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Retail Mass Market Broker Distribution. RETIREMENT PLAN. February 2014. Ensuring Extra Wealth at Retirement. RETIREMENT PLAN.

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  1. Retail Mass Market Broker Distribution RETIREMENT PLAN February 2014 Ensuring Extra Wealth at Retirement

  2. 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 Tax-free cash lump sum Withdrawal Option - first 5 years Monthly annuity tax Monthly Premiums 2/3 Savings Net income Savings term (min. 10yrs)

  3. 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 WithdrawlsPart-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 paid-up 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 tax-free up to R300 000. If the value of the retirement benefit is less than R75 000, the full benefit may be taken in cash

  4. 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.

  5. 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%

  6. 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).

  7. 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.

  8. RETIREMENT PLAN: ANNUITY TYPES Whole Life annuity Assured will receive a monthly income until his/her death. Thereafter no further payments will be made. 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. 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. Retirement capital Monthly annuity tax For life income Retirement capital Monthly annuity tax For life income Guaranteed income Retirement capital Death of assured Monthly annuity For life of spouse tax income Guaranteed income

  9. 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

  10. 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.

  11. 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: • 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

  12. OMGS SMOOTHED BONUS PORTFOLIO Endowment policies

  13. OMGS SMOOTHED BONUS PORTFOLIO Retirement Annuities

  14. 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%).

  15. 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.

  16. Product Product Premium Type Premium Type Premium Premium Rank Rank 10-yr Investment Plan 10-yr Education Plan Level Level R150 R150 1 2 Level Level R250 R250 2 3 Level Level R500 R500 3 3 Increasing Increasing R150 R150 1 1 Increasing Increasing R250 R250 1 1 Increasing Increasing R500 R500 2 2 15-yr Investment Plan 15-yr Education Plan Level Level R150 R150 1 1 Level Level R250 R250 1 1 Level Level R500 R500 1 1 Increasing Increasing R150 R150 1 1 Increasing Increasing R250 R250 1 1 Increasing Increasing R500 R500 1 1 REDUCTION IN YIELD RATES: COMPARATIVE RANKING

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