Fact File. Retirement Preservation Plans

Transcription

1 Retirement Preservation Plans Fact File The Retirement Preservation Plans are built on the best thinking, the most tax efficient structures and the best investment strategies. These aspects ensure that you save for a more comfortable and rewarding retirement. This Fact File will allow you to understand your Preserver Plans and how you can make them work better for you.

2 Welcome Discovery Invest s Preserver Plans Discovery Invest s Preserver Plans will help ensure that you can save for a more comfortable and rewarding retirement. The Fact File is designed for your easy reference. Contents Page 1. Discovery Invest Preserver Plans Lump sum contributions to your Preserver Plan Retirement age Choosing the underlying funds for your Preserver Plan Benefits to enhance and protect your Classic Pension or Provident Preserver Plan Switching between investment options Taxation Death or ill-health before your selected retirement date Invest Aware Business practices... 7

3 1 The Discovery Invest Preserver Plans The Discovery Invest Preserver Plans are suitable for anyone leaving an employer as a result of resignation, dismissal, retrenchment or if the pension or provident fund is wound up, and who wishes to preserve the benefits of their pension or provident fund membership with their previous employer until retirement. Discovery Invest offers two types of Preserver Plans: The Core Pension and Provident Preserver Plans. These plans offer a wide range of investment options that you can choose to invest in The Classic Pension and Provident Preserver Plans. In addition to the same range of investment options as the Core Preserver Plans, the Classic Preserver Plans offer a range of unique benefits to enhance and protect your investments. These benefits are detailed in section 5 of this Fact File. At termination of your membership with your employer s pension or provident fund, the benefits in your fund can be transferred to a pension preservation fund or a provident preservation fund respectively. The Discovery Invest Core and Classic Pension Preserver Plans accept pension fund benefits, while provident fund benefits may be invested in the Discovery Invest Core and Classic Provident Preserver Plans. If you choose to invest in the Discovery Invest Core or Classic Preserver Plans, you will apply to become a member of the Preservation Pension Fund (registration number 37760) or the Provident Preservation Fund (registration number 37759). Your benefit in the appropriate preservation fund cannot be ceded, transferred, assigned, reduced, hypothecated or pledged and is subject to the provisions of the Pension Funds Act (No. 24 of 1956). You are therefore not allowed to use the benefit or right to the benefit as security or to transfer it to someone else or to make it over to a third party. Your creditors cannot attach the benefit or right to the benefit. Membership in the preservation fund will only be confirmed if Discovery Life, acting as the fund s appointed administrator, has confirmed to you in writing that your application for membership has been accepted, and that your contribution has been received. No tax is payable on the money transferred in this manner and no tax is payable on the growth and income earned (May 2012). The preservation funds allow a single withdrawal of any portion of the investment in the fund prior to your retirement. If any withdrawals had ever been taken previously, then no future withdrawals will be allowed. A portion of this withdrawal is tax free according to current tax practice (May 2012). The fund rules provide that, at your selected retirement age, your investment amount in the preservation fund accrues to you. This comprises your contribution plus or minus any investment returns and minus all fees that have been levied. If you have invested in a pension preservation fund then, at your selected retirement age, a maximum of one third of the investment fund can be taken as a lump sum withdrawal while a minimum of two thirds must be used to purchase an annuity from a registered insurer. If you have invested in a provident preservation fund then your full investment fund can be taken as a cash lump sum while any contribution to a pension-providing vehicle such as a linked annuity is voluntary. Tax in accordance with the applicable tax rules and rates, as determined by the South African Revenue Service, will be applied on any lump sum and annuity payments. The income received from the annuities will be taxable as gross income in terms of the Income Tax Act. No recurring contributions may be made to a pension preservation fund or a provident preservation fund. 1.1 Transfer of benefits from a preservation fund to a pension fund or a provident fund with a new employer You may transfer your investment in the Discovery Invest Core or Classic Pension Preserver Plan to a pension or provident fund with your new employer. Where transfers take place to a provident fund the portion considered to be member contributions is fully taxable. You may transfer your investment in the Discovery Invest Classic or Core Provident Preserver Plan to a provident fund or pension fund with your new employer. Any transfers out of your Discovery Invest Classic Pension or Provident Preserver Plan could affect your Classic Plan benefits detailed in section 5 and should be done in consultation with your financial adviser. 1.2 Contributions to the Preserver Plans The transfer value that you deposit into the applicable Discovery Invest Preserver Plan will be the once-off lump sum contribution. 2 Lump sum contributions to your Preserver Plan 2.1 Phasing in your lump sum contribution Lump sum contributions may be phased in monthly through a money market account. If you want to phase in your investment, the full contribution amount will be invested into the Discovery Money Market Fund. Your contribution amount (plus interest) will be divided by the number of months you chose and the amount derived will be withdrawn in the first month from the Discovery Money Market Fund and invested proportionately in the investment options selected. In the second month, the remaining amount will be divided by the number of phase-in months remaining and invested. This will continue until all your money is phased into the investment. You can choose to phase your investment in over 3, 6, 9, 12, 15, 18, 21 or 24 months. Your selected phase-in period (if applicable) is reflected on your member certificate. 1

4 2.2 Fees applicable to your Preserver Plan There are certain fees on both the Core and Classic Preserver Plans. The fees are categorised into initial fees and annual fees and must be paid to: Discovery Invest for administering your policy Your financial adviser for performing financial planning on your behalf The investment managers of the underlying investment choices you have selected. If you have chosen the Classic Pension Preserver Plan or Classic Provident Preserver Plan, an additional Protector Premium of 1.2% per year is payable to Discovery Life for providing the unique protections and enhancements detailed in section 5. This premium is a percentage of your investment fund and is deducted monthly as 1/12th of the annual Protector Premium Initial Fees Discovery Invest Initial Fee The initial fee is based on the size of your contribution into the Preserver Plan. If you invest more than R there will be no initial fees. If you invest less than R , you will pay fees on a tiered structure as follows: Contribution amount First R % Next R % Next R % Initial fee as a percentage of contribution amount Please note that these figures will be increased by VAT. Financial Adviser Initial Advice Fee On a lump sum contribution, your financial adviser may charge an initial advice fee as a percentage of your contribution amount, which Discovery Life will pay over to your financial adviser from your contributed amount on behalf of Discovery Invest. 100% allocation or upfront payment You have an important choice to make in terms of the initial fees payable to Discovery Invest and your financial adviser: do you want to pay these fees upfront, or pay it off over the first five years of your policy? If you choose to pay these fees over five years called 100% allocation the amount is calculated upfront and you then pay it off over five years. In effect, Discovery pays the initial advice fee to your financial adviser, and then recoups this and any Discovery Invest Initial Fees from your Preserver Plan over five years. The amount that you will have to pay over the five years is the Discovery Invest Initial Fee (including VAT) plus the Financial Adviser Initial Advice Fee (including VAT if applicable) multiplied by This is divided over 60 months and paid in level monthly instalments. If you choose this option, 100% of your initial contribution amount is allocated to the underlying investment options at inception of your contract. If you transfer your investment to another insurer or to your new employer, Discovery will deduct any unpaid monthly fees resulting from the 100% allocation. If you did not choose 100% allocation, you will be able to transfer your full investment value. All section 14 transfers will be subject to RF 1/98, PF20 and the Pension Funds Act and any applicable legislation of pension fund circulars from time to time. Example of how the fee calculation works: Lump sum contribution On a lump sum contribution of R75 000, based on the Discovery Invest Initial Fee scale, of 1.75% + VAT, the Discovery Invest Initial Fee amounts to R Assuming that you and your financial adviser agreed to a 2% Financial Adviser Initial Advice Fee on your initial R contribution, that works out to an additional cost of R1 710 (including VAT). If you paid your Discovery Invest Initial Fee and Financial Adviser Initial Advice Fee in one go, you would pay the following: Discovery Invest Initial Fee R Financial Adviser Initial Advice Fee R Total initial fees R Therefore, with your initial contribution of R minus the applicable fees an amount of R would be invested into your underlying fund choices. What if you chose 100% allocation? If you want to rather pay the Discovery Invest Initial Fee and Financial Adviser Initial Advice Fee over five years, so that the total contribution of R is invested into the underlying fund choices, you will pay the total initial fee of R multiplied by 1.262, over five years. R x = R So instead of paying R immediately, you will pay R67.44 per month for a period of 60 months. Please note: this fee will not change and will remain R67.44 for the entire 60 months. Investment Manager Initial Fee Please remember that certain investment management companies may charge initial fees on their funds that you may choose Annual Fees Discovery Invest Annual Administration Fee You also pay an annual administration fee. This is not calculated based on the size of your initial contribution, but rather on the size of your investment fund. The percentage charged on an annual basis decreases as your fund value increases, as shown in the following table. Investment fund size Discovery Invest Annual Administration Fee First R % Next R % Next R % Next R % Over R1 million 0.30% Please note: these percentages will be increased by VAT. Units in your investment fund are redeemed on a monthly basis as 1/12th of this fee. 2

5 Financial Adviser Annual Advice Fee Your financial adviser may also charge an annual advice fee as a percentage of your investment fund value for managing your investment fund. Units will be redeemed on a monthly basis for this as 1/12th of the advice fee selected, plus VAT. Discovery Life will deduct these from your investment on behalf of Discovery Invest and pay these over to your financial adviser. Investment Manager Annual Fee The investment managers to your underlying investment choices will normally charge an annual management fee as a percentage of your investment in their fund. This fee is divided by 365 and deducted daily in the unit prices provided by the investment manager to Discovery Invest. Fee reviews for Preserver Plans Fees quoted at inception are not fixed and may be reviewed during the investment contract term. Before any fee increases, Discovery Invest will inform you in writing about the changes as well as the options available to you. 3 Retirement age Irrespective of the retirement age you selected at inception, you may decide to change your actual retirement date. The actual retirement age must be ages 55 or older. If you choose to retire earlier than your initially selected date, your retirement benefits may be reduced if you have chosen 100% allocation. This reduction will be equal to any unpaid monthly fees resulting from the 100% allocation at your earlier retirement date. Should you choose to retire later than your initially selected retirement date, your investment will continue until the new retirement date. Any changes to your retirement date could affect your Classic Pension or Provident Preserver Plan benefits detailed in section 5 and should be done in consultation with your financial adviser. 4 Choosing the underlying funds for your Preserver Plan 4.1 Investment choices that are available Your contribution to the Preserver Plan will be invested in the underlying investment options that you have selected. The investment options selected and the allocation of the contribution between these investment options will be reflected on your member certificate. Should any of the underlying investment options be capped or cease to exist, Discovery Invest will request an instruction for a new selection from you. 4.2 Discovery s range of investment options Discovery Invest Funds Discovery s range of funds cater for a full range of risk profiles. These are single manager unit trust funds which offer flexibility and control for clients with specific investment objectives, while the multi-manager funds offer solutions for clients who want an additional layer of investment manager diversification. Discovery Invest has partnered with Investec Asset Management, one of South Africa s leading asset managers to manage the range of single manager Discovery Invest Funds. Discovery has partnered with Investment Solutions to provide the multi-manager offering Alpha Indices Through Discovery s association with Deutsche Bank, Discovery Invest is able to provide investors with access to new generation investment methodologies. Deutsche Bank has, through its proprietary models and investment research, constructed a range of investment indices. This is done by weighting various shares according to predefined criteria to construct the relevant indices. Through Discovery Invest, you are able to invest in these indices. Depending on the index chosen, you are able to get exposure to local as well as global returns. Because these are not unit trusts, they are not regulated by the Collective Investment Schemes Act Target Retirement Date Funds If you are looking for a simple, yet scientific approach to saving for a planned retirement date, the Discovery Target Retirement Date Funds provide an effective solution. The process is simple select your planned retirement date and the fund does the rest. Based on the selected target retirement date of the fund, professional investment managers adjust the fund s mix of asset classes over time as the target retirement date approaches. Typically, the investment managers would move funds from an initial more aggressive approach, which has the potential for higher returns to one which is more conservative. This approach is designed to enhance the potential for long-term returns and helps to limit the investment risk. Once the fund reaches its target date, it will still be actively managed placing increasing emphasis on generating income and reducing risk into your retirement. The Target Retirement Date Funds are unit trusts and are managed by Investec Asset Management Dynamic Asset Optimiser The Dynamic Asset Optimiser model is based on the findings of Harry Markowitz, a Nobel Prize winner in Economics. The Dynamic Asset Optimiser is built on the premise that correct asset allocation is the main driver behind the matching of risk and return, as market conditions change. 3

6 There are four steps that the investor follows to make the investment: 1. Identify your investment risk profile as aggressive, moderate or low risk. 2. Through the Dynamic Asset Optimiser, you will be provided with a split of asset classes that matches your risk profile at inception of your contract. 3. You select your funds within each of the asset classes. You may choose between: Discovery Funds a range of Discovery Invest unit trusts selected by Discovery Invest Client choice you can select from a range of external unit trusts or Discovery Invest unit trusts. 4. Discovery will rebalance your chosen funds from time to time based on the optimal asset class mix. This rebalancing is designed to ensure that the split between the various asset classes matches your selected risk profile on an ongoing basis. The annual fee charged for administering the Dynamic Asset Optimiser is 0.25% plus VAT if you selected the Discovery Funds and 0.50% plus VAT if you selected Client choice. These are annual fees, so the fee is divided by 12 and charged monthly. The fee is levied proportionately across the selected investment options within the Dynamic Asset Optimiser. These fees may be reviewed in the future. Before any fee increases, Discovery Invest will inform you in writing about the changes Escalator Funds The Escalator Funds are designed to provide unlimited upside potential in bull markets, while offering downside protection in bear markets. You are protected at a level of at least 80% of the highest value the Escalator Fund has ever reached. This ensures that if markets are down when you want to realise your investment, you have the guarantee that you will be always be able to realise at least 80% of the highest value of your Escalator Fund. The fund is calculated with reference to a mix of assets that dynamically rebalances between an underlying riskier asset and a cash component on an ongoing basis. This rebalancing is done according to a defined algorithm. As the performance of the riskier asset improves, the allocation to the riskier asset increases. If the performance of the riskier asset falls, the allocation to the riskier asset decreases. Discovery Invest provides a range of Escalator Funds with various unit trusts and indices as the underlying riskier asset that you may choose from. Geared Escalator Funds You can choose the Geared Escalator Funds that give you the same downside protection of at least 80% of the highest level that the fund has ever reached. The Geared Escalator Funds are calculated with reference to the rebalancing between the riskier asset and the cash component in a similar way to the Escalator Funds described above, except, that when the riskier asset is performing well, the Geared Escalator Fund is based on using gearing (borrowing money, internally within the fund at a rate of SAFEX + 0.8%) to give up to 120% exposure to the riskier assets. You will earn any excess returns on the borrowed money that the riskier asset earns over SAFEX + 0.8%. Because of this borrowing, the Geared Escalator Funds are for a more aggressive investor than the Escalator Funds. Additional information regarding the provider of the guarantees and any credit risk associated with a particular Escalator or Geared Escalator Fund can be found on the relevant fund fact sheet at External Funds Discovery also offers access to a wide range of external investment managers to provide flexibility in your investment choice. 5 Benefits to enhance and protect your Classic Pension or Provident Preservation Plan If you have chosen the Classic Pension or Provident Preservation Plan, you have automatic access to a range of benefits designed to enhance and protect your investment fund. There are six benefits: 1. Retirement Tax Funder 2. Quartile Performance Protector 3. Target Retirement Date Inflation Protector % Escalator Retirement Guarantee 5. Early Retirement Disability Protector % Escalator Death Guarantee These six benefits are explained below. 5.1 Retirement Tax Funder The Retirement Tax Funder will assist you in funding the tax liability that results from the lump-sum withdrawal you make from your Classic Pension or Provident Preservation Plan at retirement. At retirement, the Retirement Tax Funder will provide a boost to help pay for any tax on your lump-sum withdrawal. This boost will effectively increase your tax-free portion on the lump-sum withdrawal up to certain limits, depending on how many years you remain invested in the Classic Preserver Plan as per the table below: Years invested in the Classic Pension or Provident Preservation Plan up to retirement 20 or more ( 240 months) R to 20 ( months) R to 15 ( months) R to 10 (0 119 months) R Effective maximum tax-free lump-sum withdrawal at retirement due to Retirement Tax Funder and applicable tax tables The table above will be changed at Discovery s discretion from time to time in line with changes to taxation. Discovery will boost your fund through the Retirement Tax Funder in line with your maximum permissible lump sum withdrawal of one third of your Pension Preservation fund at retirement and the tax tables at the time. The Retirement Tax Funder will also be calculated on a withdrawal of one third of your Provident Preservation Fund at retirement, despite being allowed to withdraw your full fund at retirement. The Retirement Tax Funder boost will be calculated based on the applicable tax tables at retirement and not the actual tax that you pay. 4

7 Any boost you qualify for through the Retirement Tax Funder will be paid into your Classic Preservation Plan at retirement, before any cash lump-sum withdrawal. Discovery will increase the boost amount to allow for any additional tax on the boost itself. 5.2 Quartile Performance Protector The Quartile Performance Protector is designed to help ensure that the performance of a range of Discovery Funds you have chosen for your Classic Preservation Plan is favourable relative to the other funds in their respective sectors. If your chosen Discovery Fund s performance is not in the top 25% of all funds in its sector over each five year period from your commencement date, you will receive a boost of up to 20% to your fund s five year growth based on the fund s relative performance in its sector. The boost will be payable at the end of each five year period. The percentage boost depends on the performance quartile that the fund is in over the five year measurement period in its sector and applies only to certain Discovery Funds. The largest boost will be received if your fund is in the fourth quartile with lower boosts in the third and second quartiles. The funds included in each sector will be updated at Discovery s discretion from time to time. The full details of the boosts your selected funds qualify for under the Quartile Performance Protector can be found on your investment certificate. The boosts shown on your investment certificate are expressed as a percentage of the amount in the relevant Discovery Fund at the start of the five year period. Discovery may update the list of qualifying funds from time to time. You will qualify for an additional 10% boost over and above the percentages shown on the investment certificate if: You own a Discovery LIFE PLAN with a monthly premium above the minimum qualifying LIFE PLAN premium at the time Your LIFE PLAN remains in force, with a premium above the minimum qualifying amount, for the full five years preceding the payout Your chosen qualifying fund is not in the top quartile over the five year period. This qualifying LIFE PLAN premium will be increased each year in line with the average increase in Discovery LIFE PLAN premiums for all new Classic Preservation Plans. You must be invested in the applicable Discovery Fund for the full five years in order to receive the boost at the end of the five year period. If you transfer out of your Classic Preservation Plan or switch out of qualifying funds, your Quartile Performance Protector will be proportionately reduced. Should you switch into a qualifying Discovery Fund after the start of any five year period, your boost will be reduced by 20% if the switch is in the first year and by an additional 20% in each year thereafter within the five year period. 5.3 Target Retirement Date Inflation Protector The Target Retirement Date Inflation Protector will assist you in achieving a growth rate on your selected Target Retirement Date Fund(s) in line with or in excess of inflation. At the end of every five years that you remain invested in a Target Retirement Date Fund, Discovery will boost the amount in that fund if it has underperformed the inflation target over the previous five year period. The size of the boost is intended to bring the growth on the Target Retirement Date Fund in line with your relevant inflation target. The boost will be limited to 10% of the amount in the relevant Target Retirement Date Fund at the start of the five-year period. Your inflation target will depend on your age at the end of the five-year period as per the table below: Age next (years) Inflation target Up to 50 CPI + 3% 51 to 60 CPI + 2% More than 60 CPI + 1% You must remain invested in the relevant Target Retirement Date Fund for the full five years continuously in order to receive any boost to your fund. Money switched into a Target Retirement Date Fund within the first six months of a five-year period will qualify for the full five year Target Retirement Date Inflation Protector, after which any money switched into a Target Retirement Date Fund will not qualify for the benefit at the end of the five-year period % Escalator Retirement Guarantee The Discovery Escalator and Geared Escalator Funds provide an 80% guarantee of the highest unit price ever reached by the fund. The 100% Escalator Retirement Guarantee increases this guarantee at your originally chosen retirement date to 100% of the highest unit price reached while you were invested in the relevant Escalator Fund. In order to receive this added protection, you must be invested in the same Escalator Fund for at least five years continuously prior to the retirement date. The amount payable under this benefit is the number of Escalator Fund units you own at your originally chosen retirement date and that you have owned continuously for at least five years prior to retirement, multiplied by the difference between the highest unit price achieved by the particular Escalator Fund while you were invested and the unit price of the Escalator Fund at your retirement. Any money switched or contributed into an Escalator Fund within five years before your retirement date will not qualify for the benefit. The 100% Escalator Retirement Guarantee will be proportionately reduced by any transfers out of your Classic Preservation Plan. If you are invested in the Dynamic Asset Optimiser and have chosen the Discovery Funds option, the Quartile Performance Protector will be based on the starting allocation of Discovery Funds to the various asset classes over the five year period. The Quartile Performance Protector boost will not be affected by the Dynamic Asset Optimiser rebalancing done by Discovery. 5

8 5.5 Early Retirement Disability Protector The Early Retirement Disability Protector boosts the value of your Classic Preservation Plan to help compensate you for potential lost future investment returns if you become disabled. The boost will be an amount which is payable into your Classic Preservation Plan if you qualify for a claim under category A or B of the Capital Disability Benefit as defined in the Discovery Individual LIFE PLAN Guide and you are unable to return to work. A copy of the Guide is available at The disability must result in early retirement from the Classic Preservation Plan in order to receive the Early Retirement Disability Protector. The amount payable depends on how many years you have left before you reach the age of 65 (shown in the table below) from the date of a valid disability claim. 6 Switching between investment options You may switch between investment options at any time, subject to Discovery Invest s practice at the time. The current practice (May 2012) is to allow four free switches per year. Additional switches will attract a fee of 0.25% (+VAT) of the value switched, capped at a maximum of R500 per transaction. A switch will be subject tp any initial fees levied by the investment managers to which the funds are switched. A switch will be subject to any initial fees levied by the investment managers to which the funds are switched. 7 Taxation Years to age 65 Boost to your fund value for a Category A Disability Claim 15 or more ( 180 months) 20% 10% 10 to 15 ( months) 15% 7.5% 5 to 10 ( months) 10% 5% 0 to 5 (< 60 months) 5% 2.5% Boost to your fund value for a Category B Disability Claim Please note that any contributions paid into your Classic Preservation Plan within three months of a disability claim will not qualify for the Early Retirement Disability Protector. Only one claim will be admitted per Classic Pension or Provident Preservation Plan. This benefit will not pay out on your initial contribution or on any subsequent contributions for self inflicted injuries or illnesses or if your claim arose directly or indirectly from any condition, illness, disability or impairment that existed prior to inception of this benefit and of which you knew about and sought medical treatment or medical advice for from a recognised medical practitioner. This benefit expires on reaching age % Escalator Death Guarantee The 100% Escalator Death Guarantee pays a boost into your Classic Preservation Plan if you die while invested in any of the Escalator or Geared Escalator Funds. The amount payable under this benefit is the number of Escalator Fund units you own at the time of your death, multiplied by the difference between the highest unit price achieved by the particular Escalator Fund while you were invested and the unit price of the Escalator Fund at the time of your death. This allows you to lock in 100% of the highest value your Escalator fund has ever reached, protecting your assets against a possible untimely death. If you switch out of Escalator Funds or withdraw from your Classic Preservation Plan prior to Discovery s acceptance of a valid claim, the 100% Escalator Death Guarantee will not be paid. The benefit will not pay out if your death is caused directly or indirectly by a condition, illness, disability or impairment that existed prior to inception of investing in or switching into the Escalator or Geared Escalator Fund and of which you knew about and sought medical treatment or medical advice for from a recognised medical practitioner. This benefit will also not pay out if you commit suicide. There is currently no income or capital gains tax payable in the Core or Classic Pension Preservation Fund or the Provident Preservation Fund (May 2012). Discovery Invest will implement any changes to tax practice as appropriate. 8 Death or ill-health before your selected retirement date Section 37C of the Pension Funds Act applies, which requires the Board of Trustees of the Fund to distribute your benefits equitably between your dependants (whether nominated as beneficiaries or not), nominated beneficiaries or both. You may change your beneficiary nomination at any time by notifying Discovery Invest in writing. Notification must reach Discovery Invest before your death, failing which the Trustees of the Fund will not consider the notification. 8.1 The death benefit amount On death, the preservation benefits will be transferred to the deceased investor s dependants or stated beneficiaries or both, or to the deceased investor s estate in line with legislative requirements. Once Discovery Invest has been notified that an investor is deceased, Discovery Invest will prevent any further income (if applicable) or preservation fund being paid to the deceased investor s bank accounts as well as any expenses being deducted from the investment. Discovery Invest will provide the executor of the estate of the deceased investor with the relevant documents to be completed. Once these documents have been returned to Discovery Invest, they then shall be presented to the Trustees of the Fund for approval. Once approval is received from the Trustees, and any tax amounts have been paid, the benefit will be paid as per the resolution. 8.2 Ill-health Should you retire due to ill-health, as defined in the Pension Funds Act, even if this is before the selected retirement date, the investment fund value will be paid to you in line with legislative requirements as described in section 1. 6

9 9 Invest Aware 9.1 What you should know about Escalator Funds They are based on a riskier asset and a cash component. The riskier asset may be a Discovery unit trust, an external unit trust, an index or set of indices (the list of funds is available from Discovery Invest). The value of the fund at any point in time is based on the market value of both the underlying riskier asset and the cash component. The 80% dynamic market value guarantee level is based on the overall value of each Escalator Fund and not on the value of the riskier asset only. The guarantee applies at all times and not only at the end of a specified time. For Geared Escalator Funds, the exposure to the riskier asset may exceed 100%. This additional exposure is achieved by effectively borrowing money. If the additional growth on the additional exposure is less than the interest rate on the borrowed component, the overall fund value may decrease. The allocation between the riskier asset and the cash component is determined through an algorithm which enables the guarantee at any time The cost of Escalator Protection The cost of making an investment in an Escalator Fund is an initial Protector Premium of 0.25% % of your contribution, plus an annual Protector Premium of 1.00% of the Escalator Fund value. This is deducted daily and is embedded in the unit price of the applicable Escalator Fund. These costs are not fixed and may be subject to change in the future. In addition, as with all funds, there are asset management fees which are built into the prevailing unit prices. Discovery will inform you in writing before any changes are made to the Protector Premiums. 10 Business practices 10.1 How should I issue instructions to Discovery Invest? Instructions must be given in writing on the relevant forms. These instructions must be sent to Discovery Invest either by fax on or ed to invest_support@discovery.co.za The forms are available from us when calling Will I receive regular statements on my investment? Discovery Invest will provide a quarterly statement reflecting your investment values and all transactions during a specified period (or previous quarter) What happens if an investment choice that I selected is unavailable? It may happen that Discovery Invest is unable to continue offering a certain investment option as an investment choice. In the event of this happening, Discovery Invest will inform investors accordingly and will request an instruction to select a new investment choice Misrepresentation The information given to Discovery Invest in your application form, or any other documents that you provide in support of your application, forms the basis upon which your contract is issued. If you fail to disclose any information, or provide false information or distort information when applying for your contract, Discovery Invest will be entitled to: Refuse to pay out any current or future claims that are related to the misrepresentation or non-disclosure Recover monies already paid to you for claims that relate to the misrepresentation or non-disclosure Cancel certain benefits or your entire contract with immediate effect Fraud Your contract and all its benefits will be cancelled should you: Submit a fraudulent claim Use any fraudulent means or devices to make your claims Provide false information in order to obtain a benefit Knowingly allow anyone acting on your behalf to provide false information in order to obtain a benefit Deliberately and wilfully conspire to cause the illness or disability that gives rise to a claim Consent to disclosure You have consented to the exchange of information, including medical information, between Discovery Invest, Discovery Life, any medical practitioner you have consulted or any other life office, Discovery Health and Discovery Health Medical Scheme Contact details Please remember that in addition to talking with your financial adviser, if you have any Discovery Invest questions or service needs, you can call us on You can also visit for additional resources and a downloadable version of this Fact File (as a PDF file). 7

10 The Fact File is part of Discovery Invest s commitment to fairness and full compliance with legal requirements for financial service providers to provide detailed easy-to-understand information about how each product works. Each investor must consult their own financial adviser who must be an authorised financial services provider to advise the investor as to the suitability of the products and funds for the investor s personal investment needs. Discovery Life is a registered long-term insurer and an authorised financial services provider. Discovery Invest is an authorised financial services provider. Copyright Discovery Invest All rights reserved Physical address: 155 West Street Sandton Postal address: PO Box Benmore 2010 Contact centre number: Fax number: GM_13986DI_14/06/2012 IPFFE 04/12