NEW MEMBER BENEFIT SESSION AGENDA Structure Management - - PowerPoint PPT Presentation

NEW MEMBER BENEFIT SESSION

AGENDA

❑Structure ❑Management ❑Membership ❑DPA & CoE ❑Contributions ❑Transfers ❑Investments ❑Risk Benefits ❑Resources

Structure of the UCTRF

The UCTRF is a defined contribution provident fund. The full contribution is made by UCT as your employer. The full benefit is payable as a lump sum in cash (subject to tax) on retirement.

Management of the UCTRF

The UCTRF is managed by a Board of 14 Trustees, 7 of whom are elected by the members. Trustee elections take place every 3 years. (The next elections will be held in September 2019.) The Board has to ensure that members' and beneficiaries’ interests are protected. The Board appoints a Principal Officer, who is responsible for compliance and the day-to-day running

• f the UCTRF.

UCTRF Membership

❑ All staff with whom a contract for permanent employment with the Employer has been

concluded, irrespective of the end date of such contract, are required to join the UCTRF.

❑ You can only leave the UCTRF when you leave the Employer’s service:

Resignation, retrenchment, dismissal (but you can choose to leave your benefit in the UCTRF) Retirement (but you can choose to leave your benefit in the UCTRF) Death

Understanding your DPA & CoE

Your Deemed Pensionable Amount (DPA) is a percentage of your Cost of Employment (CoE).

Everything to do with the UCTRF works on the DPA. This figure is used to calculate the amount allocated to the UCTRF and UCTRF benefits. You may elect this percentage when you join the Employer and when your salary changes (usually at the beginning of each year).

Understanding your DPA & CoE

The default DPA percentages are: However, you may choose a DPA between 100% and 50% of your CoE. Up to R150 000: 70% R150 001 to R250 000: 75% R250 001 to R400 000: 78% R400 001 and above: 80%

Effect of DPA on Retirement Benefit

The lower your DPA percentage, the more your take home pay. BUT you may not have sufficient retirement savings to live comfortably when you retire. We strongly recommend that you use the Retirement Provision Calculator

• n the UCTRF website to get an

understanding of whether you are saving enough for retirement. http://uctrf.co.za/23/L/Retirement- Provision-Calculator

Contributions to the UCTRF

The Employer makes the full contribution to the UCTRF out of your

• CoE. The current structure is as follows:

Category Contribution rate** Retirement savings 20.066% of DPA Risk benefits/Admin* 2.434% of DPA Total 22.5% *The risk premiums and administration fee are revised each year. ** T2 staff employed prior to 1 July 2017 have a different contribution rate.

Additional Contributions

You can request that the Employer make additional contributions to your UCTRF retirement savings: There is no deduction from these contributions toward risk premiums or administration fees, so they are pure retirement savings.

Between 1% and 10% as additional retirement savings

Tax on Contributions

Your total contributions to pension, provident or retirement annuity funds totaling the lesser of: Whichever amount is less will be tax free. Any balance will be taxable, but will be paid out tax free on leaving the UCTRF.

27.5% of taxable income

R350 000

Transferring into the UCTRF from another fund

Fund Type Advantages Disadvantages Previous Employer’s Provident Fund

• Tax-free transfer
• Probable saving in fees
• Retirement savings in one place
• You may be able to withdraw cash

from your previous fund (subj to tax)

• Check you are happy with

investment choices available in UCTRF Previous Employer’s Pension Fund

• Probable saving in fees
• Retirement savings in one place
• Taxable
• You may be able to withdraw cash

from your previous fund (subj to tax) Provident Preservation Fund

• Tax-free transfer
• Probable saving in fees
• Retirement savings in one place
• You can make one cash withdrawal

from a preservation fund (subj to tax)

• Check you are happy with

investment choices available in UCTRF Pension Preservation Fund Not available (unless you treat it as a cash withdrawal from the preservation fund) Retirement Annuity Not available

What you need to know before you take cash from a previous fund

It is important to understand the implication of taking cash on your retirement benefit.

Tax

Up to 36% Reduced tax relief at retirement

Loss of capital

Loss of interest earned Reduced retirement benefit

Death Benefits

*Not applicable to T2 staff whose current contract of employment started prior to 1 July 2017. ** For T2 staff whose current contract of employment started prior to 1 July 2017 - 3x DPA

 UCTRF Accumulated Retirement Savings, plus  Risk benefit of 6 times annual DPA* (default)

UCTRF Death Benefit

• Compulsory: 1 x DPA**

Separate Death Benefit (unless paid

• ut on permanent

disability)

Changing your Death Benefits

 The current cost of 1x DPA is 0.24% of DPA.

 The option to increase your voluntary cover is only available on joining the UCTRF, when the number of your dependants

increase (e.g. if you get married or have a child) and then in October 2019 and each October thereafter. Alternatively you may increase you cover if you are prepared to provide medical evidence of your good health to the insurer at your own expense.

* For T2 staff whose current contract of employment started prior to 1 July 2017 - up to 2x DPA

You may elect to reduce your death benefit to a minimum

• f 4x DPA inclusive of your UCTRF Accumulated

Retirement Savings. The difference in your premium will be allocated to your Accumulated Retirement Savings.

UCTRF Death Benefit

• Voluntary: up to an additional 4x DPA*

Separate Death Benefit

What is the difference between the UCTRF Death Benefit and Separate Death Benefit?

Separate GLA (tax free)

Falls outside the Pension Funds Act Pays directly to the beneficiary you have nominated (or yourself if disabled) Pays in event of death or permanent disability

UCTRF GLA (taxable)

The UCTRF Board must make a disposition in terms

• f S37C of the Pension Funds Act

The UCTRF Board must determine your dependants and nominees with the guidance of your recommendation Pays in event of death

Trustee S37C process

Your recommendations will be an important guide to the Board. If you would like to motivate your recommendations, please attach a letter of motivation to your nomination form. Please draft your motivation on the assumption that it will be acted

• n in the next twelve months.

The Board is obliged to consider all dependants as defined by law (but not necessarily to make allocations to them). The Board must pay benefits in the proportion it judges to be fair, so we need as much information as possible.

Nomination of Beneficiaries

You MUST complete the Nomination of Beneficiaries form. It is important to update your form if your circumstances change. You can do this online.

Death Benefits

R19.75 per month forms part of 22.5% contribution

Funeral Cover*

Lump sum benefit

• Main member, Spouse, Child (14-21 years) – R30 000
• Child (6-13 years) – R15 000
• Child (2-5 years) R7 500
• Child (under 2 including stillborn) – R7 500

Cover

*Please note: Members will be covered for funeral cover unless they choose to Opt Out of this benefit, in which case the savings in the premium will be allocated to the members’ retirement savings.

Disability Benefits - Cash Lump Sum

Compulsory (only payable if you are totally and permanently disabled)  1 times DPA* Voluntary (only payable if you are totally and permanently disabled)  If you select additional separate death cover, your lump sum disability cover will be increased to match.

* For T2 staff whose current contract of employment started prior to 1 July 2017 - 3x DPA

Disability Benefits – Income Continuation*

* Not applicable to T2 staff whose current contract of employment started prior to 1 July 2017

70% of the first R15 000 of monthly DPA, plus 60% of the next R20 000, plus 45% of any DPA in excess of R35 000 per month; and The contribution to the UCTRF will also continue to be paid. Payable on temporary or permanent disability (tax free) after 3-month waiting period (you will need to rely on your sick leave).

Investment Options: Individual Portfolios

Portfolio Name Portfolio Type Feature / asset class Objective Risk Profile Time Portfolio A Income Fud Money market instruments Inflation + 1% Low 0 – 2 years Portfolio B Smooth Bonus Fund Smooth returns; capital guarantee Inflation + 3% Medium 3 – 5 years Portfolio C Balanced Fund Market- linked Inflation + 5% High 7 Years Portfolio D Shari’ah Fund Complies with Islamic law Inflation + 4% Medium to High 5 – 7 years

Investment Risk

Example of long-term actual returns over the different portfolios achieved over a 23- year period

Investment Risk

Life Stage Model

Structured Model Normal Retirement Age 65 Invested according to age

Life Stage Strategy

Your Choices

❑ You can change your investment choice.

❑You can decide how you want to invest your:

Accumulated retirement savings (1st switch in each 12 month period between 1 July and 30 June free, subsequent switches R496 each) Future retirement savings (monthly contributions)

What if you don’t choose?

If you don’t complete the investment forms you will be defaulted to:

 The Lifestage model;

unless you turn 60 or older in the year you join the UCTRF, in which case:

 The Income Fund (Portfolio A)

Resources

Benefit information sessions 1st and 2nd Tuesday of each month Bremner Building, UCT

UCTRF website www.uctrf.co.za

Retirement Planning Seminars 3rd quarter

Info sessions (next held in September 2019)

AGM 4th quarter

Disclaimer

This presentation is for information purposes only. The information contained herein is not intended to be, and must not be regarded as, financial advice or advice as defined in the Financial Advice and Intermediary Services Act (37 of 2002). The University of Cape Town Retirement Fund (the ‘UCTRF’), the Trustees, the Principal Officer and UCTRF staff, together with the UCTRF’s service providers, shall not be liable for any loss or harm or damage which may be suffered by any person as a result of the use or reliance upon the information presented herein, or any discussions between the aforementioned and any person arising from the presentation. In the event of any discrepancy between the presentation and either the UCTRF Rules or the UCTRF’s Insurance Policies, the Rules and Policies will prevail. The Pension Funds Act 25 of 1956 overrides all Rules and Insurance Policies.

Thank you! Any questions?