STELLENBOSCH UNIVERSITY RETIREMENT FUND GUIDE FOR NEW MEMBERS

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1 1 of 9 STELLENBOSCH UNIVERSITY RETIREMENT FUND GUIDE FOR NEW MEMBERS SECTION 1 The intention of the University of Stellenbosch Retirement Fund (USRF) is to provide the best available benefits for contributions paid for you and your dependants. This document briefly explains the benefits offered by USRF on a question-and-answer basis, and also provides examples of how the benefits are calculated. Please remember, however, that it is merely a summary of the benefits and that full details are contained in the official rules of USRF, which are available at the Human Resources Division. Should there be any contradiction between the contents of this summary and the official Rules, the provisions of the Rules will have precedence. You should contact the Human Resources Division if you have any uncertainties or require more information. 1. MEMBERSHIP 1.1 Who may join the Fund? All permanent employees of the University of Stellenbosch, the Bureau of the Dictionary of the Afrikaans Language, UNISTEL Group Holding (Pty) Ltd, USB Executive Development Ltd and SUSPI (Pty) Ltd or who have been in the service of one of these employers for two years in a temporary capacity, except i) An employee who is required by his service conditions to belong to another retirement fund, or ii) an employee who immediately before accepting employment was a member of one of the previous funds (the Pension Fund for Associated Institutions or the Pension Fund for Temporary Employees) and who chooses to remain with that previous fund.

2 2 of 9 2. CONTRIBUTIONS 2.1 On what portion of my remuneration are contributions calculated? On the pensionable basis plus any other amounts as determined by your Employer; hereafter referred to as the Fund Salary. 2.2 If my Fund Salary is adjusted, when are the contributions and benefits recalculated? Contributions and benefits are re-calculated from the first day of the month in which the Fund Salary is adjusted. 2.3 How much is contributed? Members do not contribute to the Fund. The employer contributes a basic contribution of 10% of the fund salary plus the spouse and child pensions as described in point 5. Furthermore, you can structure your package annually by choosing any of the following contribution categories so that additional contributions to the fund are paid according to the following scale: Member category Additional employer contributions as % of member s fund salary A 0.0% B 2.5% C 5.0% D 7.5% E 10.0% 2.4 May I contribute additionally? Yes, after rule change 5 during 2011 members can contribute on a voluntary basis, within certain limits, on an after tax basis. 3. RETIREMENT BENEFITS 3.1 What is my normal retirement age? 60 years or as specified in the member s service contract with the Employer. After the age of 60, and on the basis of continuous satisfactory performance, employment may be continued until a maximum age of 65.

3 3 of What will my retirement benefit be if I retire on my normal retirement date? Your retirement benefit is the pension that the Fund or a registered insurer is prepared to offer you against the value of your Fund credit. You may, however, take your full Fund credit out of the Fund and decide yourself what you want to do with it. The Trustees reserve the right, however, to refuse your request to commute your benefit, so that you may obtain only one third in cash (while the remaining two thirds must be used to purchase a pension), should there be sufficient reason. Your Fund credit is made up of the sum of: contributions to the Fund, made by the employer with regards to your retirement benefit; contributions to the Fund, made by the employee with regards to your retirement benefit; transfers that have been transferred from other funds; any contributions from the retirement reserve account granted to the member; increase or decrease with the investment return to the date of calculation. 3.3 May I retire before my normal retirement date and, if so, what benefit will I receive? Yes, you may retire with the approval of the Employer, any time from the age of 55. The value of your early retirement benefit will be calculated on the same basis as described under point DEATH BENEFITS AFTER RETIREMENT 4.1 Is any benefit payable if I should die after I have retired? No, there is no further benefit available after retirement. Payment of post-retirement death benefits to other members spouses or dependants will depend on the terms on which the member bought his/her pension. It is thus important to weigh this on retirement. 5. DEATH BENEFITS BEFORE RETIREMENT 5.1 What benefits are payable if I die before my normal retirement date and while I am still in service? The following benefits are payable from the Fund: i) Fund Credit The member s full fund credit minus any costs incurred to trace potential

4 4 of 9 ii) iii) beneficiaries. This amount is paid in a lump sum to the deceased s dependants and/or beneficiaries, as determined by the Trustees of the Fund. Spouse Pension The spouse pension payable to spouses of members who die in service is equal to 35% of the member s pensionable salary. Child Pension The child pension is equal to 10% of the member s pensionable salary for each dependent child, to a maximum of three dependent children at any stage. In the case where no spouse s pension is payable, the child pensions will double. A dependent child will be defined as a child, legally adopted child or stepchild of the member as long as such a child is still unmarried, under the age of 18 years and dependent to the member at the time of the member s death. Where stated by the trustees, the age restriction of 18 years may be extended to 24 years if such a child is a full time student, or extended indefinite in the case where such a child is fully dependent to the member for medical reasons. 5.2 How are the benefits paid? The spouse and child pensions are payable monthly on the first day of the calendar month that follows the death of the member. Your fund credit is payable in cash, depending on the final decision of the Trustees of the Fund. Your nomination form must be kept up to date to help the Trustees in the apportionment of the single-payment death benefit. EXAMPLE: Suppose a married member with 3 children, a Fund Salary of R p.a. and a Fund Credit of R dies. The following benefits will be payable to the deceased member s dependants and/or nominated beneficiaries (as decided by the Trustees): Lump sum: R (the member s Fund Credit) Spouse pension: R5 833 per month (35% x R per year divided by 12 months) Child pension: R1 667 per month per child (10% x R per year divided by 12 months) NB: As a result of the terrorist attacks on America of 11 September 2001, reinsurers worldwide began to include certain exclusion clauses in their reinsurance agreements with

5 5 of 9 the great insurers. This had the consequence that insurers in South Africa, when reviewing their policies, had to include the same exclusions to their policy benefits. The Fund s insurer has indicated that it must as a consequence also change the policy conditions of its policies to include certain war and terrorism exclusions to the insurance policy of the Fund. 6. RETIREMENT BENEFITS 6.1 What benefits are payable? In the case of a normal resignation and retirement because of the abrogation of the member's post, the member receives his/her Fund credit (see section 3.2 for the definition of a Fund Credit). A member can choose to save benefits or to receive it in cash. 6.2 When will the amount mentioned above be paid out? The administrators will attempt to pay your retirement benefits in eight weeks from your last day of service and after the necessary tax allocation has been received from the Tax Office. Members must make sure that they complete the necessary withdrawal forms through their human resources office. 7. FURTHER OPTIONS 7.1 Option to maintain retirement benefits after retirement You may transfer your retirement benefits tax-free to another approved pension fund, provident fund, preservation fund or retirement annuity fund. 7.2 Option on leaving employment or retirement to change your Group life insurance (death benefit) to an individual policy You have the option of changing the full insured death benefit or a portion of it to an individual life insurance policy, without having to provide proof of good health. Please note that this benefit does not form part of the main benefits of the funds and will not necessarily be available in future. The policy will be issued by the insurer underwriting USRF s death benefits, and the premium payable will be based on your age at the time of the change. This option must be exercised within 31 days of your leaving the service of the University. There is also a guide that has been drawn up to discuss your withdrawal benefits in greater detail. This guide is obtainable from the Human Resources Division web-site

6 6 of 9 8. GENERAL 8.1 Do I receive tax relief with regard to my contributions? No, the employer contributions to the Fund are not taxed in the hands of the employee. The employee contributions are treated as a normal deduction and form part of the taxfree component at retirement or resignation. 8.2 Is tax payable on the benefits payable to me? All single-amount benefits are taxable, but the Income Tax Act makes provision for certain tax-free amounts (for example, on retirement a portion of your benefit is tax free). SECTION 2 The Income Security Scheme provides monthly income benefits to members who become completely disabled and are declared disabled by the Insurer. All members of the University of Stellenbosch Retirement Fund are automatically covered under the University of Stellenbosch Income Security Scheme (the Disability Scheme). 1. PREMIUMS The employer pays all contributions towards the Disability Scheme. 2. DISABILITY BENEFITS 2.1 What happens if I become disabled? If you become completely disabled as a result of illness or an accident and are not able to resume your occupation with your current employer for the waiting period of six months from the date of disability, you will be entitled to a disability benefit from the Disability Scheme for a period of 12 months, after the end of the waiting period. Thereafter the benefit will be paid only if you are not able to perform the functions of a similar occupation, which could reasonably be expected of you. Under the Management Scheme, the insurer will, within 4 weeks of the onset of the illness or injury, institute a rehabilitation programme with the aim of rehabilitating the member of staff as quickly as possible for re-introduction into the labour market. A member of staff will be paid an income for the first 12 months after the illness or injury if he/she is not able at all to exercise his/her occupation or any other occupation at the University.

7 7 of 9 After 12 months the situation of the member of staff will be considered whether or not he/she will be able to exercise a similar occupation for which he/she might be found to be suitable or for which he/she might reasonably be expected to qualify, taking into account the degree of disability, the claimant s knowledge, training and level of education. NB: The definition of disability is fully set out in the official insurance policy, a copy of which is available on request. This guide is merely a summary of those benefits and terms, and you are referred to the policy for the precise formulation of the various policy conditions. Your claim will be considered by the Insurer underwriting the scheme, with whom the final approval or rejection of any disability claim rests. If there is any difference between this summary and the policy, the rules of the policy apply. 2.2 When does the disability benefit come into effect? It comes into effect after you have been disabled for a continuous period of six months (the waiting period). During the waiting period the company will continue to pay your full remuneration if there is sufficient leave available. 2.3 What will my disability benefit be? The benefit is equal to your monthly Fund salary (up to a maximum that are determined by the insurer). (The Insurer does, however, require medical proof of the insurability of members whose cover is above the scheme s limit for not providing proof of insurability before their cover above the limit will be allowed.) EXAMPLE: The following is assumed: (a) You are unable continue your normal work for six months on account of illness and a claim for a disability benefit has been accepted by the Insurer. (b) Your cost to company at the time of disability is R per year (R per month) and your Fund salary (75% of cost to company) is R per year (R per month). Your monthly disability benefit is thus R from the seventh month of disability.

8 8 of 9 If you also receive income from other sources or the Insurer is of the opinion that it is within your capacity to earn such income in terms of the conditions contained in the insurance policy, your disability benefit will be reduced accordingly. The Insurer may at any time request that you present medical proof to confirm your continued disability. The payment of any benefits is dependent on your capacities, and is not dependent on the availability of employment opportunities. 2.4 What happens to the membership of USRF while I am receiving a disability benefit? You remain a full member of USRF while you are receiving a disability benefit and the Employer will continue make contributions to the Fund based on 100% of your Fund salary. You will thus retain your death cover as if you were in full-time service. On your normal date of retirement your disability benefit will cease and you will receive your normal retirement benefit from USRF. 2.5 When does payment of the disability income cease? The payment of your disability income will cease under the following circumstances: i) as soon as you die; ii) if the Insurer, based on the grounds of their assessment and the definition of disability in the policy, decides that you are no longer disabled; iii) as soon as you reach the normal retirement age; or iv) as soon as you retire if that should happen earlier than described in (iii). 2.6 Are there conditions causing my disability that will result in my not being entitled to a disability income? A member is not entitled to the disability benefit if the disability is directly or indirectly because of, caused by, accelerated by or aggravated by one or more of the following: war, terrorism, invasion, action of a foreign enemy, hostilities (whether war is declared or not), civil war, martial law, rebellion, revolution, insurrection, military or usurped power, unrest or civil commotion an illness, accident or injury: i) for which he/she received treatment during the six months before his/her date of joining, or ii) from which he/she suffered on his/her date of joining if, in both cases, disability began within 12 months after his/her date of joining.

9 9 of Are there increases in my disability income? Yes. Your benefit will increase annually by the lesser of 10% or the rise in the Consumer Price Index. RM0377-Retirement Fund Guide for New Members (August 2011)