Retirement by jianglifang


Financial Wellbeing Programme

                                Member information
                                 At normal retirement age or earlier
If you retire at your normal retirement age, or earlier

Step by step guide to retiring from your retirement fund
Step 1: Understand your benefits and options

Step 2: Make your investment decision

Step 3: Complete the paperwork

   Need assistance with any of these steps?                             For more detailed information on your
       Call 0860 388 873* or email:                                          Visit
               and ask for the
        DECISION SUPPORT SERVICE                                                           Invest directly at:
                  *Charged at local Telkom rates.
               Lines are open Mon - Fri: 8am - 5pm.

Step 1: Understand your benefits and options
There are many considerations for someone approaching early or normal retirement date - from general issues such as where
you will live and what you will do, to specific financial decisions that you have to make, which will affect your financial security
into retirement. This information focuses specifically on your choice of an annuity.

What are your basic options?
If you are a member of a pension fund, you may use up to 1/3rd of your benefit (available as a
cash lump sum) as you wish or to clear your debt. However, you should still consider this as part
of your retirement benefit. It is possible to purchase a Voluntary Purchase Annuity (income) for
a set period with your voluntary cash (that is, the portion you are not “forced” to purchase an
annuity with). The capital portion is exempt from tax, which makes it very tax efficient. With
the balance of your benefit (minimum 2/3rds for a pension fund member), the Fund will buy one
or more annuities from a registered insurer on your behalf, from which your monthly pension will
then be paid. This is to ensure that the larger part of your Fund credit is used for its original purpose,
namely to provide you with a monthly income when you are no longer working.

Please note: If you are a member of a provident fund, there is no restriction on the portion you can take in cash. However, bear
in mind that this money is intended for your retirement.

January 2011
An overview of the basic annuities

  Level Annuity                        Fixed Escalation                      With-profit           Inflation-linked       Living Annuity
  Your monthly pension                 Annuity                               Annuity               Annuity                (also called
  will remain exactly                  Your monthly                          Pensioners share in   Your monthly           investment-funded
  the same from year                   pension will increase                 actual investment     pension will           income)
  to year. This annuity                at a pre-determined                   returns – even        increase at an         Your benefit is
  therefore does not                   rate each year,                       though the size of    inflation-related      invested in the stock
  offer any protection                 offering some                         increases is not      rate. Your pension     market and will
  against inflation.                   protection against                    guaranteed, the       plus increases are     therefore be affected
                                       inflation.                            actual pension plus   guaranteed and paid    by investment profits
                                                                             past increases are    until you die. This    and losses. You
                                                                             guaranteed and paid   pension will keep up   can choose to draw
                                                                             until you die. This   with inflation.        between 2.5% and
                                                                             pension should keep                          17.5% from your
                                                                             up with inflation.                           capital as a pension
                                                                                                                          The risk lies with you
                                                                                                                          to ensure that your
                                                                                                                          investment keeps
                                                                                                                          up with inflation and
                                                                                                                          that your money
                                                                                                                          lasts until your

  These are also called annuities for life. With any of these annuities, you will exchange your
  retirement capital for a guaranteed income for your full lifetime.
                                                                                                                          Under this annuity,
                                                                                                                          your dependants or
  Under the guaranteed annuities, your benefit stops when you die, unless you choose that                                 will receive the
  it should continue. You must make this decision when you buy the annuity. You can make                                  remaining capital
  provision for your dependants by selecting additional options such as “Joint and Survivorship”                          when you die.
  or “Term Certain and Thereafter”, or by choosing a Capital Preservation option.

These annuities may be chosen on their own or in a combination, if you have a big enough retirement

Summary: Annuity payout profiles compared
                                                                           Guaranteed annuity                     Living annuity
                                                                            (annuity for life)            (investment-funded income)
                                                                Level: Highest
                                                                Fixed Escalation: Intermediate            Depends on drawdown rate. Annual
 Initial Income
                                                                With-profits: Intermediate                income limited to 2.5% to 17.5% p.a.
                                                                Inflation-linked: Lowest
                                                                                                       If investment performance is
                                                                                                       consistently - Greater than your
                                                                Level: None                            drawdown rate:
                                                                Fixed Escalation: Guaranteed increase Sustainable annual increases.
 Annual Increases                                               e.g. 1%, 2%, 3%, etc.                  Equal to your drawdown rate:
                                                                With-profits: Targets inflation        Increases not sustainable.
                                                                Inflation-linked: Guarantees inflation Less than your drawdown rate: Risks
                                                                                                       rapid depletion of funds and consequent
                                                                                                       reduction in income.
 Capital to beneficiaries on                                                                              Yes, provided funds have not been
 death                                                                                                    completely depleted before death.
                                                                                                          No, unless investment performance is
 Protection against living too
                                                                Yes (all types)                           consistently greater than your
 long                                                                                                     drawdown rate.
*Exceptions: Single life annuity with guaranteed term and Capital preservation option

January 2011
Investing your lump sum
Please remember the original purpose of your retirement fund benefit – it is to provide you with an income after you retire.
Before making plans about how to spend your cash lump sum, carefully look at the quotes you will receive from insurers. (These
quotes will show you how much your monthly pension will be.) You may then decide to rather invest part or all of your lump
sum to provide you with an additional monthly income.

Tax – how to avoid paying too much
The tax you pay depends on the amount you commute (take) in cash. The following (cumulative) tiered tax table is used at

                             Retirement Benefit                                                                                    Rate of tax
                                 R0 - R315 000                                                                                             0%
                           R315 001 - R630 000                                                                 R0 + 18% of the amount over R315 000
                           R630 001 - R945 000                                                             R56 700 + 27% of the amount over R630 000
                            R945 001 and above                                                            R141 750 + 36% of the amount over R945 000

Step 2: Make Your Investment Decision
                          FINANCIAL ADVICE                                                                                     INVEST DIRECTLy
    Before you make a final decision about what to do                                                  If you want to reinvest directly and manage your
    with your retirement benefit, it makes good sense to                                               investment portfolio yourself (i.e. without consulting
    discuss your options with a financial adviser. An adviser                                          an adviser), you will need to be sure that you have
    will make sure that the decisions you make about your                                              the necessary skills and knowledge to make the best
    retirement fund are best suited to you, taking your                                                decision for your circumstances. There is a wealth of
    future retirement needs into account. An adviser can                                               information available online to assist direct investors.
    also help ensure that your life and disability cover is
    preserved, and also discuss medical cover options with                                             Go to to find out
    you.                                                                                               more about how you can invest online with
                                                                                                       Old Mutual.
    Should you not already have a financial adviser or
    broker, you can phone 0860 388 873 or email and ask
    for the Decision Support Service to help arrange
    one for you.

Step 3: Complete the paperwork
■    Complete the fund exit form:
     - Included in your HR exit pack
     - Fill in all details including details of your investment.
■    Complete the relevant application form for the annuity that you have chosen to invest in.

DISCLAIMER: The information contained in this document has been compiled in order to explain the various options available on exiting a retirement fund and does not constitute advice. It
has been compiled in good faith, however, no representations or warranties, express or implied, are made to the accuracy and no responsibility or liability is accepted by Old Mutual for any
damages or losses which may flow, directly or indirectly, from the use or reliance on any of the information herein contained.

January 2011

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