THE RETIREMENT PLAN

GOAL CATEGORIES & THE RMM SOLUTION 1 CategoryDescriptionRMM solution InvestSaving for a future goal 2-IN-ONE Savings 4 my Goal Single Premium investment plan RetireSaving to be able to maintain a lifestyle after retirement Retirement Plan Death & DisabilityLeaving sufficient funds behind to settle outstanding debt and take care of dependants Pure Life Plan Life & Disability Plan Accidental Death & Disability Plan Paying for a dignified funeral Funeral Care Plan Standard Funeral Plan Comprehensive + Funeral Plan EducationSaving for a child's education to ensure a brighter future 2-IN-ONE Savings 4 Education Debt FreeSettling all debt or consolidating debt to ensure greater disposable income Old Mutual Finance Household & CarEnsuring your personal belongings against theft or damage iWYZE

FINANCIAL GOAL: MAINTAINING A LIFESTYLE AFTER RETIREMENT 2 Why would your customers need to save for retirement? Case study Medical expenses are usually higher at that stage Income from pension fund is less than salary whilst working Because of inflation, the cost of living will be higher at that time Medical expenses are usually higher at that stage Income from pension fund is less than salary whilst working Because of inflation, the cost of living will be higher at that time

RETIREMENT PROVISION 3 Pension Fund Provident Fund Retirement Plan Annuity Retirement Before RetirementAfter Retirement Regular income

BASIC TERMS & CONCEPTS: RETIREMENT PLAN What is a pension fund? ■Both employee and employer contributes towards the fund. At retirement the employee can take one third as a cash lump sum and the remaining two thirds (compulsory money) has to be invested in an annuity What is provident fund? ■In many cases it is only the employer that contributes towards the fund. At retirement the employee is not compelled to invest his/her capital in an annuity. What is a retirement plan? ■A retirement plan is an investment policy and works very similar to a pension fund. At retirement or end of term the policyholder can take on third as a cash lump sum and the remaining two thirds (compulsory money) has to be invested in a retirement annuity. 4

BASIC TERMS & CONCEPTS: RETIREMENT PLAN What is a retirement annuity? ■An annuity is an income purchased by a customer with a lump sum investment after retirement. There are two types of annuities, compulsory and voluntary annuities. ■Compulsory annuities can only be purchased with compulsory money and voluntary annuities can only be purchased with voluntary money. 5

Retirement Plan Minimum entry age for policyholder18 Maximum entry age for PolicyholderMust not be within 10 years from age 65 Minimum premium160 Maximum premium2000 Minimum term10 years Maximum termUntil age 70 Earliest retirement age55 Who can be the premium payer?Policyholder only Surrender value available?No, unless: The policy is in a paid-up status The combined paid-up value across all SARAF Retirement Annuities are less than R7000 The customer can prove that he/she has emigrated Theory table RETIREMENT PLAN: THEORY TABLE 6

7 Retirement Plan Part-withdrawals allowed?No, unless Old Mutual receives a valid: Divorce Order instruction or Maintenance Order instruction Paid-up option available? API applicable? Premium Holiday Family Support Services Excluding Funeral Support

RETIREMENT PLAN: DISABILITY, DEATH & MATURITY 8 Disability of policyholderDeath of policyholderMaturity The customer has 3 options: 1.Continue paying premiums 2.Request that the policy be made paid-up if the minimum paid-up value is met. 3.Claim the fund value with a valid disability claim The full fund value available at the time of death will pay out in equal shares to: The nominated beneficiary and Any other dependents. If the Fund value <R The customer can take the full amount as cash or buy an annuity. If the fund value is >= R The customer has 2 options: 1.Use the full fund value to purchase an annuity, 2.Take one third of the fund value as a cash lump sum. The remaining two thirds must then be used to purchase the annuity.

HOW DO YOU CALCULATE ONE THIRD AND TWO THIRDS? 9 3/3 = R /3 = R /3 = R R ÷ 3 = 1/3 R × 2 = 2/3 R R

HOW DO YOU CALCULATE ONE THIRD AND TWO THIRDS? 10 Calculation 1/3 = R ÷ 3 = R /3 = R × R

RETIREMENT PLAN: FEATURES EXPLAINED Will the cash lump sum be taxed? The 1/3 cash lump sum is tax free up to R The example below will illustrate how this works in practice. Example: A customer’s total fund value at maturity is R Please calculate how much he will receive as a cash lump sum and how much remains to purchase the compulsory annuity. ■1/3 = R ÷ 3 = R ■2/3 = R × 2 = R ■R – R (tax free portion) = R ■Only R f the 1/3 cash lump sum will be taxed. 11

RETIREMENT PLAN: FEATURES EXPLAINED What other advantages are there for a customer with a Retirement Plan? ■The long-term premiums are tax-deductible, up to a limit. For tax-paying customers, this reduces the overall tax they owe SARS. ■Investment growth is not taxed, which means the savings growth is higher than other plans, every year. What is a divorce order? The Pension Funds Act, provides upon divorce, for the processing of a withdrawal of an interest in the retirement plan of a policyholder to the non-policyholder. This withdrawal will be equal to a percentage of the fund value of the retirement plan as at the date of divorce. The withdrawal value can be paid into another retirement plan or directly to the non-policyholder and may be subject to tax. 12

RETIREMENT PLAN: FEATURES EXPLAINED What is a maintenance order? Special circumstances must be present for this to occur. The withdrawal will be as per the instructions in the Maintenance order. It may take the form of a monthly/annual/once-off withdrawal and is intended for use of the maintenance of children by the customer’s spouse. What is a Section 14 transfer? Policyholders can transfer their retirement savings between registered funds. A transfer value will be available after payment of the first premium. The transfer value will be the same as the surrender value. 13

RETIREMENT PLAN: THE 2% RULE The 2% rule is a tool to make customers aware of the reduced income they might receive after retirement. It is especially a useful tool when dealing with government employees. Example: Mrs. Bulelwa is employed by the SANDF. She started working for government 9 years ago and during that time she contributed towards a pension fund. She is 37 years old and plans to retire at 60. Assuming her final salary that she would receive before retirement is R20 000, please calculate what her income gap would be after retirement. R × 2% = × 400 = R R – R = R