Description of the Fund
This is a policy of insurance. In return for a single premium investment, the GIWPA pays a regular income for life to the pensioner, spouse and dependants, as specified in the contract terms. This income will increase annually participation in investment profits, adjusted for mortality profits or losses. The annuity income in payment is guaranteed never to decrease.
Investment profits: the annuity is priced assuming a minimum net investment return (the postinterest rate, or PRI, which may be selected by the client). Investment profits arise to the extent that investment returns, which are smoothed formula shown below, exceed the selected PRI.
Mortality profits or losses arise if the experience of the portfolio of annuity different to the mortality assumption used. The cumulative impact of this element is expected to be very small in the long term relative to investment profits. When choosing an investment of this nature, itimportant to consider price and future increase potential..
Fund Objective
On a post-retirement interest rate of 3.5% p.a., the Fund targets annual increases that are broadly 70% of CPI over periods of 10 years or more. Our current expectation is that CPI will be 5.5% p.a., which is at the top end of the target inflation range of 3% to 6% p.a. that has been set by the SA Reserve Bank. This makes our targeted increase 3.9% p.a. on a PRI of 3.5% p.a.: note that this is a target, not a guarantee.
The Fund aims to outperform similar with-profit annuity funds and uses international best practice risk management technology to protect the Fund against the risk of longfalling below the PRI.
