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Discovery Life Offers Structural Breakthrough In Retirement Planning
Discovery Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1999/007789/06)
ISIN: ZAE000022331
Share Code: DSY
(`Discovery`)
MEDIA RELEASE FROM DISCOVERY LIFE
DISCOVERY LIFE OFFERS STRUCTURAL BREAKTHROUGH IN RETIREMENT PLANNING
20 June 2005
In a structural breakthrough for the retirement products market, Discovery Life
has announced the launch of its retirement Optimiser, designed to address the
many shortcomings of the current range of retirement products.
Optimiser is Discovery Life`s first entry into the investment products space,
and comes at a time when the life industry is under attack for the failings of
the current offerings in the market.
`The move into the retirement sector is in line with our mission of entering
markets where we can make a difference, as we did with the pioneering of
consumer-centred health and risk-only life policies,` says Discovery CEO Adrian
Gore.
`Just as Discovery Health has used consumerism to create sustainable healthcare
coverage, and Discovery Life has cut the cost of life cover.`
Gore says the Optimiser directly addresses the five main problems with existing
retirement annuities (RAs): they are expensive to invest in; they create
investment risk for the policyholder at the time of retirement; surrender values
are low; expectations at retirement are not being met; and income during
retirement is inflexible, since it does not take into account changes in
circumstances, such as in one`s health.
By using the Discovery Life Plan to underpin it, the Optimiser ensures that a
policyholder`s retirement fund is significantly boosted, that policyholders
enjoy certainty of retirement benefits and that income during retirement is
protected, regardless of one`s health status.
Importantly, policyholders have significant protection in the event of needing
to reduce or cease paying contributions. The value of the investment will never
fall below 90% of the fund`s value in the event of it becoming paid up, or 95%
if this occurs less than three years prior to retirement.
`This will be of immense comfort to particularly policyholders who see their
financial circumstances change and who have to reduce their payments suddenly,`
says Discovery Life MD, Herschel Mayers.
Policyholders can choose from a number of investment options, depending on
investment risk appetite. They can either choose a guaranteed inflation-linked
fund, or choose a market-linked fund, offering access to domestic and offshore
portfolios.
The guaranteed inflation-linked fund guarantees a return of CPI plus 2 percent
net of all costs and tax.
The market-linked options include Investment Solutions` multi manager
portfolios, a range of unit trusts managed by South Africa`s leading fund
managers, or the unique Escalator portfolio, whereby returns are guaranteed at
least 80% of the portfolio`s highest value over its lifespan.
Investors can also choose between the standard plan, in which contributions
increases are fixed at the consumer price index, and the AcceleRater plan, where
contributions rise by CPI plus an aged based factor.
Contributions are also tax efficient, due to a flexible combination of endowment
and annuity. Furthermore, in a feature which should be welcomed in the current
residential property bull market, Vitality members can receive an 8% discount on
a First National Bank (`First National`) home loan for the first 10 years of
bond repayments, up to R1 000 per month. The discount amount goes into the
market-linked fund of the policyholder`s choice.
Upon retirement, policyholders start to see the real benefits of the underlying
life plan. The Life Plan Optimiser offers significant returns above high
projection rate offerings of traditional assurers, of up to 100% in some
instances - using the inflation-linked fund for comparison, with a starting age
of 35 and a retirement age of 65, and with payments on the AcceleRater Plan
(even on the Standard Plan, the return is 30% higher than that of traditional
assurers).
Up to a third of the fund can be taken out as a tax free lump sum at retirement,
with the balance used to fund income, while the value of contributions by
Vitality members will be boosted by a further 7% of the value of one`s home loan
with First National, for a total of 15%, to a maximum of R1 750 a month.
During retirement, policyholders can draw down up to 50% of the value of their
unused Life Plan as tax-free income over five years, as well as a lump sum
booster for every tenth anniversary after retirement.
There is also an enhancement built into income to cater for instances of severe
illness.
`The Optimiser is a unique offering that caters for a broad range of needs for
people planning for their retirement, while being affordable at the same time,`
says Mayers
Distributed by : Beachhead Media & Investor Relations
Patrick Lawlor 011 214 2410/ 082 459 6709 / patrick@bmsa.co.za
Rio Matlhaku 011 214 2402 / 082 907 7943 / rio@bmsa.co.za
On behalf of : Discovery Life
Adrian Gore, CEO Discovery Holdings
011 529 2800
Herschel Mayers, MD Discovery Life
011 529 2110
Fact sheet on the Discovery retirement Optimiser
Tell me more about the Discovery retirement Optimiser
The minimum contribution is R300 a month, not including contributions to the
Life Plan.
Retirement age is set in advance at 55, 60, 65 or 69.
Optimiser can be funded from one of two plans:
* The Standard Plan: contributions increase annually according to
CPI.
* The AcceleRater Plan: contributions increase annually at CPI
plus a factor, according to your age.
The Optimiser is a blend of annuity and endowment, which creates a tax efficient
funding structure.
Contributions to the retirement annuity, including the HomeEquity Booster, are
tax deductible. The endowment portion is not.
Why is the Life Plan so important?
The Discovery Life Plan is fundamental to the Optimiser, since by linking it to
the Optimiser, retirement benefits are enhanched significantly.
The Life Plan utilises unused life cover to boost income at retirement, and to
provide extra income in case of severe illness, or if one lives a long life (see
below).
Risk benefits consequently reduce proportionately as the Life Fund value
reduces.
It is important to maintain contributions to the Life Plan, both before and
after retirement, so as to get the full benefit of the retirement income (see
below).
Tell me about the Investment Optimiser
Investors can choose either the Guaranteed Inflation-linked Fund, or the Market-
linked Fund, or a combination of the two.
The Guaranteed Inflation-linked Fund provides certainty of returns in excess of
rises in the cost of living. Returns are linked to CPI, if held to retirement.
The Market-linked Fund has the following options:
* Investment Solutions` Multi Manager portfolios.
* A choice of unit trusts run by South Africa`s leading fund
managers.
* Discovery`s unique Escalator portfolios - these smooth out fluctuating returns
at retirement.
What if I cannot carry on paying for the Optimiser?
If you need to reduce or stop paying the contributions, the Optimiser will
become paid up, or surrendered.
You will be guaranteed 90% of the Fund`s value, or 95% of its value, if paid up
or surrender date is within three years of retirement age.
In the case of the Guaranteed Inflation-linked fund, the fund value is
determined as follows:
* For the retirement annuity, contributions accumulated at CPI
less a management fee of 1% per annum less retirement fund
taxation (currently 18%).
* For the endowment, contributions accumulated at CPI less a
management fee of 1% per annum.
If you die prior to retirement, the death benefit is equal to the fund values,
subject to a minimum of contributions paid.
The paid up or surrender values include the HomeEquity Booster discount.
OK, what happens when I retire?
Up to one third of the fund`s value can be taken out as a tax-free lump sum
subject to certain limitations.
This amount comes out of the Life Fund, as instalments over 60 months. The Life
Fund will never fall below 50% of its value at retirement.
The remaining two thirds provides a regular income:
* For the retirement annuity, a compulsory fixed interest or
linked life annuity provides regular income, and is taxable.
* For the endowment, regular tax-free withdrawals of between 5%
and 20% are made until the fund is exhausted.
There is also a boost from the HomeEquity Booster, which provides a
retrospective boost of the equivalent of 7% per annum to your home loan, or a
total discount of 15% (to a maximum of R1 750 a month effectively).
And thereafter?
At every tenth anniversary after retirement, you will receive a tax-free lump
sum drawn from the Life Fund, called the Longevity Booster. The balance is paid
out at death. The Longevity Booster is equal to 10% of the retirement fund,
after deduction of the lump sum.
Should you become severely ill in retirement, you will receive additional income
through the Ill-Health Booster, depending on the severity, of between 25% and
6,25%. This amount is tax-free and has no impact on the Life Fund.
The monthly payments will not reduce the Life Fund value by more than 4% per
annum, or 50% overall.
The retirement Optimiser includes an automatic lock-in benefit, which ensures
that you can keep making payments to the Life Fund during retirement.
Tell me more about the HomeEquity Booster
The HomeEquity Booster is available to all Discovery Vitality members.
You need a home loan with First National to qualify. First National will match
any interest rate down to Prime less 1,8%.
You get a discount of 8% per month on your home loan repayments, up to a maximum
of R1 000, for ten years.
This amount can either be transferred to your DiscoveryCard account, or else can
be paid into the Market-linked Fund of the retirement Optimiser.
A further effective discount of 7% is paid retrospectively upon retirement, up
to an effective R1 750 a month, or a total discount of 15%.
Vitality members who have a life cover through a Discovery group scheme, get a
higher discount on their home loans of 10%.
ENDS
Sandton
20 June 2005
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 20/06/2005 04:50:56 PM
Produced by the JSE SENS Department
