Your Retirement - Our Passion. Member Benefit Statement Brochure 2017

Transcription

1 Member Benefit Statement Brochure 2017 Ÿ Introduction Ÿ Your benefit statement explained, step-by-step Ÿ Member portfolio fact sheets as at 30 June 2017 Ÿ Benefits in a Nutshell Ÿ Extract from the 2017 Integrated Annual Report Ÿ Your Last Will & Testament Ÿ Significant rule changes during the past financial year Ÿ Contact details Your Retirement - Our Passion Ethics Hotline

2 INTRODUCTION Your annual benefit statement confirms relevant personal details and reflects your Sentinel accumulated savings towards retirement. This brochure explains the content of your benefit statement and will help you understand how the Fund operates, the benefits and services it offers and also highlights events that occurred during the past financial year. The benefit statement is dated 30 June 2017, i.e. the Fund's financial year-end. Enhancements to this year's benefit statement have been made to assist you in your planning. A dashboard is included that reflects the present value of your future retirement income replacement position as well as potential improvement actions that may be considered. Your benefit statement is available on your secure personal profile through the Fund's web site. More accurate benefit forecasts can also be obtained through the benefit calculator that is provided in this secure web site portal. Please register for access to the above, if you have not already done so, by visiting Sentinel's web site at Please note that the following assumptions have been used in all benefit related calculations: Ÿ Anticipated inflation rate (CPI) 6% Ÿ Anticipated annual salary increases applied to future contributions 7% Ÿ Anticipated future annual investment returns 11% Ÿ Pension discount rate applied to the pension/annuity factor 4% Ÿ Pension options applied: The default retirement benefit option: no lump sum, 75% spouse provision and a 5 year term certain (capital protection) guarantee. The default benefit for a widow of a deceased member: no spouse provision and a 5 year term certain (capital protection) guarantee. Ÿ Marital status assumptions applied to all pension calculations: Unless specifically shown, pension calculations provide for double life pensions, i.e. for the member and a spouse thereafter. Spouse age: 2 years younger than member. This information is based only on your Sentinel membership and investment. In reviewing your actual financial position, you should also include any other investments that you may have, specifically those that you may hold in other retirement funds. Please take the time and read this brochure for a better understanding of the content of your benefit statement! 2

3 YOUR BENEFIT STATEMENT EXPLAINED, STEP-BY-STEP The following information and explanations are provided in the sequence that it appears on your benefit statement. A - PERSONAL MEMBERSHIP DETAILS Your membership conditions essentially mirror your conditions of employment. These elements have been obtained from your employer and are specified in your employer's Special Rules. Your personal details are important to the Fund and are also reflected so that you can confirm that these are correct. Should any of these details be incorrect, please contact the Fund as soon as possible in order for this to be corrected. Contact details In the event that contact details, i.e. your cellular phone number and/or address do not appear on your statement, you have not registered these with the Fund and will receive all correspondence from the Fund via snail mail. You can expedite your receipt of valuable information by r e g i s t e r i n g t o r e c e i v e electronic communication and to obtain 24/7 access to y o u r m e m b e r a c c o u n t through the secure web portal. Retirement Age Your Normal Retirement Age (NRA) is the age at which you need to retire. The option to retire early becomes available ten years before NRA but after age 50. Yo u r m e m b e r s h i p w i t h Sentinel does not have to end when you leave the service of your employer. You may retain membership until retirement age. IMPORTANT TEST Your Fund Salary represents the portion of your total remuneration package that is used to determine your c o n t r i b u t i o n s t o w a r d s retirement. Compare the value reflected here with your total gross package to determine whether you are s a v i n g s u f f i c i e n t l y f o r retirement. If this value is substantially lower than your f u l l p a c k a g e, y o u a r e probably not saving enough! Do the same test on your Total Contribution Rate t o w a r d s r e t i r e m e n t (excluding Employer Risk). This should total at least 15%. 3

4 B MEMBER DASHBOARD Sentinel aims to assist you in achieving an Income Replacement Rate of 75% at retirement. At this stage of your career, your focus should be on accumulating sufficient capital to provide a monthly pension that equates to around 75% of your last Fund Salary when you retire. This is dependent on the following: Savings Term 40 Years Contribution Rate 15% of Fund Salary Investment Returns CPI + 6% Over the long term YOUR RESPONSIBILITY YOUR RESPONSIBILITY The member dashboard provides you with a snapshot of your current position and alludes to matters than can be considered to improve your future benefits. B1 PENSION INCOME FORECAST Calculations are based on the assumptions provided in the introduction above and represent gross income values, i.e. before any deductions for medical aid, tax, etc. This dashboard shows two results. Both these figures have been discounted to present value, i.e. today's rand value. Please refer to the Benefits in a Nutshell insert elsewhere in this Brochure for a explanation of Sentinel's Pension Income Choice product offering. Result 1: The figure printed in bold reflects the present value of your projected future monthly pension, assuming your membership conditions and the assumptions reflected above are maintained until you reach normal retirement age. Compare this value to your Latest Fund Salary (reflected in A above) to measure your current position. Example: Result 2: The figure printed below Result 1 (not in bold) r e f l e c t s t h e p o t e n t i a l improvement that an Additional Voluntary Contribution (in addition to your current contributions) of R1, 000 per month, escalated annually by 7%, will make to your future retirement benefit. IMPORTANT TEST: Take the figure in bold, and relate it to a % of your Latest Fund Salary shown in A PERSONAL MEMBERSHIP DETAIL above. How far are you from the 75% replacement income objective? 4

5 B2 & B3 CONTRIBUTION DASHBOARD Example: These dashboards reflect the level of your contributions in relation to the current thresholds of the tax deductions provided for in the Income Tax Act. It also alludes to the scope that you may have to increase your contributions in a tax effective manner. Please remember that only your Sentinel contributions are accounted for and that contributions to any other approved retirement fund, i.e. a retirement annuity fund, are not included. The tax deduction for total retirement contributions, including Sentinel risk benefit contributions, made by you and your employer, is limited to a maximum of 27.5% of the greater of remuneration or taxable income, limited to a maximum of R350, 000 per year. Excess contributions will not be forfeited as these roll over to subsequent tax years. The following table illustrates the cash flow advantages that you already enjoy on your normal monthly contributions and may extend further by making Additional Voluntary Contributions (AVC's). Monthly Taxable Income Marginal Tax Rate Monthly AVC Tax Saving Actual cash flow cost R6,312 0% R1000 R0 R1000 R6,313 to R15,823 18% R1000 R180 R820 R15,824 to R24,711 26% R1000 R260 R740 R24,825 to R34,205 31% R1000 R31 R690 R34,206 to R46,300 36% R1000 R360 R640 R46,301 to R59,025 39% R1000 R390 R610 R59,026 to R125,000 41% R1000 R410 R590 R125,001 and above 45% R1000 R450 R550 If this appeals to you, please talk to your employer's payroll department to find out whether they will facilitate an Additional Voluntary Contribution deduction on your monthly salary in order for you to maximize the opportunity in a tax effective manner. 5

6 C MEMBER INVESTMENT ACCOUNT This dashboard reflects the total of all transactions and movements that were posted to your investment account, from 1 July 2016 to 30 June Retirement contributions excludes Sentinel risk benefit contributions paid by your employer (if applicable) because those contributions do not form part of your retirement savings as they pay for additional death and/or disability cover. Special Contributions represent amounts transferred into Sentinel from another fund, either voluntarily or in terms of Section 14 of the Pension Funds Act. D INVESTMENT DASHBOARD The investment portfolio/s that your retirement savings were invested in on 30 June 2017, and the portfolio/s exposure is indicated in this section of the statement. Sentinel's investment strategy provides members with two investment avenues: The Life Stage Model: consists of three portfolios, with different risk profiles. Retirement savings are automatically moved from one investment portfolio to the next based on the number of years to Normal Retirement Age. A member who opts to follow the Life Stage Model is therefore not required to make any investment decisions. Life Stage portfolios consist of the Wealth Builder (Aggressive, up to 12 years before NRA), the Inflation Protector (Moderate, from 12 to 5 years before NRA) and the Pension Protector (Conservative, for the last 5 years before NRA). Member Choice: Members, who elect not to follow the Life Stage Model, are able to exercise individual choice and switch between investment portfolios daily (daily unit pricing). The three Life Stage portfolios as well a Money Market, Capital Protector and Shari'ah portfolio are available and splitting of capital is also allowed. Two switches between portfolios per calendar year are allowed free of charge and thereafter a fee of 0.1% of capital switched, limited to a maximum fee of R5, 000, is levied. Please obtain advice before you exercise individual investment choice. Please refer to Member portfolio fact sheets elsewhere in this brochure for details of Sentinel's investment portfolios. 6

7 E RISK BENEFIT COVER This section provides the values of cover that you may become entitled to in terms of the Rules of the Fund, in the event of death or permanent disability, if applicable. Please note that you may qualify for a disability benefit if the Trustees are satisfied that you are totally and permanently disabled to perform your own and similar occupation, in a specific environment. The quoted figures provide projected default benefit values as at 30 June The assumptions quoted earlier in this brochure also apply to these calculations and, if applicable, average Fund Risk Salary over 12 months is used for cover values. Please also note that the illustrated maximum lump sum percentages do not constitute a compulsory option and that monthly pension values can be improved by selecting lower lump sum values. Cover Multiple refers to the cover multiple of your average annual Fund Risk Salary. Cover Value reflects the actual cover that you enjoyed as at 30 June Please remember to submit a nomination form to the Fund and to update it regularly, as changes occur in your life that may impact your wishes. You will find additional explanations of these benefits in the Benefits in a Nutshell insert elsewhere in this Brochure. ACCESS TO YOUR FUND AFFAIRS WHENEVER IT SUITS YOU! You can access communication, previous benefit statements, daily updated investment values and a benefit calculator electronically! 1 Register to access your personal information by accessing our web-site 2 go to User Login and click on Signup, 3 to find a form that must be completed and submitted with a copy of you ID or Passport to: info@sentinel.za.com or faxed to

8 LIFE STAGE MEMBER PORTFOLIOS FACT SHEET AS AT 30 JUNE

9 OTHER MEMBER PORTFOLIOS FACT SHEET AS AT 30 JUNE

10 SENTINEL BENEFITS IN A NUTSHELL BENEFIT TYPE QUALIFICATION CRITERIA BENEFIT COMPOSITION MEMBER OPTIONS TAX IMPLICATIONS A WITHDRAWAL due to RESIGNATION or DISMISSAL A withdrawal benefit may be claimed if your employer terminated your service and you have not yet reached your normal retirement age (NRA). A withdrawal benefit may not be claimed if you have already attained NRA, or if you re-joined Sentinel through another employer or if you have not left your employer but will become a member of another fund. The benefit consists of your Fund Credit on the date that you notify the Fund of your benefit option. Provided that you have not attained your Normal Retirement Age, you have 24 months to decide what you want to do with your money and during this period you may exercise investment choice to move your money from the Money Market to a more appropriate portfolio or the Life Stage Model. You may: Ÿ Extend your Sentinel membership until you retire or die, or Ÿ Transfer your benefit to an approved retirement fund, or Ÿ Withdraw the benefit in cash, or Ÿ Partially withdraw and transfer the balance to a retirement annuity or your new employer's fund. Ÿ Ÿ Ÿ Tax liability is deferred until a benefit is paid. Tax free, except if transferred to a provident fund before 1/3/2016. The accumulative tax table below will be applied to withdrawal benefits: A WITHDAWAL due to RETRENCHMENT RETIREMENT RETIREMENT due to DISABILITY Members who are retrenched will qualify for a WITHDRAWAL benefit and all the above will apply, except for the tax treatment that may be better. Alternatively, you may qualify for a RETIREMENT or DISABILITY RETIREMENT, in which case the relevant sections below will apply. The option to retire from the Fund becomes available when you have left your employer and are within 10 years from your Normal Retirement Age (NRA) and at least 50 years old. Once you have attained NRA, it is compulsory to retire in the Fund when you stop contributing through your employer. To qualify for a disability benefit, the Trustees must be satisfied that you are totally and permanently incapable to perform your own and similar o c c u p a t i o n s i n a s p e c i f i c environment. Medical evidence must be submitted to support your claim. A retirement benefit is based on your Fund Credit and consist of maximum one-third lump sum, plus a monthly pension(s). You have 24 months, or until you attain NRA, to finalise plans and decisions and during this period you may exercise investment choice. Once approved by the Trustees, your Fund Credit will be enhanced by additional risk cover (provided that you participated and contributed towards Sentinel's Risk Benefits ) a retirement benefit will be awarded on the total available capital. The Pension Income Choice model allows retirees to sculpt the ideal income package, consisting of: Ÿ Guaranteed pensions, including: A guarantee that the pension will be paid for the life of the pensioner and nominated spouse thereafter. 75% or 100% spouse pensions. A term certain guarantee of 5 to 25 years to secure payment beyond the death of the pensioner. The purchasing power is maintained on a "with profit" increase basis. Ÿ Flexible pensions (living annuities), provided that requirements are met. The following tax table will be applied to certain retrenchment withdrawal benefits and retirement lump sums: This table is applied on an accumulative basis to retirement fund and employer lump sums. Monthly pensions are taxable and fall within the ambit of PAYE regulations. Disability pensions are taxable and do not qualify for tax exemption. DEATH of MEMBER A death benefit becomes payable when you die (irrespective whether you died at work or not) and the Fund has been notified of your death. A deceased contributory member's Fund Credit will be enhanced by additional risk cover (provided that the member participated and contributed towards Sentinel's Risk Benefits ) and the total will form the basis for benefits. 50% Of the total available funds will be used to provide a spouse or spouses pension, if applicable, and the balance w i l l b e p a i d i n l u m p s u m s t o dependents, nominees or the Estate. A lump sum allocation to a spouse, or part thereof, may be used to increase the spouse pension. Spouse pensions are guaranteed for life and the purchasing power is maintained on a with profit principle. Spouses may elect a term certain guarantee of between 5 and 25 years to secure the payment to dependents beyond the death of the spouse. Lump sums are taxed in the hands of the deceased member. The following tax table will be applied to lump sums: Monthly pensions are taxable in the hands of the spouse(s) and fall within the ambit of PAYE regulations

11 EXTRACT FROM THE JOINT LEADERSHIP REVIEW OF THE 2017 INTEGRATED ANNUAL REPORT The year under review has again been a challenging one, to say the least, yet overall performance achieved reflects the effects of prudent and innovative structures put in place over a number of years to minimise the impact of poor performing investment markets and to protect capital. Sentinel's four strategic pillars for sustainability and growth Consistently excellent investment returns As stated in our 2016 joint leadership review, South African and world markets have been volatile since 2008, and are expected to remain so for the foreseeable future. This statement held true for the year under review as the South African economy slowed even further and entered into a technical recession. The year has been characterised by extreme domestic market uncertainty coupled to a highly volatile South African rand. The impact of increased political uncertainty and low economic growth led to the resultant downgrading, by all major credit agencies, of South Africa's credit rating which weighed heavily on domestic investment market volatility. A strengthening rand reversed and the currency gains seen over a number of months were wiped out over a very short period. The attractiveness of South Africa as a stable emerging market investment destination has suffered as a result of the above factors and the poor financial performance and turmoil surrounding a number of state-owned enterprises. Sentinel too has experienced the pressure of these uncertain conditions, the toughest and most challenging in some years. This has presented extraordinary challenges to the Board of Trustees, Board committees and management. It is gratifying to note that given the huge levels of volatility and uncertainty experienced over the past year, that all of the Sentinel life-stage portfolios and the pensioner portfolio were able to deliver positive returns net of asset management and administration costs. Over many years Sentinel has developed a robust model to fit the risk profiles of the differing investment portfolios for members and pensioners. Based on 59 investment mandates vested in 33 selected investment managers, we diversified beyond the traditional local and offshore asset classes to also include private equity, hedge funds and unlisted property as these alternative assets are expected to deliver real net returns in excess of the returns provided by traditional asset classes. Currently Sentinel has a policy of utilising the full allocation of investments the Fund is allowed to make offshore and in Africa. Minimal costs Sentinel is guided by the same non-profit principle that characterised the mutual societies that thrived in South Africa until the 1990s. We offer a highly competitive fee structure and our database technology can handle large or small employers with equal proficiency. We exist for our members, pensioners and beneficiaries. The Fund is service rather than profit driven. We, therefore, work continuously on behalf of our stakeholders to manage administration and investment management costs effectively. Top-class governance Sentinel prides itself on the industry leading governance structures and reporting mechanisms it has put in place over many years. In our 2016 integrated annual report, Sentinel introduced several best practice reporting principles as recommended by the International Integrated Reporting Council (IIRC). These included a business model infographic, a focused approach to the Fund's material issues, and the incorporation of the 'six capitals' concept. In striving to achieve our goal of presenting an even more informative and transparent integrated annual report, these concepts have been further expanded on in this our sixth integrated annual report. Since the draft King IV report was published, Sentinel has been busy evaluating the code and impact thereof on our reporting and business processes. King IV will be implemented to ensure that Sentinel remains at the leading edge of governance initiatives. First-rate administration Our commitment to service excellence and the maximisation of efficiencies to enhance cost effectiveness is driven by technology and a motivated highly skilled workforce. A stable management team and staff complement, with low employee turnover numbers, has resulted in Sentinel being able to retain expertise and institutional memory in the organisation and an a d m i n i s t r a t i o n f u n c t i o n t h a t r e m a i n s consistently first rate. We are, however, mindful of the need to transform in line with South Africa's demographics, and remain diligent in our employment equity planning and ensuring that this process meets our set targets. Combined assurance During the year under review, Sentinel has further enhanced its comprehensive combined assurance framework optimising the assurance coverage obtained from management, internal and external assurance providers in the risk areas affecting the Fund. Annuitisation The actual annuity income that retirees earn is based on their accumulated retirement savings which depends on how long they have contributed to the Fund and whether they have contributed consistently at the recommended level over this period. The industry targets a replacement ratio of 75% of final salary, but members who join the Fund early in their careers can, from the age of 60 years, anticipate a pension in excess of this. Sentinel performs an asset liability modelling (ALM) exercise at least every 18 months in support of achieving this outcome. Cybercrime As technology and cybercrime rapidly evolves, our IT department will continually evaluate and update these defences to mitigate the risk of an attack on the Fund. Retirement reform National Treasury published regulations with regard to lowering charges and improving market conduct for retirement funds. Sentinel already complies with the vast majority of these and welcomes most of the revised regulations. Transformation As a retirement fund governed by the Pension F u n d s A c t, S e n t i n e l d o e s n o t h a v e shareholders. We support Black Economic Empowerment (BEE) and transformation via three channels. The first is through our internal Employment Equity (EE) plan, in which we develop employees from designated groups up through the ranks. The second is by recruiting promising graduates as interns and training them in the financial, investment and retirement fund fields. Thirdly, we support a black investment manager incubation programme that assists start-up black investment management firms to establish themselves in this industry and support these managers after they have graduated from the programme into the mainstream investment management industry. This successful programme has been under way for a number of years and at 30 June 2017, 12 black investment management firms have graduated from the programme, while a further 10 black investment management firms are being supported

12 Outlook for 2017/18 The domestic arena, which houses the bulk of Sentinel's assets, is in a cauldron of uncertainty and turmoil. This mix has the potential for longterm instability creating irrational decisions and behaviour. Stabilising the economy, creating an environment of certainty with regard to policy decisions and game plan, and setting the scene for longer-term sustainable inclusive growth is paramount in ensuring the financial stability of all South Africans and in particular those whom we serve. Sentinel has for more than 70 years weathered many storms. The Fund has, through its welldiversified asset base and robust investment strategy, overcome many market, political and international rollercoaster ups and downs. We are therefore confident that although the next 12 months will be challenging, if not difficult, Sentinel will navigate this successfully within the ambit of acceptable risk tolerance levels. Appreciation We extend our sincere appreciation to all Sentinel service providers and business partners for their contribution to our commitment of excellent service and also to our participating employers, members and pensioners for their continued loyalty and support, even during the difficult times of late. COST RECOVERY FEE Sentinel s Total Cost recovery methodology includes all investment, fund entity and administration costs and is based on assets held in the Fund. This fee is charged individually to member accounts and on a pooled basis to the Pensioner Portfolio and Risk Benefit Portfolios. # The following table reflects the actual costs recovered in the 2017 financial year as well as the budgeted costs for the 2018 financial year, per the various portfolios: Description Wealth Builder Portfolio Inflation Protector Portfolio Pension Protector Portfolio Money Market Portfolio Shari'ah Portfolio * Capital Protector Portfolio * Pensioner Portfolio Risk Benefit Portfolios 2017 Actual 0.54% 0.53% 0.51% 0.23% 0.98% 0.65% 0.49% 0.42% 2018 Budget 0.57% 0.55% 0.51% 0.26% 0.99% 0.65% 0.51% 0.45% AB la Grange Chairman of the Board FJ Visser Chief Executive Officer * These are external portfolios and costs include direct asset management fees levied by the portfolio service providers. # Investment returns are communicated reflecting both gross returns (returns before cost of returns, after implicit costs) and net returns (returns after deducting all costs; after implicit and explicit costs). 14

13 YOUR LAST WILL AND TESTAMENT The responses to some of the questions that we are often asked during individual and group consultations are important and worth sharing with all our members. Why should I have a Will? So that you can decide who your beneficiaries and the executor of your estate should be when you pass away. It will also allow you to appoint a guardian to take care of your children. What will happen if I die without a Will? If you die without a Will, your estate (this is your net worth, i.e. the difference between what you own and what you owe) will be distributed in terms of the law of intestate succession: 1. According to the law of intestate succession, property will be distributed amongst the deceased's family and children. This may include beneficiaries who you want to exclude and may exclude beneficiaries who you want to include. 2. If there are no family or children of the deceased, the property will be forfeited to the State. 3. A guardian, whom may be a different to the person that you would have preferred to look after your minor children's' affairs, may be appointed by the Master of the Supreme Court. 4. The Master will appoint an executor of the estate. Why can't I do my own Will? The old saying, when a Will speaks, the person who made it is no longer there applies. Wills drafted by those with little or no relevant experience usually lead to problems. It is important to have a person with the necessary knowledge and experience draw up your Will. A lawyer, your bank or a trust company can help you to draw up a Will. Will my pension fund money be paid in terms of my Will? No, money held in any approved retirement fund, like Sentinel, will not form part of your estate (can't be bequeathed in a will) when you die and will be allocated and paid in terms of the Rules of the Fund and section 37C of the Pension Funds Act. In terms of the Pension Funds Act, your pension fund money may only be paid to your Estate if you did not have any legal, financial or other dependants. To express your wishes with regard to retirement fund savings, you must complete a Nomination Form that must be submitted to the Fund before death. SIGNIFICANT RULE CHANGES DURING THE PAST FINANCIAL YEAR The general rules of Sentinel were amended so that the Fund remains relevant and sustainable. The following significant amendments were registered and approved by the Financial Services Board (FSB): Ÿ To allow for transfer of pensioners from other funds Ÿ To make provision that a trustee vacancy shall not invalidate a decision of the Trustees Ÿ To reduce the number of Trustees from 22 to

14 WHERE TO GO FOR HELP MEMBER ASSISTANCE A footprint has been established to serve members and consist of a Client Contact Centre that provides telephonic support, Regional Client Service Centres in Johannesburg, Carletonville, Klerksdorp, Welkom and Witbank as well as an Advisory Service to assist with Fund product options. Sentinel House 1 Sunnyside Drive Sunnyside Park PARKTOWN 2193 (27)(11) info@sentinel.za.com Carletonville S Buys Office Park, Shop no. 10 Corner Kaolin & Radium streets (018) /9! CONTACT DETAILS P O Box MARSHALLTOWN 2107 Johannesburg South Africa (27)(11) CLIENT SERVICE CENTRES: Klerksdorp 54 Buffeldoring Street, Wilkoppies (018) (018) (011) Welkom Shop 24, The Strip, 314 Stateway (057) /6 (057) Witbank WCMAS Building, Corner OR Tambo and Susanna streets, Emalahleni (Witbank) (013) (013) Parktown Sentinel House, 1 Sunnyside Drive Sunnyside Park (27)(11) (27)(11) SENTINEL'S ETHICS HOTLINE fraud@kpmg.co.za PENSION FUNDS ADJUDICATOR IEMAS FOR PENSION BACKED HOME LOANS