Solutions Retirement Solutions FAQ

Frequently asked questions

GENERAL

What is an annuity?

An annuity is the regular income you receive during your retirement years. The annuity is provided through products which then pay the regular income.

What is the Old Mutual Wealth or Fairbairn Capital Retirement Fund annuity strategy at retirement?

The Annuity Strategy of the Old Mutual Wealth and Fairbairn Capital Retirement Funds is the Max Income Guaranteed Bonus Escalation annuity (Income for Life)

What does it mean that the Old Mutual Wealth Retirement Fund have an annuity strategy with an annuity option?

The Trustees of the Old Mutual Wealth Retirement Fund make available this possible solution which may be of benefit to you. The Trustees consider that this annuity option would be suitable for the general class of members who may decide to follow their annuity strategy. You may of course select a different annuity to this.

How do I know which annuity is best for me?

That will depend on many factors, including your living costs, dependants, health, lifestyle preferences and the amount of money you have at retirement to buy an annuity. While the Retirement Benefit Counsellors can offer you guidance specific to the annuity strategy, you should speak to a financial planner if you want a complete needs analysis and advice.

What is the main benefit of the annuity option made available in terms of the fund’s Annuity Strategy?

Max Income Guaranteed Bonus Escalation annuity (Income for Life) provides a certain income for the rest of your life. Old Mutual, as the insurer, carries the risk that you will live longer than expected and guarantees to pay you for as long as you live.

Are there any risks of investing in this annuity option?

Yes, you have no control of the increase level of your income each year, so there may be years when there is low (or even zero) income increases (mainly due to poor overall performance by investment markets).

What other annuity options are there?

There are many types of annuities. These include the following: Level Life Annuity: A fixed annuity that doesn’t increase each year, despite the fact that inflation usually increases the cost of living each year. The initial income provided by such a level annuity is higher than the initial income provided by an annuity which escalates annually. It continues to pay an income until death, as with all life annuities. Escalating Life Annuity: An annuity that increases at a set rate (for example 5%) every year. It continues to pay an increasing income until death. Inflation Linked (or CPI) Life Annuity: An annuity that increases at the inflation rate (ie at the rate in which the Consumer Price Index increases) every year. It continues to pay an income until death. Living Annuity with more investment options and greater flexibility in choosing your withdrawal amounts: An annuity, the income level of which depends on the value of your investment – which is influenced by (amongst other things) the income withdrawal rate that you choose to take (between 2.5% and 17.5%) , how the underlying investments perform, and how long you live for. For more information and guidance on these annuity options, you should speak to your financial planner.

Can I change my Max Income Guaranteed Bonus Escalation annuity (Income for Life) to the Old Mutual Wealth Linked Retirement Income at a later stage?

No. Once you have selected the Max Income Guaranteed Bonus Escalation annuity (Income for Life) you cannot change from that option for the rest of your retirement.

Can I choose a combination of annuities?

Deciding how much to purchase of different types of annuities is complex. Speak to a financial planner if you need more information and guidance on this.

Can I withdraw any part of my retirement capital as a lump sum or must the entire amount be used to purchase the annuity?

Capital lump sums are allowed, limited to a maximum in terms of legislation. This limit will depend on the type of fund from which you are retiring, the total value of the retirement capital and also whether you have withdrawn lump sums previously from this fund. Lump sum withdrawals may be fully or partially subject to income tax.


QUOTATIONS AND PURCHASE

Is there any way of knowing what my pension income will be before I choose the annuity I want to invest in?

Yes. The Retirement Benefit Counsellor (RBC) can provide you with a Max Income Guaranteed Bonus Escalation annuity (Income for Life) quote/quotes and based on the information you provide and your preferences.

How long is the quotation valid?

The quotations for annuities in the Max Income Guaranteed Bonus Escalation annuity (Income for Life) are valid for one week.

Do I have to accept this quote?

No. The quotation is done to help you make the best possible decision about buying an income on retirement. You are under no obligation to accept it.

If I’m not happy with the calculated monthly pension, can I request a different quotation based on different quotation details (inputs)?

Yes. Quotations can be provided using different choices and options. Please note, however, that the Retirement Benefit Counsellor is only able to assist with quotes that are based on the Funds’ annuity strategy.

Are the annuity amounts quoted before or after the deduction of fees (charges)?

The initial income amounts quoted are after the deduction of charges.

Is the annuity income subject to income tax?

Yes, the annuity income will form part of your taxable income.

What must I do to accept the quotation?

You need to complete and sign the Quotation Acceptance form and submit it to the email address stipulated on the quote.

What are the required documents to process my annuity payment?

You will need to provide the following: a Quotation Acceptance form; a copy of your ID; copies of the IDs of any contingent lives (if joint life was selected); and a Retirement Claim form.

Do I have to consult a financial adviser in order to accept an annuity quotation and buy the annuity?

No. But it is advisable to make use of a financial planner to do a full analysis of your needs and provide you with advice. The appropriate fees for such financial planning and advice services can be discussed and negotiated with the adviser.

Can I cancel my Max Income Guaranteed Bonus Escalation annuity (Income for Life) once it has been issued?

No. Once the Max Income Guaranteed Bonus Escalation annuity (Income for Life) has been issued you may not cancel it.

Are there any fees payable to request a quote?

No.

Is the process involved in buying an annuity complicated?

No. Once you choose your annuity and we receive all the supporting documents, we will implement your decision and purchase the annuity on your behalf. It’s a quick and uncomplicated process


GUARANTEED TERM AND SECOND LIFE

What does guaranteed term mean?

While your monthly pension is payable for your lifetime, the guaranteed term means that your income will continue to be paid for the full guaranteed period even if you pass away. The guaranteed term for the Funds’ annuity strategy is 5 years. This guaranteed term starts on the same date as the annuity. A guaranteed term reduces your starting income.

If I choose to include a second life, how will it affect my monthly pension?

Choosing a second life on your pension will result in you receiving a lower starting income in retirement in exchange for the second life continuing to receive an income after your death. A reduced income of 66.67% of your annuity will be payable for the rest of the life of the second life assured.

Who may be added as a second life?

The second life is normally a spouse or civil union partner, but it can be anyone else.

Will my regular income increase if the second life on the pension dies?

No.

With the Max Income Guaranteed Bonus Escalation annuity (Income for Life) what happens to my pension if my nominated second life on my pension and I die in an accident?

No further income will be payable (unless you die during the guaranteed term, in which case the full annuity will continue to pay to a nominated beneficiary for the balance of the guaranteed term).

If I get divorced from the second life on my pension (in the case of a spouse), may I replace him/her with another second life?

Once a second life has been added to your pension, that person cannot be removed or changed, so you will not be able to add a different second life at a later stage. In the event of divorce from the person you added as a second life, that person will still receive a regular pension if you pass away before them.

If the second life on my pension dies, may I add another life?

No.