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F2013 SAVINGS BENEFIT RANGE Retail Mass Market Broker Distribution February 2013.

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Presentation on theme: "F2013 SAVINGS BENEFIT RANGE Retail Mass Market Broker Distribution February 2013."— Presentation transcript:

1 F2013 SAVINGS BENEFIT RANGE Retail Mass Market Broker Distribution February 2013

2 INVESTMENT PLAN Creating Wealth for your Dreams

3 F2013 SAVINGS BENEFIT RANGE INVESTMENT PLAN R (R recommended) R Smoothed Bonus 10 years Min. Premium: Max. Premium (guide): Investment Portfolio: Min Term: API: The Automatic Premium Increase (API) is effective each year on the 1st July (provided the policy is in force for at least 6 months). 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. Savings Withdrawal Option - first 5 years Withdrawal Option - after 5-year interval Savings term (min. 10yrs) Maturity lump sum (where no tax is due) Monthly Premiums Maturity value /death or disablement The Investment Plan is designed to provide an affordable vehicle for long-term savings to provide a tax-free cash lump sum, in the event of the earliest of the policyholder’s death/disability or the attainment of the end of the selected term. 2

4 F2013 SAVINGS BENEFIT RANGE SINGLE PREMIUM INVESTMENT PLAN The Single Premium Investment Plan is designed to offer lump-sum investors access to an investment vehicle for long-term capital growth. The plan provides a tax-free cash lump sum, in the event of the earliest of the policyholder’s death, disablement or the attainment of the end of the selected term. Minimum Investment:R2 000 Maximum Premium:R Maximum Term:to age 75 Investment Portfolio:Smoothed Bonus Min Term:5 Years Death/Disability Benefit Withdrawal Option - after 5-year interval Savings term (min. 5yrs) Maturity lump sum Lump Sum investment Maturity value Capital Growth 3

5 F2013 SAVINGS BENEFIT RANGE PRODUCT FEATURES AND BENEFITS Surrenders:The Plan has a surrender value available immediately Paid-ups:The Plan has a paid-up value available Withdrawals: One part-withdrawal will be available within the first 5 years of the policy term, and then at 5-yearly intervals thereafter. The period between any part-withdrawals must also be at least 5 years Benefit Payable:On reaching policy maturity or on the policyholder's earlier death or disablement 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 Disability:On disablement of the policyholder prior to the end of the investment term, the policyholder may either continue with premium payments or the plan may be made paid-up 4

6 F2013 SAVINGS BENEFIT RANGE Access to the following Family Support Services* from independent service providers: 24 HOUR FAMILY SUPPORT SERVICES 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 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

7 EDUCATION PLAN An Investment in their Future

8 F2013 SAVINGS BENEFIT RANGE EDUCATION PLAN Savings Withdrawal Option - first 5 years Withdrawal Option - after 5-year interval Savings term (min. 10yrs) Maturity lump sum (where no tax is due) Monthly Premiums The Education Plan is designed to provide an affordable vehicle for long-term savings to provide a tax-free cash lump sum, to enable provision to be made for the child’s higher education. Minimum Premium:R155 years R (with premium waiver benefit) Minimum Term:10 years Maximum Term:Lesser of 20 years or NRA – age 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. Proposer’s Risk: On death or disability of policyholder within the first ten years, a lump sum equal to the balance of the ten years’ premiums will be paid into the policy - to ensure funds are still available to the child on maturity, as previously planned. 7

9 F2013 SAVINGS BENEFIT RANGE PRODUCT FEATURES AND BENEFITS Surrenders:The Plan has a surrender value available immediately Paid-ups:The Plan has a paid-up value available Withdrawals: One part-withdrawal will be available within the first 5 years of the policy term, and then at 5-yearly intervals thereafter. The period between any part- withdrawals must also be at least 5 years 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 Waiting Periods:*The Education Plan carries the normal six months waiting period, from application date, in respect of death or disability from causes other than accidental For death or disablement as a result of an accident, no waiting period will apply Death/Disability:*In the event of the policyholder’s death or disability within the first 10 years (but after the waiting period for non-accidental causes), the policy will be made paid-up and a lump sum benefit equivalent to the balance of the outstanding premiums for the first 10 years will be added to the client’s fund - which will become payable at the end of the selected policy term. * Only applicable to the Premium Waiver Benefit (Policyholder) 8

10 F2013 SAVINGS BENEFIT RANGE Access to the following Family Support Services* from independent service providers: 24 HOUR FAMILY SUPPORT SERVICES 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 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. 9

11 RETIREMENT PLAN Ensuring Extra Wealth at Retirement

12 F2013 SAVINGS BENEFIT RANGE RETIREMENT PLAN 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. 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:R pm Min. Term:10 years Policy Term:Maturity to occur after the age of 55 Max. Premium (guide):R API Withdrawal Option - first 5 years Retirement Capital Savings term (min. 10yrs) Tax-free cash lump sum Monthly Premiums Monthly annuity tax Net income Savings 1/3 2/3 11

13 F2013 SAVINGS BENEFIT RANGE PRODUCT FEATURES AND BENEFITS Surrenders:The Retirement Plan may not be surrendered. (Unless paid-up and aggregate across the fund is

14 F2013 SAVINGS BENEFIT RANGE Access to the following Family Support Services* from independent service providers: 24 HOUR FAMILY SUPPORT SERVICES 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 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. 13

15 F2013 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 R or less. ̶ Alternatively: ̶ Z (tax free portion) = C + E - D ̶ C = R (across all retirement funding funds) ̶ E = previously disallowed own contributions ̶ D = total previous tax-free deductions allowed to the taxpayer ̶ Tax rates: ̶ First R taxable at 18% ̶ Next R taxable at 27% ̶ Balance of taxable amount at 36% 14

16 F2013 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). 15

17 F2013 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. 16

18 F2013 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. 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 Retirement capital Guaranteed income Retirement capital For life of spouse Death of assured Monthly annuity tax income For life Monthly annuity tax income For life Monthly annuity tax income Guaranteed income 17

19 F2013 SAVINGS BENEFIT RANGE 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 18

20 F2013 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 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. 19

21 F2013 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: -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 20

22 F2013 SAVINGS BENEFIT RANGE Endowment policies OMGS SMOOTHED BONUS PORTFOLIO 21

23 F2013 SAVINGS BENEFIT RANGE OMGS SMOOTHED BONUS PORTFOLIO Retirement Annuities 22

24 F2013 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%). 23

25 F2013 SAVINGS BENEFIT RANGE What does this mean from an advice viewpoint? THE REDUCTION IN YIELD FACTOR 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. 24

26 F2013 SAVINGS BENEFIT RANGE REDUCTION IN YIELD RATES: COMPARATIVE RANKING 10-yr Investment Plan LevelR150 2 LevelR250 3 LevelR500 3 IncreasingR150 1 IncreasingR250 1 IncreasingR yr Investment Plan LevelR150 1 LevelR250 1 LevelR500 1 IncreasingR150 1 IncreasingR250 1 IncreasingR yr Education Plan LevelR150 1 LevelR250 2 LevelR500 3 IncreasingR150 1 IncreasingR250 1 IncreasingR yr Education Plan LevelR150 1 LevelR250 1 LevelR500 1 IncreasingR150 1 IncreasingR250 1 IncreasingR500 1 ProductPremium TypePremiumRank ProductPremium TypePremiumRank 25

27 THANK YOU Old Mutual is a Licensed Financial Service Provider


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