University of Johannesburg Defined Benefit Pension Fund University of Johannesburg Pension Fund What you need to know about your retirement fund Presenters: Emda Hankey and Trevino Ramsamy

Agenda  1.Introduction  2.Contributions  3.Retirement benefits  4.Withdrawal benefits  5.Death benefits  6.Disability benefit  7.Benefit statements  8.Intranet  9.AF Online and call centre  10.Investment choices  11.Investment portfolios  12.Risk profile  13.Life Stage Model  14.Switching

 Pension fund  Tax deduction  1/3 cash at retirement  Employer and member contributions depending on membership category  Normal retirement age – 65  Summary of Benefits / Benefit statement Introduction – University of Johannesburg Pension Fund & University of Johannesburg Defined Benefit Pension Fund

UJ Pension FundUJ Defined Benefit Pension Fund StructureDefined contributionDefined benefit with Defined contribution categories (Annex D & E) StatusActive fundClosed to new members InvestmentsMember investment choice – members carry investment risk Trustee portfolio and member investment choice (Annex D & E) Introduction

Contributions Member contribution: 7.5% Investment Return Employer contribution: -Category 1: 13.0% -Category 2: 14.8% -Category 3: 16.5% Equitable share of Fund: ?? Member contribution: 7.5% Investment Return Employer contribution: ?? Retirement benefit promise

 Normal retirement age  End of the calendar year in which the member reaches age 65  Early retirement  From age 55 with Employer’s consent  Late retirement  No later than age 70 with Employer’s consent  Consent has to be renewed annually Retirement Benefits

 Purchase annuity from registered insurer  Up to one third in cash  Talk to your financial advisor  Retirement Benefit – UJ Pension Fund

 Normal Retirement Age / Late Retirement  Lump sum to purchase annuity from registered insurer or pension from Fund  Benefit promise as calculated by actuary  Years of service  Salary  Talk to your financial advisor  Retirement benefit – UJ Defined Benefit Pension Fund

 Early Retirement  Lump sum to purchase annuity from registered insurer or pension from Fund  Benefit promise as calculated by actuary  Years of service  Salary  Reduction  Talk to your financial advisor  Retirement benefit – UJ Defined Benefit Pension Fund

 Reasons for withdrawal  Termination of service  Withdrawal benefit  UJ Pension Fund: Equitable share of Fund  UJ Defined Benefit Pension Fund: Lump sum based on contributions, subject to benefit promise  Deductions per Section 37D of the Pension Funds Act  Preserve the benefit if possible  Talk to your financial advisor  Withdrawal benefit

 Main and Annexure B members  Equitable share; plus  4x annual pensionable salary  Annexure A members  Lump sum of 2x annual pensionable salary; plus  A qualifying partner’s pension and a qualifying child’s pension Death benefit – UJ Pension Fund

 Pre-retirement  Lump sum of 2x annual pensionable salary; plus  An annual qualifying partner’s pension of 40% of pensionable salary; plus  A qualifying child’s pension of 10% of pensionable salary per qualifying child to a maximum of 30%  No qualifying partner, the child’s pension doubles Death benefit – UJ Defined Benefit Pension Fund

 Post-retirement if fund pensioner  5 year guarantee for qualifying partner  Full pension paid to partner  No qualifying partner – lump sum paid to the estate  After 5 years  Qualifying partner annual pension 50% of pensioner’s pension at date of death Death benefit – UJ Defined Benefit Pension Fund

 Section 37C of the Pension Funds Act  Thorough investigation  Consider legal and financial dependants  Nomination of Beneficiaries form is a guideline Distribution of death benefits

 Payable as per the Rules of the University of Johannesburg Disability Reserve Fund  82.5% of the member’s monthly salary  6 month waiting period  Subject to approval of claim by insurer  Payable until earliest of recovery, re-employment, normal retirement age or death before retirement Disability benefit

 Issued annually  Contains following information  Benefit category  Withdrawal benefit  Death benefits  Disability benefit Benefit statements

 Useful information available on intranet  Rules of the Fund  Benefit summaries  Member booklets  Trustee Reports  Nomination of beneficiary forms  Forms for additional voluntary contributions  Performance history  Red button on left of opening page  “Pension and Provident Funds” Intranet

 Call centre number   AF Online  Updated values – only defined contribution members  Various financial planning tools and calculators  From July 2013 AF Online and call centre

Introduction – Investment Choices  Legislative limitations New Regulation 28 Limitations with regards to foreign investments  Principle limitations Trustees are required to act in the best interests of the members

Introduction – Investment Choices  Members have different needs Solution: Individual investment choices  Members make own choices within a given framework of portfolios  Trustees are still responsible for the choice of portfolios offered to the members

Investment Choice Process 2013  Employees who joined the UJ Pension Fund  Annexure D, E and F members of the UJ DB Pension Fund

Current Portfolios  Wealth Creation  Wealth Preservation  Capital Protection (implicit capital preservation)  Guarantee Portfolio  Money Market Portfolio  Shari’ah compliant portfolio  Life Stage Model

Available Portfolios Member Choice Wealth Creation Wealth Preservation Capital Protection Guarantee Money Market Shari’ah Compliant Life Stage

Market Linked Portfolios  Returns generated directly from the market  No guarantee of capital protection  Should provide better returns than Guarantee portfolio  Ideal for members with long-term investment horizon

Wealth Creation  Balanced portfolio with flexible asset allocation.  Aims to achieve inflation + 7 % in the long- term.  Potentially high volatility. Equity exposure may range from 45% to 75%  Normally members more than 10 years from retirement

Wealth Preservation  Positive return portfolios with some exposure to higher risk balanced portfolios  Aims to achieve inflation + 5 % in the medium to long-term  Aims to preserve wealth in real terms while maintaining exposure to growth assets  Lower equity exposure and risk than Wealth Creation  Normally members with five to 10 years from retirement

Capital Protection  Aims to minimize the risk of negative returns over the short-term  100% of capital and growth declared is guaranteed on retirement, withdrawal, retrenchment, death and disability  A positive return portfolio with no explicit guarantees provided  Aims to achieve inflation + 3 % over 3 years  Market linked portfolios (excl Money Market) should outperform this portfolio over long term  Normally members with less than five years to retirement

Money Market  100% money market instruments  Lowest risk profile  Suitable for investors who have a low appetite for volatility risk, investors with short-term investment horizons  Normally members within one year from retirement

Guarantee Portfolio  Smooth bonus portfolio (underlying assets diversified exposure to all asset classes)  Objective to achieve inflation + 3.5% over longer term.  Fixed guarantee on capital, contributions and declared positive investment returns (on benefit payments and other specified events)  Returns declared monthly in advance, once declared cannot be taken away  Switch at book value (10% of assets limit)  Suitable for risk averse investors (close to retirement/avoid volatility of full market-linked investments)

Shari’ah Portfolio  A Shari’ah Compliant Portfolio that is also compliant with Regulation 28 of the Pension Funds act  Balanced Fund with exposure to equity and cash  Aims to give an investment return comparable to a traditional balanced portfolio  Equity exposure may be as high as 65% of the portfolio

Risk Return Profile Risk Expected Return Wealth Creation Wealth Preservation Capital Protection Guarantee Money Market Shari’ah Compliant

Investment Returns to 31 December year3 years5 years UJ Wealth Creation 18.7%14.2%11.5% CPI+7% 12.6%12.1%13.3% UJ Wealth Preservation 14.8%11.3%10.9% CPI + 5% 10.6%10.1%11.3% UJ Shari’ah 6.2%6.8% CPI + 5% 10.6%10.1%11.3% UJ Capital Guarantee 10.9%8.8%7.9% CPI + 3.5% 9.1%8.6%9.8% UJ Capital Protection 12.1%9.3%10.3% CPI+3% 8.6%8.1%9.3% UJ Money Market 5.4%6.2%8.5% CPI + 1.5% 7.1%6.6%7.8% TRUSTEE PORFOLIO1 year3 years5 years Trustee 19.3%14.6%11.2% CPI + 5% 10.6%10.1%11.3%

Investment Returns to 31 March year3 years5 years UJ Wealth Creation 20.3%14.2%12.1% CPI+7% 12.9%12.3%13.2% UJ Wealth Preservation 15.2%10.6%9.4% CPI + 5% 10.9%10.3%11.2% UJ Shari’ah 8.2%7.6%6.5% CPI + 5% 10.9%10.3%11.2% UJ Capital Guarantee 12.5%9.5%8.1% CPI + 3.5% 9.4%8.8%9.7% UJ Capital Protection 11.7%8.6%9.8% CPI+3% 8.9%8.3%9.2% UJ Money Market 5.1%5.9%7.8% CPI + 1.5% 7.4%6.8%7.7% TRUSTEE PORFOLIO1 year3 years5 years Trustee 22.0%15.7%12.8% CPI + 5% 10.9%10.3%11.2%

Risk Profile – Where do I fit in? The most important factor is: How much risk can I take?

Risk Profile – Where do I fit in?  Member’s investment horizon - i.e. duration of membership of the Fund  Member’s dependence on Fund’s assets  Member’s tolerance for investment risk

Guidelines for Investment Choice  Members who fall within the following categories should consider the applicable portfolios: Members younger than 53 – Wealth Creation Members between 53 and 60 – Wealth Preservation Members 60 years and older – Capital Protection

LifeStage Model – Default/Trustee Choice  Based on the assumption that younger members can accept more risk due to their long investment time horizon  As a member ages, his/her risk is reduced by reducing his/her equity exposure  Portfolio suitable for members who are uncomfortable with making an investment choice

Member’s ageWealth Creation Market Linked Portfolio Wealth Preservation Market Linked Portfolio Capital Protection Market Linked Portfolio Up to 53 years100.0% 53 to 54 years66.7%33.3% 54 to 55 years33.3%66.7% 55 to 58 years100.0% 58 to 59 years66.7%33.3% 59 to 60 years33.3%66.7% 60 to 65 years100.0% LifeStage Model – Default/Trustee Choice

Risk Return Profile Risk Expected Return Wealth Creation Wealth Preservation Capital Protection Guarantee Money Market Shari’ah Compliant Age 54 & younger Age 59 & older Life Stage Model

LifeStage Model – Default/Trustee Choice  Portfolio restructuring in terms of member’s age completed automatically on an annual basis on your birthday  Life Stage Model constructed on assumption that members will retire on average at age 62 years

Administration Aspects: Annual Switching  Members must exercise choices on or before Friday, 31 May 2013  A member’s assets will not be invested in more than one portfolio (please choose only one portfolio)  Investment choices – once annually

Administration Aspects  Option forms to be returned to:  Mrs. Maggie Langedyk  Human Resources Resourcing Division B5 Building APK Campus Kingsway Road Auckland Park  Or via 

Thank you for attending this session!

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