The. OPN Living Annuity. Your post-retirement income solution

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1 The OPN Living Annuity Your post-retirement income solution

2 OPN Living Annuity OPN Living Annuity Suitable for Members retiring from the OPN Personal Pension, or any other RA, Pension, Provident or Preservation funds Members with an existing living annuity wanting to reduce the drag on their assets caused by high product fees Benefits Be in control of your savings have a choice of quality underlying unit trusts in your OPN Living Annuity be able to manage the amount and frequency of your income payments Stop paying away your retirement assets through excessive fees Leave any residual assets to your estate when you pass away Retirement Annuities, Pension Funds, Provident Funds and Preservation funds have helped you save towards retirement in a disciplined, structured and tax-efficient manner. How you invest your savings at retirement is going to have a very important influence on the benefits that you receive from them over time. There are 2 key questions to be asked: How do I want my income to be structured? How can I maximise the benefit that I receive? The new generation OPN Living Annuity provides you with control over the structuring of your income and cuts out unnecessary costs to make sure that you get the maximum benefit during retirement. There are four aspects of a living annuity that need to be understood: 1) Managing the amount and frequency of your income payments You set your annual income between 2.5% and 17.5% of the asset value You can adjust your income annually and although it is not necessarily advisable to adjust the income higher in times of high inflation, this might become unavoidable to you - and the OPN Living Annuity provides this flexibility that fixed payment annuities don t Income can be payable monthly, quarterly, annually, bi-yearly 2) Managing the choice of quality underlying unit trusts in your OPN Living Annuity The value of your Living Annuity is determined by the value of the underlying unit trusts that you select The choice of underlying unit trusts is therefore a very important decision as this will determine the growth of your asset base and subsequently influence your income potential and duration You are able to change these underlying unit trusts as required to meet either changing personal or economic circumstances 3) Maximising your benefit by reducing layers of fees that you are charged The whole point of saving for retirement is to make sure that you have enough assets at the point of retirement to support you and your family in the lifestyle you require Historically, many annuity products have charged both initial and ongoing fees that resulted in the product provider earning more from a retiree s annuity assets than the actual retiree! Many layers of fees have been reduced or removed completely to ensure that your annuity assets go as far as possible Tel: (0860 INV PPS) Fax: clientservices@ppsinvestments.co.za

3 for instance: There are no initial product fees when investing in the OPN Living Annuity Ongoing product administration fees can be as low as ZERO depending on which underlying unit trust(s) you choose There are no product fees for switching between underlying unit trusts if required Your financial advisor will negotiate a fee for initial and ongoing advice for as long as you require the advice - this fee is regulated by our bands and will also be transparently reported to you at all times Remember that the higher your ongoing fees the lower the effective growth rate within your product. To illustrate the additional value of our reduced ongoing fees consider the following table: The table illustrates the impact of ongoing fees on a R100,000 investment growing at a rate of 10% over a 15 year period post-retirement. The annual fee is the combined annual fees of the living annuity, the asset manager managing the unit trusts selected and the potential fee for optional financial advice. We can clearly see that the higher the income and the fees, the lower the value left after 15 years. Annual Fee 2.5% income 5% income 7.5% income 10% income 1% R 257,184 R 180,094 R 125,023 R 86,006 2% R 223,248 R 155,797 R 107,768 R 73,857 3% R 193,528 R 134,587 R 92,757 R 63,325 4% R 167,535 R 116,097 R 79,716 R 54,209 5% R 144,830 R 100,000 R 68,402 R 46,329 Importantly, when investing in a OPN Living Annuity your total annual fees could be as low as 0.65% per annum plus whatever fee you agree to pay a financial advisor should you appoint one. 4) Leaving any residual assets to your estate, not to an insurance company s shareholders You have worked and saved hard leading up to your retirement specifically to build assets with which to purchase an annuity - in the old days you would buy a fixed annuity and you would receive an income for the rest of your life but once you ve passed away the income stops and there is no residual asset. Any remaining money is withheld by the insurer - they bear the risk that you might live for a long time after retirement so they keep the residual assets if you pass away shortly after retiring. In a living annuity, however, the residual value of the capital at the time of your death is payable to your elected beneficiaries. This means that living annuity investments will, if managed efficiently, have enduring value to your beneficiaries. Although, this will probably not be your primary objective for your post-retirement savings, it is a useful asset for your beneficiaries. Should you need more clarity on how a living annuity would work for you, your financial advisor or member relationship consultant will be able to assist you in this regard. There s never been a more important time to make the right choice of retirement product and we have never been in a better position to serve you in this regard. Tel: (0860 INV PPS) Fax: clientservices@ppsinvestments.co.za

4 1) How do you retire into the OPN Living Annuity? You want to take up the option of the OPN Living Annuity and you are: Retiring from the OPN Personal Pension/any other RA/Pension Preservation Fund at least 2/3rd of your retirement capital must be invested in an annuity product, such as the OPN Living Annuity Retiring from a Provident/Provident Preservation Fund (you have three options): take the full amount as a cash lump sum take a portion as a cash lump sum and invest the remainder in an annuity, such as the OPN Living Annuity invest the entire amount in an annuity, such as the OPN Living Annuity What do you do? You need to send a written instruction to your current retirement fund provider informing them of your decision to transfer to the OPN Living Annuity, attach a copy of our application form and any additional documentation they require. Send us your written confirmation and the OPN Living Annuity application form to (021) and leave all of the administration to us. This process should be completed in 4-8 weeks. 2) You are contemplating transferring from an existing Living Annuity into the OPN Living Annuity: What do you do? You need to send a written instruction to your current Living Annuity provider informing them of your decision to transfer to the OPN Living Annuity, attach a copy of our application form and any documentation they require. Send us your written confirmation and the OPN Living Annuity application form to (021) and leave all of the administration to us. Your transfer (which will be referred to as a Section 37 transfer) should be completed in 4-8 weeks. Note: Your income % and frequency will remain as is until your next anniversary date when you may change it. You will never be without an income payment for any period of time. Remember: You pay no initial administration fees to PPS Investments You do not pay advice fees at the point of transfer You may negotiate your ongoing advice fee with your advisor Unlike transferring certain RA products which may incur a reduction in value, there are no such penalties when transferring a living annuity - the full policy value will be transferred We believe that YOUR retirement savings are YOURS - why pay excessive fees and deplete what YOU have worked so hard for! Your financial advisor or member relationship consultant will be able to assist you with this process. There s never been a more important time to make the right choice of retirement product and we have never been in a better position to serve you in this regard. Tel: (0860 INV PPS) Fax: clientservices@ppsinvestments.co.za

5 The OPN retirement and savings products form part of the PPS Investments product suite. PPS Investments has been managing retirement and savings products for a number of years but until 2009, has done so exclusively for the members of the Professional Provident Society under the PPS brand. The suite of OPN products make available to all investors the flexibility, transparency and cost-effectiveness that epitomise the PPS products.

6 Contact your financial advisor, a PPS Member Consultant on or the PPS Investments Client Service Centre on Otherwise send us an to clientservices@ppsinvestments.co.za. Disclaimer: The information, opinions and any communication from the PPS Investments group, whether written, oral or implied are expressed in good faith and not intended as investment advice, neither does it constitute an offer or solicitation in any manner. Furthermore, all information provided is of a general nature with no regard to the specific investment objectives, financial situation or particular needs of any person. It is recommended that investors first obtain appropriate legal, tax, investment or other professional advice prior to acting upon such information. PPS Multi-Managers is a licensed financial services provider.