Retirement savings The actions of a few…

01 August 2011 Walter van der Merwe, FedGroup Life

To assert that the life industry is devoid of scandal is to ignore the growing list of media articles exposing instances in which the retirement savings of ordinary, hard-working South Africans have been ‘lost’ by those who have been entrusted to protect

Currently flooding the media are reports of billions of Rands in retirement savings that have been misappropriated or ‘lost’. The victims of these financial muggings are the retirement fund members and pensioners whose financial interests were not safeguarded, but rather exploited.

Regulation is not enough

There is no question that regulators have broadened regulations to protect investors, but it seems that these regulations are not having the desired results. While it has become onerous for honest parties to do business according to regulation, recent media coverage illustrates that the life insurance industry is still fraught with inappropriate activity.

Regulation does not seem to negate the misappropriation of retirement savings, nor does it seem to protect investors even when the appropriate product disclosures are made. In most reported cases it seems like the parties involved were correctly licensed and authorised to conduct business and fulfilled their responsibilities utilising regulated investment products. How, then, is it possible that retirement savings of hard-working South Africans have been ‘lost’?

The “spirit” of the law

At the heart of this concern is the classic idiomatic antithesis: acting in the spirit of the law versus acting in the letter of the law. A problematic representation of half-truths suggests that the literal interpretation of the life industry’s regulation is being followed. This literal interpretation of the industry’s regulation seems to result in retirement savings being lost.

Furthermore, the words of Albert Camus, “integrity has no need of rules”, leads one to think that the mere existence of regulations does not make honest parties of those entrusted to protect the interest of others.

Crippling our credibility

The actions of a few are crippling the credibility of the life industry. While additional legislation may not be necessary to counteract the trend of scandalous fraudulent activity, the appropriate prosecution and consequences for those involved should be executed. In doing so, we might be able to deter others from engaging in similar activities.


Furthermore, all parties involved should act in the spirit of the law and not merely the letter of the law. Those who have been entrusted with the responsibility to safeguard the retirement savings of hard-working South Africans should do so with integrity, regardless of the letter of the law.

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