With effect from 1 October 2023, the Board of Trustees (the Board) embarked on a journey to refine the Fund’s investment strategy, resulting in an updated strategy, as contained in the updated Investment Policy Statement (IPS), which is effective from 1 July 2024. Two important changes are the portfolio name changes and the switching methodology leading up to retirement.

The following investment portfolios have been renamed to better describe their purpose:

The LA Wealth Creation Portfolio – previously known as the Accumulation Portfolio

The LA Wealth Consolidation Portfolio – previously known as the Consolidation Portfolio

The LA Capital Protection Portfolio – previously known as the Preservation Portfolio

The LA Cash Plus Portfolio – previously known as the Cash Portfolio

The LA Shari’ah Portfolio – previously known as the Shari’ah Portfolio

Please go to Investments/Investment policy statement on the Fund’s website to read more about the Investment Policy Statement (IPS).

Prior to 1 July 2024 – members participating in the default life stage strategy were automatically moved from the Accumulation Portfolio to the Consolidation Portfolio (the previous portfolio names) as they approached their normal retirement age of 65. The transition commenced at age 59.5 with 14 transition switches (i.e. a switch every 3 months) over a 3.5-year period.

An enhanced switching methodology was implemented on 1 July 2024 as follows:

After 1 July 2024 – for members who participate in the life stage strategy, the number of switches leading up to retirement have been increased allowing for a smoother transition prior to retirement. 50 monthly switches of approximately 2% each from the newly named LA Wealth Creation Portfolio to the LA Wealth Consolidation Portfolio will commence at age 59 (72 months before normal retirement age) and will end 23 months before normal retirement age.

Therefore, your member share will be fully invested in the LA Wealth Consolidation Portfolio 23 months from your normal retirement age (at age 63 years and 1 month).

The Board is of the opinion that increasing the number of transition tranches can decrease the probability of a member being prejudiced by sudden or adverse market movements. This is also very much in line with most of the retail umbrella funds and municipal competitor funds.

The transition phasing process is automated and is handled by the Fund Administrator, so no actions are required from members.

How the life stage investment strategy works

The strategy sees to it that your member share is automatically invested according to how many years you have left until your normal retirement age. The younger you are, the longer you have to invest until retirement. As a result, your investment can be exposed to more risk and is placed in more aggressive strategies in an effort to earn higher returns. The older and closer to retirement you are, the more protection your retirement savings need. As such, your investment is shifted to less risky strategies, which may deliver lower growth, but will also keep your capital safe.

The life stage investment strategy automatically moves you through these portfolios – from a more aggressive investment approach (LA Wealth Creation Portfolio) with a focus on long-term capital growth when you are younger to a more protection-focused approach (LA Wealth Consolidation Portfolio) as you near retirement age.

Below are some of the benefits that life stage investing gives you:

• • Cost effectiveness and simplicity of design that requires minimal intervention from you.
  • Protection of your retirement benefits against the effects of inflation.
  • Enhanced or optimal returns during your pre-retirement cycle and protected returns during the transition process close to your retirement.
  • Acceptable risk levels given your time horizon to retirement.
  • Access to portfolios managed by top investment managers.
  • Easy and seamless transition of your member share into a living annuity or life annuity when you retire.

Alternatives to the life stage investment strategy

The life stage investment strategy is the Fund’s default investment strategy which means that if you do not elect an investment option on joining the fund, your total contributions will be invested in the appropriate portfolio of the life stage strategy.

While the life stage strategy is the default investment approach for the LA Retirement Fund, you are allowed to choose not to invest in it and you can instead invest in any of the two underlying portfolios, namely the LA Wealth Creation Portfolio or the LA Wealth Consolidation Portfolio.

In addition to making use of one or both of these two life stage portfolios as stand-alone investment options, you also have an option to invest in a conservative, low-risk option known as the LA Capital Protection Portfolio with a focus on capital preservation and the LA Cash Plus Portfolio. The LA Cash Plus Portfolio option addresses capital risk and may be considered by members who are very close to retirement and who do not wish to be exposed to negative returns in the short period leading up to their retirement and may be considered by members planning to take a large part of their benefit as a cash lump sum.

You may also choose to invest in the LA Shari’ah Portfolio which complies with Islamic investment principles. The investment managers satisfy the guidelines and standards as set from time to time by the Islamic Accounting and Auditing Organisation.

Changing your investment

You can change your investment selection while you are a Fund member. You are allowed a maximum of two switches per fund year (i.e. between 1 July and 30 June) and the first of these switches is free. A switching fee of R350 (incl VAT) is charged for the second switch. This fee is taken from your member share being switched. It is recommended that you speak to a financial adviser before making the decision to switch your retirement investments.

About the In-Fund Living Annuity

As a member of the Fund, you have the option of moving a portion of or all your retirement savings into a living annuity provided by the Fund when you retire.

At retirement when you invest in the in-fund living annuity, you select one of two options which will determine the investment of your retirement capital and the amount of your monthly annuity income.

If a retiree has chosen the trustee endorsed investment option, their capital will be invested in the LA Wealth Consolidation Portfolio. If a retiree has chosen the customised option, the retiree may select one or both of the two life stage portfolios (LA Wealth Creation Portfolio and/or the LA Wealth Consolidation Portfolio) or they can select the LA Capital Protection Portfolio or the LA Shari’ah Portfolio

As an in-fund living annuitant, you may elect to switch from the trustee endorsed option to the customised option and vice versa once a year on 1 July.

About the Pooled Annuity Account (PAC)

The Pooled Annuity Account (PAC) was introduced with effect from 1 July 2024 to provide a pension for life for retiring members.

This is something that members may be interested in purchasing on retirement (in addition to the IFLA or simply on its own). It is also an appropriate option for In-Fund Living Annuitants who may be concerned about the sustainability of their retirement income.

The PAC does not operate like the IFLA. There is no investment account with a retirement capital balance to be calculated by the Fund. Pensioners therefore do not elect a drawdown rate that determines both the value of their monthly income and the value of their remaining retirement capital.

A pension is calculated for life by the actuary and the pensioner is therefore not required to make an investment decision. The pensioner assets are invested according to a Liability Driven Investment (LDI) Strategy (LDI Growth and LDI De-risk). This investment strategy is aligned to the Fund’s Pension Increase Policy.

More details on the PAC are available in the In-Fund Annuity options Q&A on the Fund’s website.

With effect from 1 July 2024, you have the option of purchasing an IFLA and a PAC annuity from the Fund. You would then receive an income from both the IFLA and PAC.

Please go to the Fund Guides on the Fund’s website to read more regarding the IFLA and PAC in the In-Fund Living Annuity Options Q&A.