Jargon Buster

A business professional who deals with the financial impact of risk and uncertainty.

The person who receives the income from an annuity.

An annuity is a product which pays a regular income in exchange for a lump sum.

Someone who benefits from a will, a trust, a life insurance policy or death benefits from
an annuity or pension.

This is a commonly used measure of inflation, published by Statistics SA. It measures
the change in prices of a basket of retail goods and services over time.

A period of time that must pass before someone can do something or before an
agreement becomes final.

If you die and have dependants, they may receive benefits from your pension.
Pension providers and schemes may have different definitions for a dependant, but they
could typically include your spouse or civil partner, your children and anyone else who
may be financially dependent on you.

Drawdown or ‘income drawdown’ is an option which allows you to take income directly
from your living annuity, while it remains invested.

An enhanced annuity is an annuity that pays a higher income to an individual if aspects
of their lifestyle (such as smoking and drinking alcohol) or medical history may shorten
life expectancy.

This describes the way in which an annuity income can increase each year - you may
choose to have no increase (level annuity) or increase your annuity each year at a fixed
rate (say 5% per year) or in line with the change in a measure of inflation, such as the
Consumer Price Index (CPI) for example.

Also known as financial planner, these are professionally qualified individuals who
provide financial advice to meet clients' needs and objectives. In doing so they will
offer the most suitable and competitive product from the range of providers available to
them.

The regulator responsible for regulating advise firms rendering financial advice and
intermediary services to customers.

Inflation is a term used to describe the average increase in the price of goods and
services. It is measured and expressed as a change over a set period, such as month or
a year.

An investment fund (typically a Balanced Fund) managed by an independent asset
manager. A with-profit annuity’s annual increases are linked to an investment portfolio to
determine how much your income will increase each year. It can be zero.

When you make an investment, there will be a risk that you may lose some or all of the
money you have invested. For most investments, the outcome of your investment is
uncertain. An investment is considered to be ‘safer’ when there is a higher chance of
you getting your money back. Conversely, when something is considered to have a high
investment risk, there is a high possibility that you may not get back all of the money you
invested. Risk and return are linked and usually the higher the risk, the higher the
potential return.

In the event of your death, a percentage of your annuity income may continue to be paid
to a surviving spouse, civil partner or dependant if you have selected a joint life annuity.

A life annuity is a product that you can buy with the funds from a pension scheme. It will
pay you a guaranteed income for the rest of your life.

The income payments from this type of annuity may fluctuate in value as they are linked
to the performance of an investment fund(s). Income from a living annuity can have
some guarantees attached to it (a blended living annuity) so it is worth checking what
these are and how these work with the provider.

If investment returns are good, your annuity income payments may rise. If investment
returns are poor, then your annuity income payments may fall, so living annuities are not
without risk.

The life insurance company is a company operating as a life insurer and is issued with a
license to operate as such by its regulator and offers insurance policies to customers,
such as policyholders of annuity policies.

Also called a Guarantee Period. An annuity income is payable for as long as the
annuitant (the person receiving the annuity) lives. They can choose a minimum payment
period (up to 20 years), which means that, if they die within that guarantee
period, the annuity will continue to be paid for the remainder of that period. The
remaining payments are made to the beneficiaries of the deceased.

A non-profit annuity is an annuity purchased with retirement savings, which pays a
guaranteed, regular income for life. The income payable from this type of annuity is not
linked to the performance of investments.

The regulator who issues operating licenses to insurance companies and is responsible for
regulating and supervising insurance companies in South Africa.

The fund built up over the years from pension/retirement savings contributions made by
you and/or your employer. At retirement your pension fund is converted into retirement
benefits such as an annuity. There is normally the option to take up to one third of the
fund as a lump sum.

The South African Revenue Service (SARS) is the nation’s tax collecting authority.
Established in terms of the South African Revenue Service Act 34 of 1997 as an autonomous agency, they are responsible for administering the South African tax system and customs service.

The cash amount offered to the policy owner by the insurance company upon
cancellation of a policy outside of the cancellation period. Annuities do not normally have
a surrender value.

Some annuity providers assess the annuitant's life expectancy and it is the underwriting
process that uses this information to determine how much income to provide.

A type of annuity bought with savings, rather than your pension. It provides you with a
guaranteed income in a similar way to a conventional life annuity.

A with-profit annuity is an annuity purchased with retirement savings, which pays a
guaranteed, regular income for life. The income payable from this type of annuity is
linked to the performance of investments.