Discovery has launched its investment arm, Discovery Invest. The company has produced an array of innovative retirement and savings products, but the one that stands out is the Annuity Integrator, which is part of its Retirement Income Plan.
If one has risk cover through Discovery, this package would enhance retirement income. As one gets further into the retirement period, one needs less risk cover and preferably more income as medical inflation increases along with longevity. Through the Annuity Integrator (so called because the company is integrating its product offerings from Discovery Life and Discovery Invest), the existing risk cover is used to increase retirement income at set periods or in the event of ill health.
The Retirement Income Plan offers both a fixed annuity on retirement or a living annuity where the investment is linked to underlying unit trust investments and other investments — and one can draw an income of between 2,5% and 17,5% of the fund value each year.
Although the Retirement Income Plan and the enhancements are available to all, those who have Discovery Life policies will be given greater enhancements to their income. If one has saved for retirement with Discovery there is an even higher boost to the annuity.
How the Annuity Integrator works
Those who have saved for at least 10 years with Discovery before retirement and have risk cover with it will benefit in three ways to maximise their annuity income:
• The Life Plan Optimiser provides an annual boost of about 30% on average, tax free, on the client’s annuity income each year for 10 years; and
• The client is then given the longevity booster, which increases his or her annuity after 10 years. This is based on 10% of the client’s initial investment;
• This amount will be increased (up to 100%) if investment performance is very poor over the 10-year period. If the client dies within one of the 10-year periods, any unpaid benefits will be payable on death; and
• If the client becomes ill during retirement, his or her annuity would be increased depending on the severity of the illness.
Those who did not save with Discovery but had policies with Discovery Life would receive the same options but at a lower rate. For example, the longevity booster would be at 7,5%, not 10%.
Those who do not have a policy with Discovery Life could still receive the longevity booster (at 5%) and the il-health booster for an additional premium.
For example, a client who has a R1-million lump sum to purchase income would, with a traditional annuity, receive R90Â 900 per annum increasing at the rate of inflation for life.
If the client had life cover of R1,5-million, disability cover of R1,125-million and severe illness cover of R750Â 000 and uses his or her lump sum of R1-million to buy an annuity with Discovery, he or she would receive:
• R90 900 per annum increasing at the rate of inflation for life;
• An additional R25 365 per annum increasing at inflation level for 15 years (tax free); and
• After 10 years, an additional R2 686 per annum increasing at the rate of inflation.
If the client contracted a severe illness five years into retirement, he or she would receive an additional tax-free amount of R28Â 693 per annum.