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Greater scope for policyholders to diversify offshore

21 February 2008 Life Offices? Association (LOA)

The Life Offices’ Association (LOA) has welcomed the increase in the offshore investment limit for the investment-linked business of long-term insurers from 15% to 30% as announced in today’s Budget.

Gerhard Joubert (pictured right), CEO of the LOA, says the LOA has engaged with Treasury in this regard over the last few years with a view to ensuring the leveling of playing fields, seeing that linked policies offer a similar value proposition for policyholder clients as a collective investment scheme. The LOA also welcomes the increase in the foreign exchange limit for the underwritten business of long-term insurers to 20% (previously 15%).

“Not only does the raising of the offshore limits for long-term insurers level the playing field between collective investment schemes and investment-linked policies, but it also benefits policyholders because it provides them with greater scope to invest offshore, which is important in any well diversified portfolio.”

Joubert says the LOA had previously only requested that the same exchange control limits are applied to collective investments and savings policies and therefore considered the simultaneous raising of the limits an added bonus.

Joubert says the life industry was also pleased about the proposal in today’s Budget to review the expense formula for the policyholder funds of an insurer so that it reflects current business practices and tax policy principles.

“The LOA has been in discussions about this with National Treasury and we look forward to provide further input on the review process.”

The LOA, on behalf of its members, has also pledged its continued support for the Government’s Social Security and Retirement Reform process outlined in today’s Budget. Joubert says the life industry had not expected any significant announcements with regards to the reform process in today’s budget.

“We agree with Minister Trevor Manuel that we are in this together. There is currently significant work in progress, which has been described in today’s Budget as a complex process that will require a series of incremental changes.”

Joubert says since the release of National Treasury’s second discussion paper on Social Security and Retirement Reform last year, the industry has been expecting the reform process to start gathering momentum this year.

He says the retirement reform process represents an important step towards establishing a system that will encourage a wider spectrum of South Africans to save for their retirement and provide for risk events such as death and disability. A recent study commissioned by the LOA revealed that South Africans are significantly under-insured as far as death and disability cover are concerned.

Joubert says the LOA supports the fact that the reform process will happen under the auspices of the National Economic Development and Labour Council (Nedlac).

Commenting on the budget in general, Joubert says instead of materializing as a doom and gloom budget as predicted by many, Minister Trevor Manuel today surprised the nation with a Budget committed to alleviate the plight of the poor and bringing relief to consumers hardest hit by the effects of inflation.

“The social security net has been widened significantly through the increase in the child and old age grants and the progressive reduction of the retirement age for men to 60. The raising of the tax threshold will also go a far way in alleviating poverty.”

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