Moonstone : Retrospective Legislation
The Life Offices’ Association has provided input on proposed changes to a number of Acts, including the Pension Funds Act.
It voiced its concern about the effects of the proposal that will provide divorced spouses with rights to take cash withdrawals from their former husbands’ or wives’ pension funds prior to the maturity of the funds, as this could cost the pension fund industry billions. Legalbrief reports as follows:
“Addressing the Finance Portfolio Committee hearing Rob Stevenson, of Old Mutual, who also represents the association, expressed his concern about certain elements of the Financial Services Laws General Amendment Bill.
While the association supported the so-called ‘clean break’ principle, it was concerned about a number of matters arising from it. He said the effect on retirement funds could be disadvantageous if funds received ‘a large number of requests’ – for withdrawals – at the same time. It was also a matter of concern that the non-member could use the money for non-retirement funding.”
Of particular concern is the proposed retrospective application of the clean-break principle and the impact hereof:
* It will unfairly interfere with vested rights.* It could have an effect on funds investment strategies and finances if numerous payouts need to be carried out in a short space of time
* It will impose a costly administrative burden on pension funds.
While cynics may see this as just another attempt by the LOA to retain the funds under management of its members, the truth is that these funds are invested based on long-term investment strategies which, if disrupted, can have huge negative implications for all those not involved in the reasons for the outflow of funds.
Eroding these funds through retrospective legislation will cause a far bigger burden on the state in the future than the double barrelled gauge it is staring down at the moment with regards to providing for the elderly and the disabled.
So far, the country has been able to withstand the pressure to backdate legislation to a large degree. Once the flood gates open, the impact can be horrific, not only for the financial services industry, but at all levels.
The “new legislation” epidemic (or is dementia a better description?) that we currently experience is mainly driven by consumerism, and unfortunately the result of wrongs from the past. There must come a time, however, where someone says enough.
We have used the analogy before of each teacher giving the class homework, not taking into account what others are doing. What is needed is a headmaster who knows what goes on in his school, ensuring that you do not get six sets of punishment in one day.
The alternative is that your top students will go to another school, leaving you devoid of the skills and opportunities so necessary to uplift those who were disadvantaged in the past and now face the same fate in the future.A nationwide telephone poll conducted in the USA in 2004 for Merrill Lynch examined the investment mistakes of 1,000 investors and their related attitudes, beliefs and behaviors.
While a lot has changed since then, there are some basic fundamentals that still apply. We will be looking at some of these over the next few weeks.
He Who Hesitates Loses Ground
Of the investors surveyed, 46% said they waited too long to invest. And of those, 25% said doing so was their most painful mistake.
Asked about major personal regrets, 28% of investors wished they had started investing earlier. That compares with 15% who wish they had worked harder in school and 9% who wished they had been more ambitious in their careers.
"If experienced investors deeply regret waiting too long to start investing, imagine how large an issue this is with the general population, many of whom haven't even begun to invest," Robert C. Doll, president and chief investment officer of Merrill Lynch Investment Managers said. "The survey results are a wake-up call to people in their 20s and 30s: Get going. The benefits of compounding and investing over the long term are substantial; unfortunately, too many investors learn these important lessons in retrospect."
The second most common mistake investors cited was "holding a losing investment so long that you ended up losing a significant amount of money." Forty-one percent of investors said they had made that mistake — and 24% said it was their most painful mistake.
The next most common mistakes cited were "not putting enough money into your investments" and "waiting too long to sell a winning investment," both of which were mentioned by 36% of investors.
At the risk of repeating myself, I have to refer to the old saying that one has 20/20 vision in hindsight. How many of us have not gloated gleefully when a client remarked: "I should have listened to you before I made that investment."
"Too little too late" could be the anthem for so many. A favourite quotation of mine appears in the book "The Drifters" by James Michener:
"Southern California is full of 64-year olds who thought they'd wait until it was safe; now it's safe, but now they're 64."
Next week we see what the survey shows about how investor views differ from that of advisors.
