2 Pot Presentation

Cape Peninsula University of Technology Retirement Fund

TWO POTS SYSTEM

• HOW THINGS WORK AT THE MOMENT _______________________________________________________________

• INTRODUCTION TO THE TWO-POTS SYSTEM - OBJECTIVE AND GENERAL INFO

AGENDA

• WHAT HAPPENS ON 1 SEPTEMBER 2024 _______________________________________________________________

• VESTED POT _______________________________________________________________

• RETIREMENT POT _______________________________________________________________

• SAVINGS POT _______________________________________________________________

• SEEDING AMOUNT _______________________________________________________________

• SUMMARY

HOW THINGS WORKED UP UNTIL 1 MARCH 2021 MEMBER SHARE ACCOUNT

INVESTMENT RETURNS

However, your fund is a Provident Fund and after 1 March 2021 , it started operating differently

FLEXIBLE CONTRIBUTIONS BENEFITS PAID OUT *The contributions are net of insured benefit premiums as well as fund expenses

WHAT HAPPENED ON 1 MARCH 2021 (for members under age 55 at that time) MEMBER SHARE ACCOUNT VESTED ACCOUNT NON-VESTED ACCOUNT All ACCRUED monies in your member individual account as at 1 March 21 kept in a separate subaccount – called VESTED PORTION. This money continues to grow with investment returns – no more contributions went into this account

AS SHOWN ON PREVIOUS SLIDE

All monthly contributions after 1 March’ 21 kept in a separate subaccount – called NON-VESTED PORTION. This money continues to grow with investment returns

WHAT HAPPENED ON 1 MARCH 2021 (for members age 55 and older at the time) MEMBER SHARE ACCOUNT

Everything remained the same – Old rules applied pre: 1 March 2021

INVESTMENT RETURNS

FLEXIBLE CONTRIBUTIONS BENEFITS PAID OUT *The contributions are net of insured benefit premiums as well as fund expenses

HOW THE “TWO POTS SYSTEM” APPLIES TO PROVIDENT FUND MEMBERS WHO WERE PRESENT PRIOR TO 1 MARCH 2021 Members who were 55 years or older on 1 March 2021 and who are still members of the same provident fund?

Members who were under age 55 years on 1 March 2021?

These members will have the option to participate in the two-pot system.

If these members don’t choose to participate in the new system, then everything remains the same as is at the moment.

These members will be given 12 months from 1 September 2024 to choose to opt in to the two-pot system – this is a once-off option

These members will participate in the new “Two pots system”. However, the monies accrued up until 1 March 2021 will be kept in a separate subaccount – as is at the moment, and will continue to grow with investment returns. The rules existing at that time (1 March 2021) will apply when you take a retirement benefit

This is discussed in more detail later on

THE TWO-POTS SYSTEM - OBJECTIVE The changes allow you to take part of your Fund savings in cash before you exit the Fund - previously, you only had this option at exit, through resignation, retrenchment, or retirement.

Why? To allow you to access PART of your retirement savings if you are experiencing a financial emergency;

AND

To make sure that the BULK of your savings remain invested, so that you will have an income when you reach retirement age.

• The delicate trade-off between these two objectives was considered in formulating the two-pot retirement system • Members’ retirement savings will actually be apportioned to three separate pots- but more about that later on…….

WHAT HAPPENS TO PROVIDENT FUND MEMBERS WHO JOINED THE FUND AFTER 1 MARCH 2021 All their monies is in the NON-VESTED PORTION up until 1 September 2024 NON-VESTED PORTION All monthly contributions after 1 March’ 21 kept in a separate sub-account – called NON-VESTED ACCOUNT This money continues to grow with investment returns

INTRODUCTION TO THE TWO-POTS SYSTEM • Effective from 1 September 2024 • Applies to ALL FUNDS in South Africa – it is “LAW” not a Fund decision!

• Contributions after 1 September 2024 will be split between the “savings pot” and "retirement pot“ • There are actually three components to the two-pot system: ✓ Savings Component (pot) ✓ Retirement Component (pot) ✓ Vested Component (pot) Your fund is a “Provident Fund” – your Vested Component consists of your Vested Portion (if you have one!) and your Non-Vested Portion (if you have one!)

These different pots (components) will all be discussed in detail later

WHAT HAPPENS TO YOUR MEMBER SHERE ACCOUNT ON 1 SEPTEMBER 2024?

• Your Member Share Account as at 1 September 2024 will be called your “VESTED POT” in future - this includes all the money you’ve saved for retirement up to 31 August 2024* • Your vested pot will be closed, so you won’t be able to contribute to this pot any more

*Remember that this vested pot will be divided into 2 further sub-pots called the Vested Portion and Non-Vested Portion

But….. There • The good news is that the money you’ve saved in your vested is a little more to pot will be invested and will keep growing with investment returns until you leave your employer or retire know about this vested pot→→→

WHAT FINALLY GOES INTO YOUR VESTED POT ON 1 SEPTEMBER 2024?

All your monies in the Fund i.e. your MEMBER SHARE ACCOUNT minus the “SEED CAPITAL” will become your VESTED POT MEMBER SHARE ACCOUNT – the sum of the vested account and non-vested account MINUS SEED CAPITAL

BECOMES

VESTED POT*

VESTED PORTION

more about the vested pot→

NON-VESTED PORTION

Will discuss the seed capital later including an example

MORE ABOUT THE VESTED POT

The "vested pot" includes all retirement savings in the Fund up to 1 September 2024, minus seed capital, and will continue to grow with future investment returns

Existing rules apply (and will continue to apply) to this amount, allowing full (or partial) cash withdrawals on resignation (taxed on current withdrawal table)

Up to {full Vested No further Portion plus one- contributions third of Nonare allowed to Vested Portion} the “vested in cash on pot” after 1 retirement, with September the balance used 2024 to buy a pension

WHAT HAPPENS TO FUTURE CONTRIBUTIONS FROM 1 SEPTEMBER 2024?

From 1 September 2024 future contributions are split between TWO further components (Pots):

RETIREMENT POT

SAVINGS POT

2/3rd contributions

1/3rd contributions

after 1 September 2024 will go to the "retirement pot“ monthly

after 1 September 2024 will go to the “savings pot“ monthly

more about these two pots →

RETIREMENT POT • 2/3rd of future net contributions after 1 September 2024 will go to the "retirement pot“ • Members will continue to earn investment returns on the monies in this retirement pot • The money in this pot must be preserved until retirement • On retirement, you must buy a pension with the entire amount in the retirement pot – except if retirement pot plus 2/3 of vested pot is less than de minimis amount (R165 000), all may be withdrawn as a lump sum

SAVINGS POT

• 1/3rd of future net contributions from 1 September 2024 will go to the "savings pot"

• You can withdraw (up to) once per year (tax year 1 March to 28 February) from the Savings Pot • Withdrawals from the savings pot are subject to certain conditions – discussed later • There is also an initial once-off “seeding” amount - detailed on the next slide

HOW THE SEEDING AMOUNT WILL WORK With effect from 1 September 2024 the following will happen: VESTED POT*

SAVINGS POT

Your Member Share as at 31 August ’24 less seed capital

VESTED PORTION

NON-VESTED PORTION

*This Vested Pot has a further 2 sub-pots called your Vested and Non-vested portion (members younger than 55 on 1 March 2021)

Lesser of 10% of VESTED POT or R30 000 transferred to SAVINGS POT

On 1 September ‘24 the lesser of R30 000 or 10% of the existing retirement savings will be transferred to the savings pot

Can I then take this initial capital transferred to my savings pot out again?

NOTE: The "seed capital" will be taken pro rata from the Vested and Non-Vested Portions

EXAMPLE OF THE SEED AMOUNT AS AT 1 SEPTEMBER 2024 Member Share Member Share = R50 000 = R 50 000

10%

= R5 000

Member Share = R 500 000 10% = R 50 000

Member Share = R 2 000 000 10%

= R 200 000

So what finally goes into the SAVINGS POT on 1 September 2024 ?

Savings Pot Example 1

Savings Pot Example 2

Savings Pot Example 3

R 5 000

R 30 000

R 30 000

SEEDING CAPITAL WITHDRAWAL OPTIONS With effect from 1 September 2024 the following will happen: Seeding The maximum seed capital that will go to the Savings Pot on 1 Amount September 2024, is the lesser of R30,000 or 10% of existing retirement savings on the implementation date

You will then be allowed to withdraw this amount if you so wish (if more than R 2,000) Only one withdrawal from the Savings Pot can be made per tax year (1 March to 28 February), with a minimum withdrawal amount of R2,000. The maximum will be whatever is in your SAVINGS POT

Withdrawals from the savings pot are taxed at the member's marginal tax rate

IMPORTANT NOTE: Whatever you decide to take out in cash – tax will be deducted, and administration fees will be charged

Savings withdrawal benefits are meant for financial emergencies!

“Emptying out” your savings pot each year will mean your eventual retirement benefit is lower and may result in you not having enough money when you want to retire

TAXATION OF AMOUNTS WITHDRAWN • You can withdraw Memberyour Shareseed capital immediately on 1 September 2024 (if more than R2 000 - there will be a process for this, so payment will not be immediate or automatic) = R50 000 • You can only make one withdrawal in a tax year (from the 1 March to 28 February the next year) • You can only withdraw cash if you have more than R2 000 in your savings pot • SARS will deduct tax from any amount that you withdraw at the highest rate that applies to you

Savings Pot 1 September 2024 Example 1

Example 2

Example 3

R5 000 Less tax Less admin fees

R 30 000

R30 000

Less tax Less admin fees

Less tax Less admin fees

So, you will not receive the full amounts as shown in your Savings Pot account – it will always be less tax and also less admin fees (see fees on next slide and example of taxation)

SARS TAX TABLE FOR 2025 TAX YEAR Member Share = R50 000

​Taxable income (R)

​Rates of tax (R)

1 – 237 100

18% of taxable income

237 101 – 370 500

42 678 + 26% of taxable income above 237 100

370 501 – 512 800

77 362 + 31% of taxable income above 370 500

512 801 – 673 000

121 475 + 36% of taxable income above 512 800

673 001 – 857 900

179 147 + 39% of taxable income above 673 000

857 901 – 1 817 000

251 258 + 41% of taxable income above 857 900

1 817 001 and above

644 489 + 45% of taxable income above 1 817 000

ADMINISTRATION FEES Member Share = R50 000

• Saving component withdrawals between R2,000 and R5,000 will incur the minimum transaction fee of R100 ✓ Saving component withdrawals between R5,000 and R30,000 will incur a fee equal to 2% of the pre-tax withdrawal amount. ✓ Saving component withdrawals above R30,000 will incur the maximum transaction fee of R600 • Minimum and Maximum fee limits will be subject to annual inflationary adjustments

TAXATION OF SAVINGS POT WITHDRAWAL EXAMPLE John earns R19 750 per month (R237 000 per annum) – Current tax rate: 18% of his salary Member Share = R50 000

Tax on R237 000:

R42,660 (18% x R237 000) for the tax year ending28/02/24

John’s Vested Pot Savings (1 Sep’24):

R1 million

Transfer to John’s Savings Pot on 1 Sep ’24:

R30 000 (the limit)

He decides to only withdraw:

R20 000

The Fund will request a tax directive on this withdrawal from SARS who will calculate the tax as follows: John’s current annual income:

R237,000 (taxed at 18%)

John’s annual income including the withdrawal of R20 000;

R257,000 (R237 000 plus R20 000)

This moves John’s tax rate from 18% to 26% on the withdrawal as he automatically goes into a higher tax bracket WHAT DOES JOHN RECEIVE AFTER TAX? : R14 800 - {R20 000 – R5 200 (Tax at 26% of R20 000)} NOTE: ADMIN FEE OF R 400 WILL ALSO BE DEDUCTED FROM THE R14 800

SUMMARY – HOW MANY POTS ARE THERE? From 1 September 2024 you have THREE Pots

VESTED POT

SAVINGS POT

RETIREMENT POT

Savings before 1 September 2024 minus seeding plus investment return

1/3rd contributions after 1 September 2024 plus seeding plus investment return

2/3rdcontributions after 1 September 2024 plus investment return

No change: Old Money/Old rules

Accessible once annually for emergency

Can only access this at retirement and only to buy a pension

REMEMBER! Your VESTED POT will be divided into the Vested and Non-Vested Portion (for members under age 55 as at 1 March 2021

No change: Old Money/Old rules

WHAT CAN I GET IN CASH WHEN I RESIGN AFTER 1 SEPTEMBER 2024 VESTED POT

SAVINGS POT

Savings before 1 September 2024 minus seeding plus investment returns earned VESTED PORTION

NON-VESTED PORTION

You can take all your money from this pot in CASH (less tax)

1/3rd contributions after 1 September 2024 – less any yearly withdrawals and seeding amount taken out plus investment returns earned

You can take all your money left in this pot in CASH (minus tax) (unless you already took money out in this tax year)

RETIREMENT POT

2/3rd contributions after 1 September 2024 plus investment returns earned

Can only access this at retirement and only to buy a pension – Money must be preserved

TAX PAYABLE ON CASH PORTION OF YOUR RESIGNATION BENEFIT Taxable amunt R0 to R27 500 R27 501 to R726 000

Rate of Tax 0% 18% of the amount exceeding R27 500

R726 001 to R1 089 000

R125 730 plus 27% of the amount exceeding R726 000

R1 089 001 and above

R223 740 plus 36% of the amount exceeding R1 089 000

WHAT CAN I GET IN CASH WHEN I RETIRE AFTER 1 SEPTEMBER 2024 VESTED POT

Savings before 1 September 2024 minus seeding plus investment returns earned VESTED PORTION

NON-VESTED PORTION

You can take up to {your full Vested Portion plus 1/3rd of your Non-Vested Portion} in CASH (less tax), the balance must be used to buy a PENSION

SAVINGS POT

RETIREMENT POT

1/3rd contributions after 1 September 2024 – less any yearly withdrawals and seeding amount taken out plus investment returns earned

2/3rd contributions after 1 September 2024 plus investment returns earned

You can take all your money left in this pot in CASH (less tax)

Money in this pot must be used to buy a pension – NO CASH allowed

TAX PAYABLE ON CASH PORTION OF YOUR RETIREMENT BENEFIT Taxable Amount

Rate of tax

R0 to R550 000

0%

R550 001 to

R770 000

18% of the amount exceeding R550 000

R770 001 to

R1 155 000

R39 600 plus 27% of the amount exceeding R770 000 R143 550 plus 36% of the amount exceeding R1 155 000

R1 155 001 and above

SUMMARY OF THE ENTIRE PROCESS

Member Share balance Transferred to Vested pot on 1 September ‘24

Vested Pot VESTED PORTION

NON-VESTED PORTION

Member Share as at 31 August ‘24– which is made up of your vested and non-vested account

Lesser of 10% of VESTED POT or R30 000 transferred to SAVINGS POT – can be withdrawn immediately

Note: Vested Pot has 2 sub-accounts

From 1 September ’24 monthly contrbutions:

1/3

2/3

Savings Pot

Retirement Pot

Money can be withdrawn once a year – 1 March to 28th Feb– min: R2000

At Retirementfull amount must be converted to a pension

FINAL SUMMARY FOR MEMBERS 55 AND YOUNGER ON 1 MARCH 2021 Current position (1 March 2021 to 31 August 2024) COMPONENT

Accumulated from

Maximum cash on resignation(balance transfer or paid-up)

Maximum cash on retirement (balance annuitized)

In-service cash withdrawal

Vested Portion

Fund Credit at 1 March 2021* (plus future returns) Net contributions after 1 March 2021* (plus future returns)

100% cash

100% cash

No access

100% cash

1/3 cash

No access

Non-Vested Portion

*Special case for provident fund members age 55 and over at 1 March 2021 – future net contributions allocated to Vested Portion

FINAL SUMMARY FOR MEMBERS YOUNGER THAN 55 ON 1 MARCH 2021 After 1 September 2024 COMPONENT

Accumulated from

Maximum cash on withdrawal (balance transfer or paid-up)

Maximum cash on retirement (balance annuitized)

In-service cash withdrawal

Vested Portion

Vested Portion at 31 August 2024 less proportion of seed capital (no new contributions) Non-Vested Portion 31 August 2024 less proportion of seed capital

100% cash

100% cash

No access

100% cash

1/3 cash

No access

None 100% cash

None 100% cash

None R2 000 or more

Non-Vested Portion

(no new contributions)

Retirement Savings

No opening Seed capital: balance 10% of member share (Vested and Non-Vested Portion) Contributions: 2/3 of net futureto maximum of R30 000 contributions

Retirement

Contributions: 1/3 of future net contributions No opening balance Contributions: 2/3 of net future contributions

per year

None

None

No access

IMPORTANT NOTE TO MEMBERS WHO WERE 55 AND OLDER ON 1 MARCH 2021 • These members will have the option to participate in the two-pot system • If these members don’t choose to participate in the new system, then all their contributions after 1 September 2024 will be allocated to the vested component, and they will not have a savings component or retirement component • These members will be given 12 months from 1 September 2024 to choose to opt in to the two-pot system.

• Their seed capital will be 10% of their member individual account, subject to a maximum of R30 000, calculated on the value of their member individual account on the last day of the month in which they opt into the two-pot system.

IMPORTANT NOTE

It is important to know that any amounts you withdraw from your savings pot before retirement will affect your retirement by: •decreasing the amount of cash that you have available when you retire •decreasing your retirement income

2-Pot Claims Processes Cape Peninsula University of Technology Retirement Fund

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Ways to claim There are 3 ways to submit a savings withdrawal claim, listed below in order of preference: 1. Via AF Connect – first prize!! This is the preferred and most efficient way.

2. Via the employer (HR) – Bulk or individual claims 3. Via an Alexforbes walk-in centre

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Member

Savings Claim Submission Process Flow Member logs into AF Connect and selects Savings Withdrawal

Complete KBA * questions

Verify personal details and confirm addresses

Confirm banking details Indicate amount to be claimed

Accept disclosures and disclaimers and submit claim

* KBA = Knowledge Based Assessment. The KBA is an additional layer of security added to member-initiated savings

claims. In the KBA process the member is asked a set of personalised questions that only they should know the answers to. The questions are based on data available in the XDS credit bureau's database.

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AF Connect | Registration

• AF Connect can be accessed: • Directly:

https://online.alexforbes.com/

• Via the My Money Matters website https://mymoneymatters.alexforbes.c om/

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2 POT CLAIM PROCESS ON AF CONNECT

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Walk-in Centres

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Two Pot |Walk in Centre Client Queue Process

Client Enters Building

Client is directed to the Alexforbes Reception Desk

Self-service Terminal

Documents

Self-service clients with : 1. AFC Registration 2. Eligibility 3. Status Update on Claim 4. Document Request

Documents Available 1. IsiZulu 2. IsiXhosa 3. Sesotho 4. English 5. Afrikaans

Queue Methodology

Reason for Visit 1. Eligibility 2. AFC Registration 3. Claim Process 4. Progress on Claim 5. Document Request

Device - ability to take a photo and upload onto AFC

Receptionist understands the reason for visit Two Pot Walk-in Centre |Infrastructure

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Client query routed to the correct queue via the visitor management workflow

- Building of additional walk-in cubicles

Client is directed to the waiting room

- A separate area to house the self-service terminals

When walk-in agent available, call the next client in queue.

- For larger offices, signage will be placed in and around reception area, walk-in centre cubicles, selfservice terminals.

Documents Available for Clients : 1. How to register on AFC 2. How to claim two pot savings 3. Member booklet with generic Two Pot information

Important – please note!!

Documents Should validation be required, you may be requested to upload proof of banking details or proof of your tax registration number to AF Connect. To avoid any delays, please bring the following documents with you or have copies/photos thereof saved on your cellphone, if you Human Capital will be using the assistance of /Alexforbes walk-in centre:

either on campus or at their

• Bank statement not older than 3 months • Tax registration certificate • Your ID

Fees The following fees will apply:

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• Saving pot withdrawals between R2,000 and R5,000 will incur the minimum transaction fee of R100.

• Saving pot withdrawals higher than R5,000 will incur a fee equal to 2% of the pre-tax withdrawal amount to a maximum of R600.

Important notes continued…!

Tax •

The savings pot withdrawal will be taxed at your marginal tax rate which is higher than the regular withdrawal tax rate, as can be seen in the tables below: MARGINAL

TAXABLE INCOME

RATES OF TAX

R0 – R237 100 R237 101 – R370 500

18% of taxable income R42 678 + 26% of amount over R237 100

R370 501 – R512 800 R512 801 – R673 000 R673001 – R857 900 R857 901 – R1 817 000 R1 817 001 +

R77 362 + 31% of amount over R370 500 R121 475 + 36% of amount over R512 800 R179 147 + 39% of amount over R673 000 R251 258 + 41% of amount over R857 900 R644 489 + 45% of the amount over R1 817 000

WITHDRAWAL WITHDRAWAL AMOUNT

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RATES OF TAX

R1 – R27 500 R27 501 – R726 000 R726 001 – R1 089 000

0% of taxable income 18% of taxable income above R27 500 R125 730 + 27% of taxable income over R276 000

R1 089 001 and above

R223 740 + 36% of taxable income over R1 089 001

Important notes continued…!

Maintenance orders, divorce orders, housing loans & employer compensation claims • If you any pending issues with any of the of the above, this may cause a delay in the payment process.

SARS • Alexforbes cannot predict how long SARS will take to issue your tax directive.

• If you have any outstanding issues with SARS, this may delay the process.

Minimum withdrawal amount You will not be able to make a withdrawal if you have less than R2 000 in your savings pot on 1 September 2024 10

To summarise: • The claims process is not as simple as pressing a button; • You will not receive the money immediately; • It may take up to a few days to process your claim, depending on your individual circumstances.

• Alexforbes cannot at this stage indicate an exact time period from date of claiming to date of payment.

• The 2 pot system is completely new to the retirement fund industry;

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• The time period can only be assessed once the system is implemented, although Alexforbes is currently hard at work updating all their systems to ensure a smooth and efficient claims process.

Thank You

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Disclaimer The following businesses are licensed financial services providers: Alexander Forbes Financial Services (Pty) Ltd (FSP 1177 and registration number 1969/018487/07) Alexander Forbes Investments Limited is a licensed financial services provider (FSP 711 and registration number 1997/000595/06).

While care has been taken to present correct information, Alexforbes and its directors, officers and employees take no responsibility for any actions taken based on this information, all of which require financial advice.

The information in this document belongs to Alexforbes. You may not copy, distribute or modify any part of this document without the express written permission of Alexforbes.

Design: 19095 Alexander Forbes Communications | Getty Images (imagery)

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THANK YOU