LOA Advises action on Statement of Intent

31 January 2007 Gareth Stokes

On 22 November 2006, The Life Offices' Association (LOA) recommended that members begin implementing Retirement Annuity (RA) fund and endowment policy enhancements from December 2006.

These enhancements are part of the Statement of Intent jointly issued by the LOA and Minister of Finance in December of 2005. Minimum standards were agreed and communicated in a press release issued by the LOA on 16 March 2006. These provisions included the following:

"RA funds, endowment policies and other related products that were terminated, or that had premium reductions, at any stage between 1 January 2001 and the implementation date will be enhanced to a minimum value of 65% of fund value or investment account.

Policyholders of savings policies like endowments and members of RA funds who reduce or stop their premiums after the implementation date, will receive minimum values of 70% if these policies remain on the books of the insurer, and 60% if they do not."

A recent communication from The Association of Professional Financial Planners (LUASA) raised some questions as to how RA holders would qualify for these enhancements. The suggestion was that the policyholder might be responsible for contacting the life office to qualify for the enhancement.

Sorting out the small print

Jonathon Dixon of the National Treasury says guidelines to the life offices are quite clear in this regard. Regulation 5.3 (1) of Part 5 provides:

(a) If fund member policy has not come to an end, the insurer must credit the policy

Dixon says this process would be automatic, thus not involving an application. The insurer has 6 months to do the adjustment.
(b) If the fund member policy has come to an end (e.g. lapses) and the excess amount is R150 or more, then the member/policyholder must make a written request to the relevant insurer.

In this event, the policyholder will have 3 years to make the written request. The insurer must make good the excess payment in that case within 6 months of receiving the request.  Such affected policyholders have until December 2009 to lodge a complaint.

To summarise, the policyholder will only have to contact the life office where his policy has come to an end and the excess is greater than R150. In all other cases, the adjustment should be made automatically.

Ensuring the client is informed

LUASA urged its members to ensure any of their clients who may be affected by these provisions are notified, so that they benefit from the enhancements as proposed.

Editors thoughts:
The Statement of Intent issued by the National Treasury and the LOA includes various stipulations to improve the position of policyholders. The life offices are obliged to perform these enhancements as agreed.


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