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Investment Channels Available 

The Trustees have designed four main investment channels to deal with the different needs of members with respect to their "inflation risk" and "final payment risk".
 
These are:
 
Life Stage Model - Default Choice

Not all of us are investment experts.  The Trustees acknowledge this fact and have therefore provided members with an investment model where their Accumulated Retirement Savings will be moved to ‘safer’ portfolios as they near normal retirement age.  This is due to the premise that younger members should be invested in a portfolio with the highest possible potential returns over the long term, but then be migrated to lower risk portfolios as they age to ensure they do not suffer large capital loss (final payment risk) just before retirement.
 
Members with 6 years or more to normal retirement, who choose the Life Stage Model, will initially have all their funds invested in the Balanced Fund.  As returns from the Balanced Fund are expected to fluctuate quite widely from year to year, it is not an ideal portfolio for managing final payment risk.  Members are therefore transitioned to the Income and Smoothed Bonus Funds as they near pre-retirement. 

Members will transition as shown in the table below:
 
 

AGE* 

Strategy for the balance already accumulated in the UCTRF 

Future contributions strategy 

59 years or less

Balanced Fund

Balanced Fund

60 years

Your accumulated balance will be restructured as shown in the right hand column

80% Balanced Fund
10% Smoothed Bonus Fund
10% Income Fund

61 years

Your accumulated balance will be restructured as shown in the right hand column

60% Balanced Fund
20% Smoothed Bonus Fund
20% Income Fund

62years

Your accumulated balance will be restructured as shown in the right hand column

40% Balanced Fund
30% Smoothed Bonus Fund 
30% Income Fund

63 years

Your accumulated balance will be restructured as shown in the right hand column

20% Balanced Fund
40% Smoothed Bonus Fund 
40% Income Fund

64 years

Your accumulated balance will be restructured as shown in the right hand column

50% Smoothed Bonus Fund
50% Income Fund


* The transitions indicated in the above table occur on 1 April of the year in which you turn the relevant age.
 
Please note: This Model is suitable for planned retirement at age 65. With effect from 1 July 2017, if you don’t exercise a choice when joining the UCTRF, your retirement saving contributions will be invested in accordance with the Life Stage Model as described above, unless you are aged 60 or over when you join the UCTRF, in which case your contributions will be 100% invested in the Income Fund.
 
Member Investment Choice Model
 
Members can choose what percentage of their Accumulated Retirement Savings should be invested in the four portfolios on offer: Income Fund, Smoothed Bonus Fund, Balanced Fund, and Shari'ah Fund.  This model is suitable for members who are comfortable with investment concepts, making their own investment decisions and with a planned retirement earlier than age 65.

For more information regarding the costs and fees associated with your investments, please click here.
 
Let’s take a look at each of these portfolios on offer:
 
INCOME FUND
 
As the name implies, the Income Fund is invested in money-market instruments.  The prime objective of the Income Fund is to preserve the Rand value of your retirement savings at all times and to increase it with the interest earned on the underlying money-market instruments.
 
Suitable for:
This channel is designed for those members wanting protection against "final payment risk”, i.e. a member that may withdraw or retire from the UCTRF in the next 2 years. 
 
Risk:
It gives limited protection against inflation risk since the portfolio includes bonds (maximum term 3 years).  The capital value of a bond may decline in periods of rising interest rates.
 
Objective:
Returns of 1% above CPI (inflation).
 
 
 
SMOOTH BONUS FUND
 
The two main features of this portfolio are:
  • It "smooths” the investment return earned on the underlying assets over a period of between 5 and 10 years; and
  • It provides a guarantee of contributions made.
This portfolio has been designed in such a way that it targets (but does not guarantee) a net long-term investment return of some 3% per annum above inflation.
 
Suitable for:
Members within 3 – 5 years of exiting the UCTRF.
 
Risk:
As the portfolio has some investments in the markets, its "inflation risk” is lower than that of Portfolio A.  It also guarantees your contributions, which decreases final payment risk.
 
Objective:
Returns of 3% above CPI (inflation).
 
 
 
 
BALANCED FUND
 
The Balanced Fund is expected to give the highest return of the 4 channels offered by the UCTRF over the long term.  Its asset allocation is similar to that of the Smoothed Bonus Fund, but it does not provide any guarantee – you are simply credited with the net return earned on the underlying assets.
 
Suitable for:
Members with 6 years or more before exiting the UCTRF. Portfolio C is also the 'default' investment channel and is thus used for members that are more than 6 years from retirement.
 
Risk:
The portfolio is invested in the markets and has the highest potential for good returns over the longer term, therefore has very little "inflation risk".
 
Objective:
Returns of 5% above CPI (inflation).
 
 
  
SHARI’AH FUND 

The Shari’ah Fund has been set up to comply with Islamic law or Shari’ah, and has an asset allocation that is somewhat more conservative than that of the Balanced Fund.
 
The managers have a mandate to adhere to the following key Shari'ah principles:
  • The ban on interest: Interest must not be charged or paid on any financial transaction, as interest is deemed unlawful by Shari'ah.
  • The ban on financing certain economic sectors: Companies involved in the following activities are not Shari'ah compliant:
o Conventional financial services
o Alcohol and tobacco
o Non-halaal food production or processing activities
o Entertainment (casinos, gambling and pornography)
o Weapons and arms manufacturing
It is expected to give a return that is lower than the Balanced Fund over the long term due to the lower possible allocation to equities.
 
Suitable for:
Members who wish to comply with Islamic law in this way.
 
Risk:
Deals mainly with "inflation risk", but is somewhat more conservative than the Balanced Fund and is managed according to Shari'ah investment principles.
  
Objective:
Returns of 4% above CPI (inflation).