ABSA CONSULTANTS AND ACTUARIES

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ABSA CONSULTANTS AND ACTUARIES

• Pension Fund of the University of the Free State
  
• Conversion of Option C to Option D
• February 2009

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TOPICS FOR DISCUSSION

• Existing benefit structures Options C and D
• 2. Why the move from Option C to D?
• 3. Why is this change imposed?
• 4. Personal circumstances to consider /
  advantages and disadvantages of the proposed
  conversion
• 5. Member communication
• 6. Implementation timeframe
• 7. General

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1. BENEFIT STRUCTURE
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1. BENEFIT STRUCTURE Cont.

• Actuarial contribution scale (Option C members)
• Member contributions of 7.5 of salary allocated
  as follows

• Employer contributes on a Rand for Rand basis to
  the Preservation
• account, plus the cost of
• Minimum pension guarantee
• Death and disability benefits
• Operational costs

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1. BENEFIT STRUCTURE Cont.
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1. BENEFIT STRUCTURE Cont.
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1. BENEFIT STRUCTURE Cont.
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1. BENEFIT STRUCTURE Cont.
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1. BENEFIT STRUCTURE Cont.
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2. WHY THE NEED TO CHANGE?

• Most Option C members would be better off under
  Option D (not all though)
• The net employer contribution saved towards
  retirement funding under option D is greater,
  irrespective of age.
• The effect of the greater saving towards
  retirement will result in potential higher
  retirement benefit.
• Members directly enjoy the benefit of higher
  investment returns, but also carry the risk of
  poor investment returns.
• Simplified benefit structure.
• Potential long term cost saving for the Fund with
  regard to administration cost. All categories
  will benefit.

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3. ADVANTAGES AND DISADVANTAGES ASSOCIATED WITH
THE CONVERSION

• Advantages (for the member)
• Greater saving towards retirement from the onset
• Potential higher retirement benefit
• Simplified benefit structure
• Individual investment choices
• Advantages (for the employer)
• Potential risk of funding minimum guarantee
  removed

• Disadvantages (for the member)
• No minimum pension guarantee
• Investment risk
• Members closer to retirement might not be better
  off converting
• Disadvantages (for the employer)
• None

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4. MEMBER COMMUNICATION

• Option C members to be issued with communication
  document, personalised benefit statement, as well
  as option form.
• Benefit statement compares your unique
  circumstances given the assumptions made.
• Select benefit structure best addressing your
  personal circumstances.
• This is a once only irrevocable choice.
• Obtain professional advice

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4. MEMBER COMMUNICATION Cont.

• Example of member communication.
• Examples of benefit statements.
• Option form to complete

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5. IMPLEMENTATION TIMEFRAME

• Member sessions conducted - 13 and 16 February
  2009
• Member communication distributed to relevant
  members - __February 2009
• Members to complete and submit option form to Mr
  A van der Bijl (Principal Officer) - 15 March
  2009
• Effective date for implementation of conversion -
  1 April 2009
• If no choice is received automatic transfer to
  Option D

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6. GENERAL

• Questions
• Closing
• Absa Consultants and Actuaries is an authorized
  financial services provider