What is EAC?
In line with the outcomes of Treating Customers Fairly, the Association of Savings & Investment SA (ASISA) has introduced the Effective Annual Cost (EAC). With its introduction in October 2016, investors (both prospective and existing) and their financial planners will be able to compare charges on most retail investment products, and their impact on investment returns, across the various regulatory wrappers so that investors are placed in a position to make better informed decisions around retail savings and investment product choices.
The standardized disclosure measures the charges that an investor will likely incur in purchasing and holding a financial product, and does not attempt to measure the features of a financial product.
You can request an EAC calculation from firstname.lastname@example.org or call us on 021 673-1340.
Where to find the EAC Illustrator?
Save and Download the EAC Illustrator
The EAC applies to the following financial products:
How is EAC calculated?
The EAC comprises four separate components into which various charges are allocated. The components are:
Charges which can be expressed as an ongoing percentage of the investment value are simply added together. Charges which cannot be expressed as an ongoing percentage are amortised over the relevant period and disclosed accordingly. The calculation takes account of the type and timing of the investment (lump sum or debit order) and whether there are any initial or ongoing fees applicable, as well as costs incurred in the administration and management of the product. This may entail forecasting the growth of your investment at a predefined rate, but note this does not mean your investment will necessarily grow at this rate.
How is EAC disclosed?
EAC is disclosed as follows:
The Effective Annual Cost (EAC) is a measure which has been introduced to allow you to compare the estimated impact of charges on investment returns when you invest in different Financial Products. It is expressed as an annualised percentage. The EAC is made up of four charges, which are added together, as shown in the table below. The figures only show the estimated impact of immediate and future charges, and do not include the impact of any charges that have already been incurred. The effect of some of the charges may vary, depending on your investment period. The EAC calculation assumes that an investor terminates his or her investment in the Financial Product at the end of the relevant periods shown in the table.
In addition, there may be free text notes explaining some of the costs included.
When will EAC be disclosed?
EAC disclosure is being phased in from 1 October 2016 (effective date 01 June 2016). Initially disclosure will be made to new investors only or existing investors into new product. All existing products will also have to be brought into line with the EAC standard when there is change to the contractual terms of the product. The deadlines for compliance for existing products are: