Agile senate group 5 november 2015
- 2. Market overview Ongoing review of market and environment Moving to lower return/interest rate environment Costs on investment products high Need to focus on customer need Regulatory change a constant! What have we done : Launch of Liberty Evolve and GateWay Investment Range Pay on delivery investing In excess of R20 billion invested FullView launched to help advisers manage the complexity and reporting Liberty Agile launched to help guarantee retirement income More to follow………..
- 4. Agile Retirement Range Retirement Annuity Pension Preserver Provident Preserver
- 5. Existing retirement products… Don’t meet customer needs What is first question you ask when doing a retirement plan for a client? Existing Retirement Solutions • Often inflexible • An investor can contribute for years and not know what they will get in retirement • Risks and uncertainties What’s the result • Excessively cautious investments • Retire with too little retirement savings • Pensioners outlive their capital
- 6. What is risk? 15% 10% 5% 0% -5% -10% 15% 2003 2012 % CHANGE IN ASSET VALUE Harvard Business Review July – August 2014
- 7. 15% 10% 5% 0% -5% -10% 15% 2003 2012 % CHANGE IN RETIREMENT INCOME Harvard Business Review July – August 2014 30% difference in standard of living – Low Risk?? What is risk?
- 8. Agile Retirement Range Now you can guarantee your retirement income Know today exactly what you will retire on. Guaranteed.
- 9. How the Agile Investment range works?
- 10. How the Agile Investment range works?
- 11. Other Investment Portfolios Very wide range of portfolios • Liberty Trackers • Internal Liberty portfolios (same as Evolve) • All GateWay unit trusts Over 100 portfolios available Flat platform fee of 0.3% p.a. Flexibility to stop, start and change contributions at any time with no charge
- 12. Exact Income Fund The only portfolio that guarantees your income in retirement For each investment in the Exact Income Fund (EIF) Liberty will guarantee the level of income that it can buy in retirement. For example: Invest R100 000 today and Liberty will guarantee that it will provide R3 000 per month in retirement. No fees on this portfolio, but it pays 0.5% ongoing advice fee
- 13. Need for ongoing advice Moving Targets • You don’t know now exactly what income at retirement you will need • Many things will change between now and retirement • Salary • Monthly expenditure • House • Spouse • Other assets • Interest Rates • Market Returns • Inflation • etc • Need to keep reviewing • Retirement Plan • How much is being invested each month You can select your income type at retirement on Exact Income Fund
- 14. Remuneration No upfront commission and no enhanced allocations All as and when advice fees agreed with client in Advice Fee Mandate Initial advice fees up to 3% Ongoing advice fees Exact Income Fund up to 0.5% p.a. (priced in) Other Investment portfolios up to 1.0% p.a. EIF Investment values drop Exact Income Remains same
- 15. Ongoing advice fee on EIF In the Exact Income Fund, client gets guaranteed income and certainty • Ongoing advice fee should behave in the same way Ongoing Advice Fee escalation rate applicable to all investments • Once investment made, applies until retirement • Can change for new investments as EPR’s change e.g. Investment of R1m and the OAF escalation rate is 6% OAF in year 1 is 0.5% of R1m = R5 000 In year 2 OAF is guaranteed to increase by 6% to R5 300 In year 3 OAF is guaranteed to increase by 6% to R5 618 etc.
- 16. Market value of EIF • The EIF outcome at retirement is very low risk • Targets an income in retirement • This is known and guaranteed – doesn’t change • Purpose is to keep until retirement • The market value of this benefit does move daily and is volatile • Investment value = Value of the annuity payments • This moves with interest rates and longevity
- 17. Benefits before retirement Restrictions: What about death? • Similar to Unit Trust based RA’s • Market Value of investments – No minimum death guarantee What if my client wants to transfer? • Benefit = Investment Value • EIF – lose their guarantee, value may be volatile Before retirement1 Retirement RA Retire from age 55, <55 only due to ill health Pension Preserver One withdrawal before retirement Provident Preserver
- 18. Options at retirement • Retire together or separately • Take up to 1/3 cash* • Use the remainder to purchase an annuity • For EIF Guaranteed Income: –Single life annuity available as guaranteed –Change income profile – select other life annuity with Liberty based on the ratio of annuity rates • Or the Investment Value may be used (OIP/EIF): –To purchase a living annuity –To purchase an annuity from another provider. * Provident Preservers not limited to 1/3 – can take everything (for now)
- 19. What the Agile Retirement Range can do for you
- 20. What the Exact Income Fund can do for you
- 21. Conclusion • Solves primary need in retirement: INCOME • Investor can choose balance between: One of a kind guarantee • Start accruing guaranteed retirement income today • Turn retirement planning into retirement knowing Please send questions to agilefeedback@liberty.co.za before tomorrow morning FLEXIBILITY CERTAINTY
- 22. Questions?