Sanlam Limited · JSE:SLM
Sanlam — Conference Presentation (2021)
45 slides from Sanlam's conference presentation, 2021
Slide 1: Guidelines for this Webinar
Guidelines for this Webinar Your cameras and microphones have been disabled for this webinar Send through Questions via the Q&A button on the toolbar, these will be addressed at the end A recording of this webinar will be made available to you.
Slide 2: Annuitisation: Impact of T-Day
ANNUITISATION IMPACT OF T-DAY Karen Wentzel Sanlam Corporate: Annuities Insurance | Financial Planning | Retirement | Investments | Wealth
Slide 3: Agenda
AGENDA How does T-Day affect you? Annuitisation Annuity options available 5 tips to retire in uncertain times T-DAY ALERT
Slide 4: Retirement reform changes: what you need to know
RETIREMENT REFORM CHANGES What Over the last few years, government has been reviewing and changing the laws that control the retirement fund industry. These you retirement reforms aim to ensure that you save enough for retirement and need to 1 MARCH that your savings are protected. Certain changes,
Slide 5: T-Day: How does it affect you?
T-DAY: HOW DOES IT AFFECT YOU? T-day rules only apply to how your retirement benefits under provident funds or provident preservation funds are paid. Nothing changes when you withdraw before retirement – you can still take all your savings in cash. From 1 March 2021, retirement benefits from provide
Slide 6: T-Day: How does it affect you?
T-DAY: HOW DOES IT AFFECT YOU? Your member share will consist of two portions: If you are 55 years or older on 1 March 2021, you will not be affected by any of these new rules – as long as you stay in the same provident / provident preservation fund.
Slide 7: How will T-Day affect your retirement benefit?
HOW WILL T-DAY AFFECT YOUR RETIREMENT BENEFIT? From 1 March 2021 You are younger than All your savings as at All your savings from 55 years on 28 February 2021 1 March 2021 (incl interest) 1 March 2021, and (plus interest thereon) will be in this portion. will be in this portion. If R247 500 or less
Slide 8: How will T-Day affect your retirement benefit?
HOW WILL T-DAY AFFECT YOUR RETIREMENT BENEFIT? From 1 March 2021 You are 55 years or older on All your savings as You may take all 1 March 2021, and at 28 Feb 2021 your savings in (plus interest this portion, plus You are saving in a provident or provident preservation thereon), interest thereon, in
Slide 9: How will T-Day affect your retirement benefit?
HOW WILL T-DAY AFFECT YOUR RETIREMENT BENEFIT? on the 1 March 2021 You are 55 years or older on 1 March 2021, All your savings as at date of All your savings (plus interest and transfer/ saved in the old thereon) in the new fund will fund (plus interest thereon) be in this portion. You are saving in
Slide 10: Impact of T-Day on annuitisation
IMPACT OF T-DAY ON ANNUITISATION Renewed focus on different types of annuities Life vs living annuities Advantages and disadvantages Risks at retirement Market risk Longevity risk Replacement risk Affordability
Slide 11: Retirement trilemma
RETIREMENT TRILEMMA Access to Two at best! good returns Protection Access to of risks capital No product can deliver in all three areas SOURCE: DR DAVID KNOX, PARTNER AT MERCER IN AUSTRALIA
Slide 12: Life vs living annuity
LIFE VS LIVING ANNUITY Living annuity Select annual income drawdown between 2.5% and 17.5% Income % can be changed on anniversary date Life Living Select underlying portfolio of your investment vs annuity annuity Life annuity Offers more security Guarantees a monthly income for life Provided by life
Slide 13: What determines the cost of life annuity
WHAT DETERMINES THE COST OF LIFE ANNUITY Life expectancy Mortality assumption: Base table and improvements Yield curves Real yield curve Nominal yield curve Expenses Initial expenses and commission Ongoing expenses
Slide 14: Pricing over the last year
PRICING OVER THE LAST YEAR Effect of nominal yields on the price of a guar. life annuity since Jan 2020 Inflation-linked (100%) Guar. Escalation (7%) With-profit (3.5% PRI) 1 000 Thousands 950 900 Premium 850 800 750 700 650 Premium for married male, age 65 for income of R5000 p.m.
Slide 15: Transition: employment to retirement
TRANSITION…EMPLOYMENT TO RETIREMENT Aspirations / decisions Realistic income potential
Slide 16: Interesting challenge
INTERESTING CHALLENGE … Volatile markets Design better Returns below norms annuity products Focus on guarantees
Slide 17: In some cases
IN SOME CASES Negative effect Affordable from outset on future increases
Slide 18: Annuity options vs risk
ANNUITY OPTIONS VS RISK Lower risk Higher risk Market Longevity Replacement Annuity vehicle Affordability risk Risk Risk Level Guaranteed Escalation With-Profit Annuity Inflation linked Living Annuity
Slide 19: Higher risk, lower risk
Higher risk Lower risk With Profit Guaranteed Living Annuity Annuity Annuity Investment RISK Volatility Longevity
Slide 20: Higher risk, lower risk: guaranteed annuity
Higher risk Lower risk With Profit Guaranteed Living Annuity Annuity Annuity Longevity risk - none PROTECTION Increases – predetermined, but don’t participate in markets Income CONCERN fixed or inflation linked
Slide 21: Higher risk, lower risk: with-profit
Higher risk Lower risk With Profit Guaranteed Living Annuity Annuity Annuity Investment – Smoothed & Averaged RISK Longevity – Guaranteed pension
Slide 22: Higher risk, lower risk: concerns
Higher risk Lower risk With Profit Guaranteed Living Annuity Annuity Annuity Pricing CONCERNS Selecting Increase Option Higher Increases, or Higher Starting Pension
Slide 23: Higher risk, lower risk: responsibility
Higher risk Lower risk With Profit Guaranteed Living Annuity Annuity Annuity Do the right thing RESPONSIBILITY Limited service providers Transparency: Increase Formula
Slide 24: Higher risk, comfort, lower risk
Higher risk Lower risk Living Annuity With Profit Guaranteed Annuity Annuity Comfort Discomfort
Slide 25: Living annuity with profit annuity
With Profit Guaranteed Living Annuity Annuity Annuity Sensible option? Trade-off?
Slide 26: Annuity options vs risk
ANNUITY OPTIONS VS RISK Lower risk Higher risk market longevity replacement Annuity vehicle affordability risk risk risk Level Guaranteed Escalation With-Profit Annuity Inflation linked Living Annuity
Slide 27: Life annuities
LIFE ANNUITIES ⧁ Options available with life annuities ⧁ Spouse pension after death of main member ⧁ Guaranteed period ➢ 0-20 years ⧁ Thirteenth Cheque ➢ Additional payment in December ⧁ Death Benefit ➢ Lumpsum payable on death of the main member
Slide 28: Ultimate decision based on trust
ULTIMATE DECISION BASED ON TRUST … Are my funds being placed with a company I can put my trust in for the rest of my life?
Slide 29: Ultimate decision based on trust
ULTIMATE DECISION BASED ON TRUST … I don’t understand how the increases are calculated, … will I be ok?
Slide 30: With profit annuity overview
WITH PROFIT ANNUITY … OVERVIEW Underlying Bonuses Competitive Balanced Mortality Transparent Pricing Fund Drives increases Based on Reflect: Ideal for defaults returns smoothed actual Returns Mortality to reduce market experience Purchase rate or volatility risk (Shared P&L) Deductions
Slide 31: With profit annuity?
WITH PROFIT ANNUITY? A with-profit annuity provides a guaranteed income for life with increases dependent on investment performance The increases are determined by: • the return in the underlying portfolio, typically a balanced fund, • Smoothing of these returns (results in more stable increases) •
Slide 32: With profit annuity increase policy
WITH PROFIT ANNUITY INCREASE POLICY The bonus formula is expressed in the following formula: 𝐈𝐧𝐜𝐫𝐞𝐚𝐬𝐞 = 𝐌𝐚𝐱 𝒔𝒎𝒐𝒐𝒕𝒉𝒆𝒅 𝒓𝒆𝒕𝒖𝒓𝒏 − 𝑷𝑹𝑰 − 𝒄𝒉𝒂𝒓𝒈𝒆 + 𝒑𝒓𝒐𝒇𝒊𝒕 𝒆𝒙𝒑𝒆𝒓𝒊𝒆𝒏𝒄𝒆; 𝟎 • PRI = Purchase rate. Rates between 2% and 4% can be selected; Product charge of 1.5%…
Slide 33: Increase options
INCREASE OPTIONS Annual bonus declarations are calculated as described above Then the increases depend on the selected purchase rate, which is deducted from the declared bonus A higher purchase rate means lower future expected increases, but is cheaper, so would result in higher initial pension The
Slide 34: With profit: investment strategy
WITH PROFIT: INVESTMENT STRATEGY Dynamic hedging to best optimise combination of exposure to growth assets whilst ensuring current pensions are guaranteed Underlying portfolios and Objectives: 50% SIM Balanced Fund • provides medium to high long-term investment growth and is suitable for investors w
Slide 35: Underlying assets
UNDERLYING ASSETS International International Underlying Asset Allocation* International Property Cash Bonds SIM Moderate SIM Balanced 50%/50% Absolute Fund SA Equity 17.4% 35.0% 26.2% SA Bonds 17.6% 17.8% 17.7% SA Equity International SA Property 0.7% 3.2% 2.0% Equity SA Cash / Enhanced Cash 42.7%
Slide 36: Smoothing and averaging
SMOOTHING AND AVERAGING Smoothing and Averaging of past returns Period Weighting in the reference portfolio is applied Most recent year 25% Reduces the year on year volatility Period ending 1 year ago 25% Offer a steady sustainable bonus rate, reflect medium term market performance 2 years ago 20% 6
Slide 37: Past increases
PAST INCREASES WPA Increases are back tested increases using the proposed portfolio Bonus Year CPI 2% PRI 3.5% PRI 4% PRI 65% IPR 2012 6.00% 6.43% 4.89% 4.39% 5.38% 2013 5.60% 7.48% 5.93% 5.42% 4.74% 2014 5.50% 9.77% 8.17% 7.65% 5.65% 2015 5.90% 10.73% 9.13% 8.60% 7.52% 2016 4.70% 9.40% 7.82% 7.30%
Slide 38: 5 Tips for Retirement Planning in Uncertain Times
5 Tips for Retirement Planning in Uncertain Times
Slide 39: Knowledge is power
1 Knowledge is power Know your retirement options and the differences
Slide 40: Don't neglect the paperwork
2 Don't neglect the paperwork Update policies, your will and personal documentation Inform your insurance company about any changes Understand exactly what benefits are covered by your retirement policy Keep your spouse updated
Slide 41: Post-retirement medical aid expenses
3 Post-retirement medical aid expenses Save for medical expenses Take out health care insurance
Slide 42: Don't touch your savings
4 Don't touch your savings When leaving a job don't cash your retirement savings Put money away for the future
Slide 43: Failing to plan is planning to fail
5 Failing to plan is planning to fail Start saving for retirement early Let compound interest work for you
Slide 44: Serenity quote
‘Accept the things you cannot change, have the courage to change the things you can, and may you have the wisdom to know the difference.’
Slide 45: Questions
questions®