusts (taxed according to beneficiary status 01 or 02) 04 – Non taxable entities The tax and fund fees are then taken out of the price and paid on behalf of the member Admin and risk management fees are generated by selling units from the client’s investment Preservation Funds are not subject to income tax and hence the client will not receive an IT3(b) or IT3(C)

6. Pricing Since we are a LISP, we will make use of NAV pricing for most of our investments Where a fund does not have unit trust pricing, life pricing (four fund approach) will be used according to the tax classification

7. Investments Any natural person who wants to preserve their pension/provident benefit. Ex-spouses who want to preserve their portion allocated to them by the Decree of Divorce Single Premium Preservation Fund Minimum R50 000 (R20 000 for PSG Konsult and Online) Can be phased in – daily/weekly/monthly phase ins Recurring Premium– Not allowed Top ups – only if it is interest from the same fund Portfolio selection must be Regulation 28 compliant Once all requirements received and submitted, t+1 for investment to settle

8. Investments Previously RF 1/98 stated that a benefit may not be accepted if reduced for any reason except Section 37D deductions RF 1/2011 replaced RF 1/98 with retrospective effect from 30 September 2010 Practical affect: A member may take a cash withdrawal and we may still accept the benefit

9. Documents Needed PSG Application form (fully completed) Certified copy of client’s ID Certified copy of client’s proof of address (less than three months) Certified copy of client’s proof of bank details (less than three months) Proof of deposit (match to unallocated spreadsheet) Recognition of Transfer

10. Investment Options Unit Trusts Within the Preservation wrapper – subject to market movements Retirement builder Fixed outcome – quoted rate for 1 year, 3 years or 5 years Rates sent out weekly, trading monthly – inform Admin to open One month prior to maturity we send out a letter to inform the client that we will switch to PSG Money Market if we don’t receive instruction Max 25% due to Prudential Investment Guidelines (Reg 28) Capital Protector CPP – option to guarantee CAPITAL, with growth on the upside of the market Quarterly tranche, if enough investors, info (rates) sent out per tranche (minimum R3 million per tranche) In for a year, if we don’t receive instruction, investor will be switched to PSG Money Market Fund May invest 100%

11. Section 14 Transfers in Transfer from another PresPen or PresProv fund Not from an RA or a Preservation fund (not allowed) Follow the Section 14 process Cannot go directly into a Retirement Builder or CPP, as we do not know when the funds will be received and rates have to be accepted by the client by signing the quote (funds invested in PSG Money Market whilst waiting for signed quote) Blanket exemption was given by the Registrar, meaning non-Valuation exempt funds don’t have to work through the FSB Separate training for Sectional Transfers and Unit Transfers

12. Transfers Summary RA to RA – Section 14 RA to Preservation – Not allowed PresPen to PresPen – Section 14 PresProv to PresProv – Section 14 PresPen to PresProv – Not allowed PresProv to PresPen – Not allowed (why would you want to anyway?) PresPen or PresProv to RA – Allowed, but not tax-free RA/Pres to ELLA - Retirement

13. Switches Switch form, fully completed and signed Post-switch portfolio allocation has to be Regulation 28 compliant t+4 (this can differ based on the type of source and destination fund as well as possible liquidity constraints in the source fund)

14. Repurchase A member may make a full or partial once off withdrawal prior to retirement, subject to tax Signed and completed Notification of Withdrawal Form Form B (for application of tax directive) FICA Certified proof of bank details (less than 3 months old) Admin will apply for a tax directive before loading the instruction on GLS Benefit paid out will be net of tax t+7 for tax application, repurchase to settle and paid

15. Repurchases If a client took a cash portion from his employer fund, we may still accept the reduced benefit (RF 1/98 replaced by RF 1/2011) Even so the client may still take a full/partial withdrawal prior to retirement

16. Retirement Clients may retire from age 55 Previously max age was 70, but this cap has been removed (for investors turning 70 after 1 March 2008) If the value is <R75 000, the client may commute 100% in cash, subject to tax (aggregate per lifetime per member) If the value is >R75 000 PresPen client may commute 1/3 max in cash (subject to tax), balance to be transferred to a Living Annuity PresProv client may commute 100% in cash (subject to tax). If not 100% then the balance is to be transferred to a Living Annuity Client may select on the Retirement Form whether to stay in the market or for the entire portfolio to switch to money market while we wait for the tax directive Admin will apply for a tax directive before loading the instruction on GLS Benefit paid out will be net of tax and transfer portion paid to receiving fund t+7 for tax application, repurchase to settle and payment

17. Retirement Signed and completed Notification of Retirement Form Form A+D (for application of tax directive) FICA Certified proof of bank details (less than 3 months old) Completed Living Annuity application (PSG or new provider)

18. Retirement Even if a client made a withdrawal prior to retirement, s/he may still commute a portion in cash at retirement Client is allowed to make a once-off withdrawal after age 55, as it is the client’s choice when to retire

19. Retirement due to Ill health The member may retire before age 55 if the member is permanently incapable Documents needed: Notification of Retirement Form Medical or other evidence as requested by the trustees (member’s cost) confirming that the member is permanently incapable, due to infirmity of the mind or body, to carry on his/her current occupation FICA Proof of bank details not older than three months Disabled member is entitled to the benefits and rights as for normal retirement

20. Standing Instructions Change Client may not have a debit order on a preservation fund, as it does not constitute a contribution from an approved fund Since this is a pre-retirement product, the client may not opt for an income – only after retirement

21. Static Details Change Address / Contact details change Residential Address Signed and completed Change of Static Details form AND Certified proof residential address not older than three months (FICA) Postal Address Signed and completed Change of Static Details form OR Letter from client instructing change Contact Details (email / tel / cell / fax) Signed and completed Change of Static Details form OR Original Letter from client instructing change

22. Static Details Change Bank Details Change Signed and completed Change of Static Details form AND Certified proof of bank details (less than 3 months old) NOTE: Internet bank statements will not be accepted

23. Static Details Change Beneficiary Changes Signed and completed Change of Static Details form OR Letter from client instructing change Beneficiary Title Beneficiary name and surname Date of birth or ID number Relationship Share of benefits

24. Static Details Change ID Number or Name Changes Signed and completed Change of Static Details form AND Certified copy of marriage certificate (if surname change) Certified copy of ID

25. Cession A Preservation Fund may not be ceded to another client or offered as security for a loan Creditors may not attach a Preservation Fund upon insolvency (Section 37B of the PFA)

26. Death Claim Section 37C of the Pension Funds Act: Death claims may not always be paid according to the beneficiary selection Trustees have up to one year to search for dependents of the deceased The benefits may not be split between commutation of a cash portion and transfer to a Living Annuity.

27. Death Claim Documents Required: Certified copy of death certificate Post mortem report (if unnatural death) Certified copy of deceased’s ID Certified copy of letter of Executorship (If the beneficiary is Estate) Original signed and completed Death claim application & discharge form Affidavit of dependants by Executor to be certified by a Commissioner of Oaths (If the beneficiary is Estate) Affidavit of dependants by independent 3rd party (minister / teachers e.g.) to be certified by a Commissioner of Oaths Certified copy of marriage certificate (if married within community of property before 1984 or anti-nuptial contract with accrual) Certified copy of ID of beneficiaries and/or dependants Dependants details Letter from Executor confirming the solvency of the estate (If the beneficiary is Estate) Copy of a will (if applicable) Certified proof of bank details (less than 3 months old) If benefit will transfer to beneficiary / dependant– New application form (PSG or other Provider) Form C (for application of tax directive) Note that the Trustees may have further requirements in order to draw conclusion to the payment.

28. Section 14 Transfer out Signed and completed Application to Transfer Form PresPen to PresPen and PresProv to PresProv Copy of application form for Transferee Fund Certified copy of members ID An RA may not be transferred to an employer’s pension or provident fund Same Section 14 process as Transfers IN to be followed in terms of Form H and Form J

29. Cut offs for processing Any instruction for processing has to be batched and submitted to Admin before 9:00 Ensure that your broker actually SENDS it well within cut off so that there is sufficient time for batching and submission to Admin

30. Turn around time Should all requirements have been received: Before 9:00 – processed for prices on t After 9:00 – processed for prices on t+1

31. Tax No IT3(b) for distributions No IT3(c) for capital gains/losses On withdrawals – first R22 500 tax free per lifetime On retirements – first R315 000 tax free Ill-health – as per retirement tables Death claims – as per retirement tables No Dividend Withholding Tax

32. Legislation Collective Investment Schemes Act Pension Funds Act, especially Section 37 Regulation 28 – Prudential Investment Guidelines Financial Intelligence Centre Act (FICA) Financial Intermediary and Advisory Services Act (FAIS)

33. Fees IFA initial fee 0% - 2.5% excl VAT IFA ongoing fee – up to 1% No initial platform fee Ongoing platform fee PSG – before 1 Aug 2011 = sliding scale PSG – after 1 Aug 2011 = 0.4% for Konsult & Online 0.5% for Retail Neg for Best of Breed LESS REBATES

34. Fax and E-mail Indemnity Faxed instructions will be accepted, FICA docs have to be certified Where an advisor did not certify FICA docs, we will check if Fax and E-mail Indemnity is on file If a client signed the F/E Indemnity in the application form/ other transaction form, we will accept instructions via e-mail

35. Disclaimer The information contained in this document is correct at time of the presentation. All figures and points must be verified prior to any business dealings due to the dynamic nature of legal and financial environments. Though every effort is made to ensure the accuracy of the information contained herein, the author cannot guarantee the validity and or current information in future circumstance when legislation is adapted. The author accepts no responsibility for the use of validated information and the misuse of current information. Individuals misusing current information or using outdated information will be personally liable for any damages/consequences incurred. PSG Asset Management Administration Services Limited reserves the right to adapt provisions as set out in this presentation where applicable legislation and practices change. PSG Asset Management Administration Services Limited is an approved financial services provider.