CREATING YOUR FUTURE. Your guide to the Alexander Forbes Core Plan

Transcription

1 MEMBER BOOKLET CREATING YOUR FUTURE Your guide to the Alexander Forbes Core Plan This booklet tells you how your retirement fund works and what benefits you re entitled to as a member. ALEXANDER FORBES CORE PLAN

2 ALEXANDER FORBES CORE PLAN Overview Your employer has joined the Alexander Forbes Core Plan to provide savings and investment benefits to its employees for their retirement years. By law, you must belong to the Alexander Forbes Core Plan while you re employed by your employer. The main reason you belong to the Alexander Forbes Core Plan is so that eventually you will be able to earn enough money to live on comfortably once you have reached retirement age and stopped working. This money will come from your investments that are made through the fund. However, it s not guaranteed that you will have enough money to live on when you have retired. The fund has given you a head start, but some of the responsibility of making sure that you have enough money when you retire lies with you. This booklet explains this in more detail. Belonging to this fund means that every month, a certain amount of money is taken from your salary and invested for you on the investment markets by financial experts. This money is known as your fund credit. When the investment markets grow, the value of your fund credit grows. When the investment markets drop, the value of your fund credit also drops. The way to make enough money for your retirement is to make sure that you stay invested for many years, and that you invest your money in the right way over the long term. Your main benefit through the fund is your fund credit. When you reach retirement age and take this money, it is called your retirement benefit. If you leave your employer and therefore the fund before you reach retirement age, your fund credit still belongs to you and it is then known as your withdrawal benefit. One of the options available to you if you leave your employer is to keep your money invested in the fund. Your money will stay invested in the portfolio and strategy that you were invested in when you were working and you will have the same investment options as before. The fund is also able to pay a living annuity pension. This is a flexible pension where you decide how much of your money to draw each year as income but you can run out of money if you draw too much too soon. This is only suitable if you have enough money to invest. You also get a death benefit through the fund. This is money that will come to your family members if you die while you are still a member of the fund. Depending on the rules of your section of the Alexander Forbes Core Plan, your benefits could also include: a disability benefit, which is money that will come to you if you become disabled while you re still a member of the fund and are no longer able to work a funeral benefit, which is money that will be paid out to help with funeral costs if you die while you re still a member of the fund, or your spouse or a child dies. This booklet explains in more detail how your retirement fund works and what benefits you re entitled to as a member. It tells you what you will get when you retire, what happens when you change jobs, what your family will get if you die, how your fund is managed, how to grow your retirement savings and who to contact if you need any help. Contents How the fund works 3 Growing your retirement savings 5 What you get when you retire 5 What happens when you change jobs 7 What your family will get if you die 8 How your fund is managed 9 Every member gets regular communication 10 Who to contact 10 2

3 MEMBER BOOKLET How the fund works How to read this booklet The schedule you get with this booklet shows you exactly what you ll get from the fund when you retire, if you resign or are dismissed from your job, if you become disabled or if you die. Please read this booklet and the schedule so that you and your family know about your benefits in the fund. Keep this booklet in a safe place so that you or your family can look up specific details about your fund benefits when you might need to do this. You re a member of the Alexander Forbes Core Plan Your employer joined either the pension or the provident section of the Alexander Forbes Core Plan. Over time, if carefully managed, your savings in the fund will grow into one of your biggest financial assets. It s because of this that you should take the time to understand how your fund works. Your fund is a defined contribution fund The rules of a defined contribution fund tell you if both you and your employer contribute to the fund, or you or your employer contribute to the fund. They also tell you what percentage of your salary your employer, or you and your employer, must contribute to the fund every month. This means a guaranteed amount of money is paid to the fund on your behalf every month. This money is invested so that it can grow. Your fund is an umbrella fund An umbrella fund is a fund that allows many different, unrelated employers to join it so that all the members can benefit from strength in numbers. One board of trustees runs the fund. All the participating employers share the costs of running the fund and providing benefits. These savings mean more of the contributions can go towards your retirement savings. Contributions to the fund Before 1 March 2016, your contributions to pension funds were tax deductible up to 7.5% of your fund salary. Your contributions to provident funds were not tax deductible. The employer contribution was tax deductible up to 20% of fund salary (including medical aid benefits, for each member). From 1 March 2016, contributions to pension funds, provident funds and retirement annuity funds are treated in the same way for tax purposes. Your employer s contributions will be included in your taxable income as a fringe benefit. You can claim a tax deduction on contributions up to 27.5% of the greater of remuneration or taxable income, up to a yearly limit of R This limit applies to all pension, provident and retirement annuity funds that you contribute to. Both the member and employer contributions form part of this tax deductible limit. If you contribute more than R in a year, the part of the contribution that is not deductible will be added to contributions in future years and will be deductible in future years if it s within the limits of that year. At retirement, if there are any contributions you didn t get a deduction on, this will be set off against your retirement benefit and added to the tax free amount on retirement or the amount taken as a pension. The schedule you got with this booklet will tell you what percentage of your salary is contributed to the fund every month. 3

4 ALEXANDER FORBES CORE PLAN Contributions are based on your fund salary Your employer uses your fund salary to base your monthly contributions on. This is also sometimes referred to as your pensionable salary. Please check this salary with your employer because it has a direct impact on the amount invested for you every month. Your death and disability benefits are also based on your fund salary. Annuity: Also known as a pension, this is a benefit paid in regular installments, for example monthly. You can get a pension when you retire to give you a regular income for the rest of your life. You may be able to get a pension from the fund or buy a pension from an insurance company. Once you have bought a pension with your fund credit, you will not get any more benefits from the fund. Every member has a fund credit Your fund credit is the amount of money held in the fund for you. It s made up of: your and your employer s monthly contributions, less administration fees and premiums for insured benefits like death, disability and funeral benefits (as set out in the rules of the fund) any amounts you may have transferred into the fund from a past employer s fund the investment returns (less investment fees) made from investing this money. Administration fee is the fee paid to the administrators of the fund for their services. Alexander Forbes Life is the administrator of the Alexander Forbes Core Plan. Every member can make additional voluntary contributions Additional voluntary contributions are extra contributions you can choose to make on top of the monthly contributions you and your employer already make to the fund. The purpose is to help you save more towards your retirement. These contributions are optional and your management committee must activate the facility. Please contact the Alexander Forbes Individual Advice Centre on for financial advice about making extra contributions. Speak to your payroll department to start making these additional contributions. 4

5 MEMBER BOOKLET Growing your retirement savings The growth on the portfolios your fund credit is invested in plays an important part in how much money you ll get when you retire or leave the fund. lower expected returns over the long term. Your fund credit may not lose value over the short term, but it s very possible that the returns will not beat inflation over the long term. In general, when you invest for your retirement you ll need to invest in shares for a long time to give you enough returns for a reasonable income in retirement. The more conservative you are with your investments when you re younger (for example, if you choose to invest mainly in cash, with not enough shares in your investment), the less likely you are to save enough money to live comfortably when you re retired. The members carry the investment risk in the Alexander Forbes Core Plan. This means that when your fund s investment portfolios show growth, your fund credit will increase and when the investment portfolios show a loss, your fund credit will drop in value. The growth on the portfolios your fund credit is invested in plays an important part in how much money you ll get when you retire or leave the fund. Your fund credit grows through careful investment It s very important for each fund to have a well thought out investment plan so your fund credit in the Alexander Forbes Core Plan will grow over time. The trustees offer a wide range of investment portfolios for the different needs of all the members. The schedule you got with this booklet will tell you which investment strategy your management committee has chosen. You can log onto to see how your investments are doing. All investment decisions have a certain amount of risk. Usually there s a direct relationship between the risk you take and the return you get. The higher the risk, the higher the return can be over time. If you make a well thought-out investment decision, you can reduce the risk and still get a good return. Shares usually have the highest returns over the long term (more than five years), comfortably beating inflation. But in the short term (one year or less), there s the risk that the value of your investment may reduce. Cash investments have! Important: The best way to make sure you have enough savings when you retire is to try not to take your withdrawal benefit in cash. Best practice advice is to keep it invested for your retirement years, as explained in the section What happens when you change jobs. What you get when you retire Your retirement benefits are there to help you live from day to day when you retire and no longer have a salary coming in every month. Retiring from the fund: normal retirement If you belong to the pension section of the Alexander Forbes Core Plan, you can take up to one-third of your fund credit as cash when you retire. You have to use the rest to get a pension. You may be able to get a pension from the fund or buy a pension from an insurance company. Remember you may have to pay tax on any cash amount you choose to take. If you belong to the provident section of the Alexander Forbes Core Plan, you can use any part or all of your fund credit to get a pension. You may be able to get a pension from the fund or buy a pension from an insurance company when you retire. There s no limit on how much cash you can choose to take. 5

6 ALEXANDER FORBES CORE PLAN Get a pension from the fund You can choose to get a pension paid from the fund. This is a living annuity and not a guaranteed pension. There are many other ways to receive a pension outside of the fund. You decide how much of your money to draw each year as income but you can run out of money if you draw too much too soon. The law allows you to draw between 2.5% and 17.5% of your money each year. The fund has set internal limits on the amount of income you can receive. You can change the amount of your income once a year on the same date you retired. This type of pension lets you leave money to your beneficiaries such as family members if you pass away. This is only suitable if you have enough money to invest. You need to have at least R of your money in the fund to use for your pension, after you have taken any money in cash and tax has been deducted. You will be able to convert your pension to a guaranteed pension outside the fund at a later date if you choose to do so. Types of retirement What does it mean? If you belong to the pension section If you belong to the provident section EARLY RETIREMENT You can retire early. You can retire early up to age 55 You have to use at least two-thirds of your fund credit to get a pension. You can retire early from 55 You can use all or part of your fund credit to get a pension or take in cash. ILL-HEALTH RETIREMENT The trustees and the employer may agree to let you retire early if you re unable to work because of health reasons but don t qualify for a disability income benefit. You can take ill-health retirement at any age. If you qualify for a lumpsum disability benefit, you automatically qualify for illhealth early retirement. You have to use at least two-thirds of your fund credit to get a pension. You can take all or any part of your fund credit in cash. LATE RETIREMENT You can only work after your normal retirement age if your employer agrees to it. In this case, you or your employer or you and your employer will carry on contributing to the fund until you retire. You have to use at least two-thirds of your fund credit to get a pension. You can take all or any part of your fund credit in cash. The fund will not take any premiums for benefits that only cover members to normal retirement age. This means that you may not have a disability or funeral benefit through the fund but you could have death cover after you have reached your normal retirement age but have not yet retired. Your normal retirement age is what your employer has set as the age at which you should retire. This age is set out in the special rules and in the terms of your contract of employment. You can delay taking your retirement benefit You can choose the date you retire from your retirement fund. This means that you will retire from your employer at your normal retirement age, but you can keep your retirement savings invested in the fund until a date you choose to leave the fund. This is known as your deferral date. Remember you ll more than likely have to pay tax on any amount you take as cash. 6 Get financial advice It s so important to plan wisely for your retirement while you re still working. Get advice from a registered financial adviser to help you with all your investment and savings decisions to make sure you have enough money for your retirement. Remember, once you re retired it will be very difficult to fix the situation if you haven t saved enough it will probably be too late, unless you re able to carry on working in some way. Plan ahead and get expert advice. Phone the Alexander Forbes Individual Advice Centre on (toll free) for financial advice. Tax at retirement The fund s Options on leaving brochure contains the latest information about the tax you will pay if you leave the fund. You can get a copy of this booklet from your human resources or payroll department and on the fund s website alexanderforbes.co.za/afrf/afrfhome.aspx. The booklet is available in English, Afrikaans and Zulu.

7 MEMBER BOOKLET What happens when you change jobs If you resign or are dismissed or retrenched, you will be paid your full fund credit. Funeral benefit: Money paid to help with funeral expenses if you die, or if your spouse or one of your children dies. It s provided through a separate employer-owned insurance policy and is not paid from the Alexander Forbes Core Plan. However, the premium may be used to calculate the contribution to your retirement savings. Options when you leave the fund When you leave the fund before you retire you can: Keep your money in the fund Transfer your money to your new employer s fund Transfer your money to a preservation fund Transfer your money to a retirement annuity Take your money in cash after tax. Options when you leave the Alexander Forbes Core Plan brochure You can find out more about what you can do with your retirement savings when you leave the fund in our Options when you leave the Alexander Forbes Core Plan brochure. You can get a copy of the brochure from your human resources department or from the AF Online website ( You can also get this on the fund s website which is: AFCorePlanHome.aspx. Financial advisers all agree that the best option is to carry on saving your money for your retirement every time you change jobs. You will delay paying tax and make sure your money is kept for your retirement. A financial advisor can help you carry on saving your money for your retirement. Delaying tax You can delay paying tax on your fund credit if you: Keep your money in the fund Transfer your money to your new employer s fund (except if you transfer from the pension section to a provident fund - this is because of the different ways that pension and provident funds are taxed) Transfer your money to a preservation fund Transfer your money to a retirement annuity If you take cash from your fund credit, you ll have to pay tax immediately, at the tax rate that applies to your circumstances, at the time of withdrawal. It is also important to realise that if you take any or all of your fund credit as cash when you change jobs, you will have to start saving for your retirement again from scratch. Keeping your money in the fund You can choose to keep your money invested in the fund when you resign, or are retrenched or dismissed. There s no minimum amount of money you need to have in the fund to access this option. Your money will stay invested in the portfolio and strategy that you were invested in when you were working. The portfolios and investment options will be the same as those available to members who are working and contributing to the fund. If you keep your money invested in the fund you can t keep contributing to the fund. You can transfer in money from another employer s fund or a preservation fund later. If you have left your money in the fund when changing jobs, you can still choose to have your money paid to you at a later stage, but you will need to take out all of your money in the fund at that later date. You may also choose to have part of the money paid out to you at that later stage, and the balance (or the full benefit) can also be transferred to another fund or preservation fund but you cannot rejoin the fund again after that. How to keep your money in the fund You will need to fill out the relevant section of the Alexander Forbes withdrawal form. Tell your employer what you want to do with your retirement savings It s your responsibility to tell your employer in time what you want to do with your fund credit. It s important to get independent, expert financial advice to choose the most tax-effective option. If you need help you can speak to the Alexander Forbes Individual Advice Centre on (toll free). Disability benefit: A benefit paid out if you become disabled. It may be given through a separate company-owned insurance policy. In that case it will not be paid from the Alexander Forbes Core Plan. However, the premium will be used to calculate the contribution to your retirement savings. 7

8 ALEXANDER FORBES CORE PLAN What your family will get if you die Your family will get a benefit from the fund if you die. If you die while you work for your employer, your beneficiaries will get an amount made up of: your fund credit the insured benefit shown on the schedule you got with this booklet (if applicable). This money is called the death benefit. The death benefit will be taxed before it is paid out. The amount of tax and the way the benefit is paid will depend on the tax laws at the time of your death. The tax rates for death benefits are the same as for cash withdrawals at retirement. For more information, please see the Options on leaving brochure available from your human resources department or online at or the fund s website AFCorePlanHome.aspx. Fill out your nomination of beneficiaries form. The nomination of beneficiaries form is not a will or a testament, but an expression of wish. The trustees use the details on the form as a guide to share out your death benefit payment. It s their legal duty to share out your death benefit fairly with the focus on providing for your dependants. Keeping your nomination of beneficiaries form updated makes it easier for the representatives of your fund and trustees to find out who your dependants and nominees are. If your nomination of beneficiaries form is outdated or incomplete, the trustees decision could be different from what you would have wanted to happen with your death benefit. This is what makes it an expression of your wishes and not a legally binding will. That s why it s so important to update this form every time there s a major change in your life (like when you get married, divorced or have a child). You can get these forms from your human resources department or online at When you ve updated it, return it to your human resources department to keep on your personnel file or complete it online at How your death benefit is shared out The law says the trustees of the fund have to decide how to divide your death benefit between your dependants and nominees. They have to find out about all your dependants and decide how to share out your benefit payment fairly. They ll consider your nomination of beneficiaries form, and the representatives of your fund of your fund can help them with information, but the trustees have the final say. The difference between a dependant and a nominee Dependant: Anyone you are legally responsible for supporting financially or anyone you may not be legally responsible to support financially but who are in fact financially dependent on you. This includes your spouse and all biological and adopted children. Nominees: People or organisations you nominate (choose in writing) on your nomination of beneficiaries form to share your death benefit these are not legal or factual dependants. Spouse: Your spouse is the person you are married to under the laws of South Africa, according to the laws of your religion or in a customary union, or you are living with in a long-term relationship. 8

9 MEMBER BOOKLET How your fund is managed The board of trustees runs the umbrella fund. Each participating employer has its own management committee. Both the board of trustees and the management committee have to protect members interests. The board of trustees The trustees manage the fund according to the law and the general rules of the fund. The board of trustees is made up of: two internal trustees appointed by Alexander Forbes two external professional trustees who are independent of Alexander Forbes and who have skill, knowledge and experience in different aspects of the retirement fund industry. The trustees also decide on the range of investment options to meet the different needs of the fund s members. From this wide range your fund representatives then choose the most appropriate options for your membership. You can find details of the investment portfolio or portfolios your fund representatives chose for your membership in the schedule you got with this booklet. The rules of the fund There is a set of general rules that applies to all members of the Alexander Forbes Core Plan. The trustees decide on the rules, which say how the fund must operate and also give a framework for all the activities of the fund. The benefits that apply to you are set out in the special rules for your participating employer. The fund representatives of each participating employer s section decides on the special rules for that section of the fund. The special rules set out who can join the fund, contribution rates, insured benefits, normal retirement age and other issues specific to your employer s participation in the fund. View the fund s rules In this booklet we can t give you the full details of how the fund works in every situation. We have tried to make this guide as accurate and easy to understand as possible. If there are any differences between the information in this booklet or the schedule, and the official rules or policies of the fund, the rules and policies will always be right. The fund s consultants and administrators The trustees appointed Alexander Forbes Life to provide advice, manage the fund, keep records, invest the fund s assets and make payments to members. You have the right to see the fund s rules by appointment. You can get them from your employer s office or at the registered address of the fund. You can find the registered address at the end of this booklet. If there is a dispute, the dispute resolution method explained in the rules of the fund will apply. 9

10 ALEXANDER FORBES CORE PLAN Every member gets regular communication It s important to know all about your fund credit in the Alexander Forbes Core Plan and keep up to date with changes in the retirement fund industry that might affect your retirement planning. You can do this by reading the regular newsletters and statements you ll get as a member of the fund. AF Online information at your fingertips You can also register with Alexander Forbes for online access to your record in the fund by logging onto With AF Online you can get updated information whenever you want it. You can get registration details from the Alexander Forbes call centre on The communication you ll get as a member of the fund 1 Benefit statement Once a year you ll get this statement showing your membership details and how your benefit is worked out if you resign, retire or become disabled, as well as the amount your family will get if you die while you are still a member of the fund. Who to contact If you have any questions about your fund benefits, please contact your human resources department or: phone the Alexander Forbes Client Contact Centre on Monday to Friday between 08:30 and 17:30 send an to ccrfadmin@aforbes.co.za send a fax to Fund name: Alexander Forbes Core Plan Financial Services Board registration number: 12/8/37095 (Pension section) 12/8/37095 (Provident section) Registered address: Alexander Forbes, 115 West Street, Sandton Please note: This booklet is for general information purposes only and is not intended to be the kind of detailed advice described in the Financial Advisory and Intermediary Services Act, 37 of Alexander Forbes, the fund, the trustees and its agents cannot be held responsible for any damage or loss suffered as a result of any action you take based on the information in this booklet or any discussions relating to it. 2 Trustee report This report gives an overview of what happened in the fund over the previous year, who the trustees are as well as information about any changes to retirement fund law that might affect the fund. 10

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12 HEAD OFFICE SANDTON Alexander Forbes 115 West Street, Sandtion PO Box , Sandton, 2146 Tel: +27 (0) Fax: +27 (0) PRETORIA Alexander Forbes House 189 Clark Street, Corner of Fehrsen, Brooklyn, Pretoria PO Box 2435, Pretoria, 0001 Tel: +27 (0) Fax: +27 (0) STELLENBOSCH 40 Dorp Street, Stellenbosch PO Box 501, Stellenbosch, 7599 Tel: +27 (0) Fax: +27 (0) DURBAN Alexander Forbes Place, 10 Torsvale Crescent, Torsvale Park La Lucia Ridge Office Estate, La Lucia KwaZulu-Natal PO Box 782, Umhlanga Rocks, 4320 Tel: +27 (0) Fax: +27 (0) EAST LONDON Shortmill House, 1st Floor, Quarry Office Park, Quartzite Drive, Selborne, East London PO Box 19367, Tecoma, 5214 Tel: +27 (0) Fax: +27 (0) CAPE TOWN Block A, The Boulevard, Searle Street, Woodstock, Cape Town, 7925 PO Box 253, Cape Town, 8000 Tel: +27 (0) Fax: +27 (0) PORT ELIZABETH 256 Cape Road, Newton Park, Port Elizabeth PO Box 27972, Greenacres, 6057 Tel: +27 (0) Fax: +27 (0) Alexander Forbes Communications. Photos: Gallo Images MB-Core