Retirement Income Plan

Fact File

Contents

01 | Linked Retirement Income Plan 1

02 | Fixed Retirement Income Plan 7

03 | Invest Aware 8

04 | Business practices 9

Discovery Invest’s Retirement Income Plan

The Retirement Income Plans are built on innovative thinking, tax efficient structures and cutting edge investment strategies. These aspects ensure that you have a more comfortable and rewarding retirement. This Fact File will allow you to understand your Retirement Income Plan and how you can make it work better for you.

Discovery Invest ’s Retirement Income Plans are designed to provide you with a regular income throughout your retirement. This is called annuity income and the level of annuity income you receive will depend on the structure of your Retirement Income Plan and your applicable tax rate.

The Retirement Income Plan can be structured as either a Linked Retirement Income Plan or a Fixed Retirement Income Plan.

This Fact File is designed for your easy reference.

1

If you have selected the Linked Retirement Income Plan, your lump sum contribution will be invested (after any initial fees) in your choice of investment options as offered by Discovery Invest.

The annuity income that you receive will be determined by the amount that you choose to withdraw out of your investment fund, plus any additional income from the Retirement Income Investment Integrator (explained below). You may choose an annuity income level between 2.5% and 17.5% of your investment fund per year according to current legislation. These limits may be reviewed from time to time.

The value of your investment fund reflects the investment returns earned on the various investment options that you have selected and will be reduced by your chosen withdrawal amount for the annuity income as well as any fees and premiums deducted by Discovery Invest (this may include financial adviser fees).

The initial annuity income amount that you choose will be paid to you in the first year of your policy. On each policy anniversary, annuity income is recalculated by multiplying the value of your investment fund by your selected annual income percentage and dividing that amount by the number of annuity income payments in the forthcoming policy year. Alternatively, you can select a rand income amount to be paid to you in the forthcoming policy year. You will receive the annuity income after the required tax has been deducted. This will apply throughout your lifetime.

You may change your selected income level on any policy anniversary subject to Discovery Invest’s practices and legislative requirements. Please note that changes to your annuity income may influence the additional income you receive from the Retirement Income Investment Integrator (see section 1.1 below for details).

Discovery Life is the owner of the underlying assets of the Linked Retirement Income Plan.

On your death, the investment fund will be paid to your nominated beneficiaries, as an annuity or cash lump sum. In the absence of a nominated beneficiary, the investment fund will be paid to your estate as a lump sum.

Transferability

Your investment fund may be transferred from one insurer to another. Any such transfers are subject to the provisions of Directive 135 and Directive 135(A) issued by the Registrar of Long Term Insurance.

01 Linked Retirement Income Plan

Convertibility

Your Linked Retirement Income Plan may be converted to a Fixed Retirement Income Plan at the rates applicable at the time of conversion.

Taxation

All investment growth on the investment options that you choose in the Linked Retirement Income Plan is tax-free under current tax practice.

Annuity income amounts and additional income from the Retirement Income Investment Integrator will be aggregated and taxed according to income tax tables as released by SARS each year, unless a tax directive is provided to Discovery for a different rate. Income from other policies with Discovery or other providers will not be allowed for in this aggregation. Discovery Invest will implement any changes to tax practice as appropriate.

Income frequency

You can select to receive your annuity income monthly, quarterly, bi-annually or annually.

2

1.1 | The Retirement Income Investment Integrator (applicable to the Linked Retirement Income Plan only)

The Retirement Income Investment Integrator rewards you for conserving your retirement savings and looking after your health by boosting your annuity income by as much as 50%. These income boosts will

be paid by Discovery and will not reduce your investment value. The Retirement Income Investment Integrator percentage enhancement of your annuity income is determined based on the table below. It depends on:

the annual annuity income percentage that you select at the start of each policy year; and

your Vitality status at the time of each annuity income payment.

Surrenders

According to current legislation, your Linked Retirement Income Plan may not be surrendered unless the investment value declines below a certain amount. The amount depends on whether you’ve made a once-off withdrawal from your savings at retirement before transferring the remainder into the Linked Retirement Income Plan. The amount is:

R75 000 – if you did not make a once-off part-withdrawal at retirement; or

R50 000 – if you did make a part-withdrawal at retirement

Beneficiaries

You may at any time appoint or remove a beneficiary. This must be recorded by Discovery Invest

Benefits payable on death

In the event of your death, the investment fund of the Linked Retirement Income Plan may be taken either in cash or as an annuity. In the absence of a nominee the benefit may be paid to the deceased estate as a lump sum. The investment fund will be subject to tax at the highest average rate of tax paid by you in the tax year of death and the preceding tax year. Any annuity taken will be taxed at your marginal rate of tax. The Retirement Income Investment Integrator will cease on death

Contributions to the Linked Retirement Income Plan

The lump sum contribution to the Linked Retirement Income Plan must be a transfer value from an approved fund.

Annual Annuity Income Percentage

Vitality status

None Blue Bronze Silver Gold Diamond

From 2.50% to 3.25% 20.00% 30.00% 35.00% 40.00% 45.00% 50.00%

From 3.26% to 4.00% 15.00% 17.50% 20.00% 25.00% 30.00% 35.00%

From 4.01% to 4.75% 10.00% 12.50% 15.00% 17.50% 20.00% 25.00%

From 4.76% to 5.50% 5.00% 7.50% 10.00% 12.50% 15.00% 17.50%

From 5.51% to 7.00% 2.50% 2.50% 5.00% 7.50% 10.00% 12.50%

From 7.01% to 8.50% 0.00% 0.00% 2.50% 5.00% 5.00% 7.50%

From 8.51% to 10.00% 0.00% 0.00% 0.00% 2.50% 2.50% 5.00%

From 10.01% to 17.50% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

3

The proportion of your annuity income that qualifies for this boost is based on the proportion of your Linked Retirement Income Plan invested in qualifying Discovery Funds at the time of each annuity income payment. Qualifying Discovery Funds consist of Discovery Funds, Escalator Funds based on Discovery Funds and indices, and Target Retirement Date Funds. The list of qualifying funds may be updated from time to time.

The Retirement Income Investment Integrator will apply for the first 10 years of your Linked Retirement Income Plan.

Changes to your annual annuity income percentage, your Vitality status or membership, or the proportion of your Linked Retirement Income Plan invested in qualifying Discovery Funds, will result in changes to your Retirement Income Investment Integrator income boost. If you select a rand value annuity income amount, Discovery will calculate the equivalent annual annuity income percentage and apply the table on the previous page.

The Retirement Income Investment Integrator will stop on your death or if you transfer your Linked Retirement Income Plan to another provider. The Retirement Income Investment Integrator will only apply to your annuity income and not any additional instalments from other products such as the Discovery Retirement Optimiser (if applicable).

The qualification criteria and table for the Retirement Income Investment Integrator may be reviewed by Discovery from time to time.

1.2 | 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 lump sum contribution will be invested into the Discovery Money Market Fund. The lump sum contribution (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 the money is phased in. You can choose to phase in your investment over 3, 6, 9, 12, 15, 18, 21 or 24 months.

Your selected phase-in period (if applicable) is shown on your policy schedule.

The Retirement Income Investment Integrator may change after each phase-in month based on the proportion of your total investment value in qualifying Discovery Funds.

1.3 | Fees applicable to your Linked Retirement Income Plan

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.

1.3.1 | Initial fees

There are no initial administration fees for the Linked Retirement Income Plan.

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 Invest will pay over to your financial adviser from your contributed amount. You can negotiate with your financial adviser to determine your initial fee.

4

100% allocation or upfront payment

You can choose the 100% allocation option, which means that you avoid the initial fees to your financial adviser being deducted from your investment upfront. The value of the fee is instead increased and paid in monthly instalments over the next five years. However, if you surrender or transfer your plan within the first five years, unpaid fees resulting from the 100% allocation will be charged on your plan.

The amount that you will have to pay over the five years is the Financial Adviser Initial Advice Fee (including VAT if applicable) multiplied by 1.262. 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.

Example of how the initial fee calculation works:

You and your financial adviser agree to a 2% Financial Adviser Initial Advice Fee on a lump sum investment of R75 000 to the Linked Retirement Income Plan. This fee amounts to R1 725 (including VAT), which is deducted from your lump sum contribution upfront.

This leaves you with R73 275 (R75 000 minus R1 725) that would be invested into your underlying fund choices.

What if you chose 100% allocation?

If you would rather pay the Financial Adviser Initial Advice Fee over five years in monthly instalments so that your total contribution of R75 000 is invested into your underlying fund choices, then you should choose the 100% allocation option. Under this option the initial fee of R1 725 for your financial adviser will be multiplied by 1.262 and divided by 60 to determine your monthly instalments to be paid for five years:

R1 725 x 1.262 = R2 176.95, then R2 176.95 ÷ 60 = R36.28

So instead of paying R1 725 immediately, you will pay R36.28 per month for a period of 60 months. If you surrender or transfer your investment before the end of the 60 months, any remaining unpaid fees from 100% allocation will be deducted before you receive your investment value.

Please note: this fee will not change and will remain R36.28 for the entire 60 months in this example.

Investment Manager Initial Fees

Please remember that certain investment management companies may charge initial fees for investing in their funds. The initial fees applicable to each fund can be found on the respective fund fact sheets available on www.discovery.co.za.

1.3.2 | Annual fees

Discovery Invest Annual Administration Fee

The annual fee charged for administering your Linked Retirement Income Plan is 0.55% of your investment fund. This fee will be increased by 15% to offset VAT expenses. Units in your investment fund are redeemed on a monthly basis as 1/12th of this fee.

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, increased by VAT. Discovery Invest will deduct these from your investment and pay them over to your financial adviser.

5

1.4 | Choosing the underlying funds for your Linked Retirement Income Plan

Investment choices that are available

Your contributions to the Linked Retirement Income Plan will be invested in the underlying investment options that you have selected. The investment options selected and the allocation of the contributions between these investment options will be shown on your policy schedule.

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.

Discovery’s range of investment options

1.4.1 | Discovery Invest Funds

Discovery’s range of funds caters for a full range of risk profiles. There are single manager unit trust funds which offer flexibility and control for clients with specific investment objectives, while the multi-manager funds and model portfolios 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.

Through Discovery’s association with international banks, Discovery Invest is able to provide investors with access to new generation investment methodologies. Since these are not unit trusts, they are not regulated by the Collective Investment Scheme’s Act.

Fee reviews for Linked Retirement Income 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.

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. The annual fees that apply to each fund can be found on their respective fund fact sheets available on www.discovery.co.za

6

1.4.2 | 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 and Life Escalator Funds with various unit trusts and indices as the underlying riskier asset that you may choose from.

1.4.3 | External funds

Discovery also offers access to a wide range of external investment managers to provide flexibility in your investment choice.

1.5 | Switching between investment options in your Linked Retirement Income Plan

You may switch between investment options at any time, subject to Discovery Invest’s practice at the time.

The current practice is to allow four free switches per year. Additional switches will attract a fee of 0.25% of the value switched. This will be increased by 15% to offset VAT expenses and is capped at a maximum of R500 per transaction.

A switch will be subject to any initial fees levied by the investment managers to which the funds are switched. Switches that result in a change in the proportion of your Linked Retirement Income Plan invested in qualifying Discovery funds will result in changes to your Retirement Income Investment Integrator.

1.6 | LifeBooster

The LifeBooster is designed to reduce the risk to your dependants or beneficiaries of your death, resulting from the investment being less than expected (given the performance of markets or the underlying choice of funds at that point in time).

When you die, the LifeBooster will boost your investment value by up to 15% on the date of death. The size of the boost will depend on your Vitality status on the last policy anniversary before your death. The LifeBooster will end on the policy anniversary before you reach 70.

The LifeBooster does not apply:

If your Linked Retirement Income Plan is funded from a Discovery Retirement Optimiser policy

If you are younger than 14 years of age at inception of the policy

If your death is as a result of any pre-existing conditions, physical defects, illnesses, bodily injuries or diseases you have suffered from, were aware of or should have reasonably been aware of, or received medical treatment or advice for during the three years before the commencement date of the policy

If your death is a result of suicide within the first two years after inception of the policy.

7

02 Fixed Retirement Income Plan

The Fixed Retirement Income Plan provides you with a guaranteed level of annuity income throughout your retirement years as long as you are alive.

Your lump sum contribution will be reduced by any financial adviser initial fees plus VAT if applicable. The balance will be used to buy your annuity income. You will receive the annuity income after the deduction of any required tax throughout your lifetime. On death, the annuity income will cease. The Fixed Retirement Income Plan provides the following options at inception of your policy (note, these cannot be changed after inception of your policy):

Annuity income increase rate – you can choose at what level to have your income increase at each policy anniversary.

Guarantee term – you can choose to have your income payable for a guaranteed period. This ensures that on death before the end of the guarantee term, your annuity income will continue until the end of the guarantee term. The income will be payable to your chosen beneficiaries.

Joint Annuity – you can choose to have your income payable for as long as you or your spouse is alive. You may also choose to have your income decrease to a certain level after the first death for the remainder of the life of the surviving spouse.

The options that you have chosen are displayed on your policy schedule.

Income frequency

You can select to receive your annuity income monthly, quarterly, bi-annually or annually.

Beneficiaries

You may at any time appoint or remove a beneficiary. This must be recorded by Discovery.

Surrenders

According to current legislation, your Fixed Retirement Income Plan may not be surrendered, commuted or assigned. It may also not be pledged as security for any loan.

Convertibility

A Fixed Retirement Income Plan may not be converted into a Linked Retirement Income Plan.

Contributions to the Retirement Income Plan

The transfer value from an approved fund will be the lump sum contribution to the applicable Fixed Retirement Income Plan.

Additional contributions cannot be made to your existing Fixed Retirement Income Plan. A new Fixed Retirement Income Plan will need to be started in this case. The annuity income that can be received from a new Fixed Retirement Income Plan will depend on financial conditions and what Discovery Invest is able to offer at that time.

Taxation

Annuity income amounts from the Fixed Retirement Income Plan will be taxed according to income tax tables as released by SARS each year unless a tax directive is provided to Discovery for a different rate. Income from other policies with Discovery or other providers will not be allowed for when applying the income tax tables.

Discovery Invest will implement any changes to tax practice as appropriate.

8

03 Invest aware

3.1 | What you should know about Escalator and Annuity 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 or Annuity 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.

The guarantee that the Escalator or Annuity Escalator Funds will not fall below 80% of the highest value reached (the guarantee level) is a guarantee provided by Deutsche Bank or BNP, as the case may be, and not Discovery Life Limited. This means that the investor bears the risk if Deutsche Bank or BNP is unable to meet the guarantee for any reason whatsoever.

The allocation between the riskier asset and the cash component is determined through an algorithm which enables the guarantee at any time.

9

04 Business practices

4.1 | 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 011 539 5777 or emailed to invest_support@discovery.co.za

The forms are available from the Discovery Invest contact centre on 0860 67 5777.

4.2 | 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).

4.3 | 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.

4.4 | 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 entered into.

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 suspend your cover from the inception date of your contract. In addition to this, Discovery Invest will also be entitled to:

¡ Refuse to pay out any current or future claims that are related to the misrepresentation or non-disclosure

¡ Adjust your premium or contribution from the date of 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, and retain any premiums or contributions paid to Discovery Invest or Discovery Life as a penalty.

4.5 | 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 cause or conspire to cause the illness or disability that gives rise to a claim.

4.6 | 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.

4.7 | 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 the dedicated Discovery Invest contact centre on 0860 67 5777.

You can also visit www.discovery.co.za/invest for additional resources and a downloadable version of this fact file (as a PDF file).

IRIFFE 04/18GM_51977DI_03/04/18_V1

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. The Discovery Invest Retirement Income Plan is administered by Discovery Life Investment Services (Pty) Limited trading as Discovery Invest, a subsidiary of Discovery Holdings Limited. Discovery Life is a registered long-term insurer and an authorised financial services provider. Registration number 1966/003901/06. Discovery Life Investment Services (Pty) Ltd branded as Discovery Invest is an authorised financial services provider. Registration number 2007/005969/07. Copyright – Discovery Invest – All rights reserved

Discovery Invest

Contact Centre 0860 67 57 77 | invest_support@discovery.co.za | www.discovery.co.za

Discovery_SAwww.discovery.co.za @Discovery_SA youtube/DiscoverySAdiscoverysouthafrica